2022 QCCA 272, 2022 QCCA 272

Chandler c. Volkswagen Aktiengesellschaft 2022 QCCA 272 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-029036-209 (500-06-000838-173) DATE: February 23, 2022 CORAM: THE HONOURABLE GENEVIÈVE MARCOTTE, J.A. GENEVIÈVE COTNAM, J.A. STÉPHANE SANSFAÇON, J.A. LAWRENCE CHANDLER APPELLANT/INCIDENTAL RESPONDENT – Plaintiff v.

VOLKSWAGEN AKTIENGESELLSCHAFT RESPONDENT/INCIDENTAL APPELLANT – Defendant JUDGMENT [ 1 ] The Appellant appeals the judgment rendered on April 16, 2020, by the Superior Court, District of Montreal (Chantal Chatelain, J.S.C.), granting the Respondent’s application for a declinatory exception for lack of territorial jurisdiction and dismissing its alternative argument of forum non conveniens. [1] [ 2 ] For the reasons of Marcotte, J.A., with which Cotnam and Sansfaçon JJ.A. concur, THE COURT: [ 3 ] DISMISSES the appeal, with legal costs; [ 4 ] DISMISSES the incidental appeal, without legal costs.

GENEVIÈVE MARCOTTE, J.A. GENEVIÈVE COTNAM, J.A. STÉPHANE SANSFAÇON, J.A. Mtre Shawn Faguy Mtre Éloïse Moses FAGUY & CIE, AVOCATS For the Appellant/Incidental Respondent Mtre Stéphane Pitre Mtre Karine Chênevert BORDEN LADNER GERVAIS For the Respondent/Incidental Appellant Date of hearing: October 19, 2021

REASONS OF MARCOTTE, J.A. CONTEXT [ 5 ] The Appellant, Lawrence Chandler (“Chandler”), was authorized to institute, on behalf of all Quebec residents, a class action in damages against the Respondent, Volkswagen Aktiengesellschaft (“Volkswagen”), a German corporation with no domicile or establishment in Quebec, for the loss of value of the securities they had purchased or held in the company. [ 6 ] The action, which is based on

article 1457 of the Civil Code of Québec (“ CCQ ”), alleges that the loss of value resulted from Volkswagen’s misrepresentations and omissions of material facts related to “cheating emissions tests” that made its diesel car engines appear cleaner than they actually were, a situation also known as “dieselgate”. [2] PROCEDURAL HISTORY [ 7 ] On May 28, 2018, the Superior Court (Chantal Chatelain, J.S.C.) partially granted Chandler’s Re-Amended Motion for Authorization to Bring a Class Action [3] (the “Authorization Judgment”).

The judge concluded that Volkswagen had waived its right to raise a declinatory exception based on lack of jurisdiction at the authorization stage [4] and that, on a prima facie basis, Chandler had arguably suffered a loss in Quebec, as per article 3148(3) CCQ , thereby conferring jurisdiction on Quebec authorities. [5] [ 8 ] Volkswagen was denied leave to appeal this judgment. [6] It subsequently filed an application to limit the class definition to two of the following three types of financial instruments: • Volkswagen shares (the “Shares”); • American Depositary Receipts (“ADRs”); and • Credit notes (the “Notes”). [ 9 ] More specifically, Volkswagen sought to limit the class action to the Shares and ADRs while excluding the Notes. [7] [ 10 ] The application was dismissed [8] and leave to appeal this judgment was again denied. [9] [ 11 ] On May 30, 2019, Chandler filed his Originating Application Instituting a Class Action (the “Originating Application”).

Volkswagen accepted service of these proceedings while reserving its right to contest the jurisdiction of Quebec courts over the matter. [ 12 ] On August 16, 2019, Volkswagen filed an Application for Declinatory Exception for lack of territorial jurisdiction. Alternatively, it asked the Superior Court to decline jurisdiction based on forum non conveniens . In support of this application, Volkswagen filed an Ontario Superior Court judgment rendered on August 15, 2018, in Leon v.

Volkswagen AG, declining jurisdiction in a similar context. [10] It also filed an expert report (the “Bernier Report”) explaining the nature of the three financial instruments covered by the action and the manner in which they were issued and traded: [11] • The Shares were publicly issued by Volkswagen outside the province of Québec. They were listed for public trading on various stock exchanges and other marketplaces, including over-the-counter (“OTC”) marketplaces, all located outside Canada.

Moreover, Volkswagen was never a reporting issuer in any province or territory of Canada. • The ADRs were publicly issued by Volkswagen outside the province of Québec and were not listed for trading on any stock exchange. They were traded in the U.S. OTC markets. • The Notes were not publicly issued in Québec.

Some notes were privately issued by Volkswagen Credit Canada Inc. (“VCCI”) to investors in Québec during the class period. [ 13 ] On April 16, 2020, in the judgment under appeal, the Quebec Superior Court partially granted the Volkswagen application and dismissed the Originating Application for want of jurisdiction. It also specified that, had it otherwise recognized the jurisdiction of Quebec courts, it would have refused to decline jurisdiction and dismissed the alternative argument of forum non conveniens .

JUDGMENT UNDER APPEAL [ 14 ] After a short introduction, Chatelain, J. briefly summarized the context of the matter and the proceedings introduced in the United States, Germany and in Ontario, based on the same cause of action. [ 15 ] Relying on Club Resorts Ltd. v. Van Breda [12] and Québec (Procureur général) c. Imperial Tobacco Canada Ltd. , [13] she turned to

article 3148 CCQ to assess the jurisdiction of Quebec courts over the matter, while acknowledging that the common law principles of international comity, order and fairness could be of assistance in interpreting the CCQ rules . [14] [ 16 ] Applying the principles set out in Marciano c. Universal Perfumes and Cosmetics , [15] she held that Volkswagen had adduced “serious enough [evidence] to really challenge the facts alleged by [the] plaintiff respecting the jurisdiction of the court”, thus transferring onto Chandler the burden of proving the facts alleged on a balance of probabilities. She also cautioned herself against the

risk of engaging in a detailed analysis that would normally be associated with a hearing on the merits. [16] [ 17 ] She refused Volkswagen’s argument that jurisdiction must be examined separately for each type of security contemplated in the application, relying on this Court’s global approach in Poppy Industries Canada Inc. c.

Diva Delights Ltd. [17] [ 18 ] She dismissed Chandler’s argument that the Authorization Judgment had previously ruled on the jurisdictional issue, [18] by distinguishing the nature of the argument made at the authorization stage, which had been based on article 575 (2) CCQ , from the merits of the matter.

She also emphasized the difference in the court record at both stages and insisted on the language used in the Authorization Judgment to support this distinction: [40] As explained below, the Court finds that, at the authorization stage , taking the facts alleged as true, the Québec courts do appear to have jurisdiction to hear the proposed class action. (Emphasis added) [ 19 ] She refused to consider that Volkswagen had attorned to the jurisdiction of Quebec courts or that it had waived its right to raise lack of jurisdiction under article 3148(5) CCQ , given that Volkswagen had consistently and repeatedly indicated its intention to contest the jurisdiction of Quebec courts as soon as the Originating Application had been filed, that it had authorized its counsel to accept service of the proceedings “under reserve of its rights to contest the jurisdiction of this Court” and that it had served its application to dismiss at the earliest opportunity. [ 20 ] She noted that, under the provisions of the new Code of Civil Procedure and despite the fact that an application for authorization to institute a class action and the subsequent originating application are part of the same class action proceeding, the originating application is considered a new action that is subject to a new set of procedural steps, including preliminary exceptions. [ 21 ] She also relied on Infineon Technologies AG v.

Option consommateurs [19] in support of the proposition that a judgment dismissing a jurisdictional challenge at the authorization stage could not serve to end the debate over the territorial jurisdiction of Quebec courts. [ 22 ] She went on to discuss the two-pronged test of article 3148(2) CCQ requiring that the defendant have an establishment in Quebec and that the dispute relate to its activities in Quebec.

After having acknowledged that Volkswagen did not have such an establishment in Quebec, she held that the fact that VW Credit Canada, Inc. (“VCCI”) is Volkswagen’s wholly owned subsidiary in Quebec would not satisfy the criterion of article 3148(2) CCQ . Nor would the allegation that Volkswagen is a guarantor of the Notes issued by VCCI, as it would not serve to assimilate the two entities as one and the same entity nor demonstrate that Volkswagen has an establishment in Quebec within the meaning of the provision .

She also dismissed the argument that Volkswagen carries on business in Quebec through agents who are dealers or distribute securities on its behalf, failing a proper demonstration in this respect. [ 23 ] Regarding article 3148(3) CCQ , Chatelain, J. concluded that no fault had been committed in Quebec, given that the misstatements and omissions were alleged to have been made in financial documents prepared in Germany.

She also referred in this respect to her earlier conclusion, in the Authorization Judgment, that the availability in Quebec of some of these financial documents (described as the “Impugned Documents”) could not support a finding of a fault committed in this province, in the absence of allegations that the information emanated from or was prepared in Quebec, or that any decision to publish the information had been made or carried out from Quebec. [ 24 ] She also held that there was no allegation that the purported violation of applicable financial reporting standards had been committed in Quebec, and that allegations that proxies and annual reports were sent to or made accessible to investors in Quebec would not be sufficient to conclude that a fault had been committed in this province. [ 25 ] Moreover, she noted that the prospectuses were remitted to the Autorité des marchés financiers by VCCI and not by Volkswagen.

The fact that these documents represented that Volkswagen guaranteed the Notes issued by VCCI and incorporated Volkswagen’s consolidated interim and yearly financial statements by reference did not serve to bring the matter within the jurisdiction of Quebec courts because “that fact cannot reasonably constitute a fault by [Volkswagen] committed in Québec”. [20] [ 26 ] On the demonstration of an injury suffered in Quebec, however, she departed from her earlier conclusion in the Authorization Judgment that such a demonstration had been made on a prima facie basis. [21] Based on the principles set out in Infineon and interpreted by this Court in Partner Reinsurance Company Ltd. v.

Optimum Réassurance inc., [22] she held that the place in which the contract for the acquisition of securities had been entered into was only one of many relevant juridical facts to be considered, whereas the evidence adduced by Volkswagen, namely the Bernier Report, demonstrated that the Shares had been purchased and sold on stock exchanges in Europe, and that the ADRs had been purchased and sold on the OTC markets in the United States.

Hence, the trades had been executed outside of Quebec for both the Shares and the ADRs. [ 27 ] As for the Notes, she insisted that no public distribution had taken place in Quebec and that they had only been privately issued to a limited number of qualified or accredited investors in Quebec under a prospectus exemption and had not been listed on an exchange. She emphasized that the only evidence filed in the record was that VCCI had privately distributed Notes to thirteen accredited investors in Quebec.

Furthermore, Chandler himself recognized in the course of this appeal that the distribution to those thirteen accredited investors had occurred outside of the class period. [ 28 ] While acknowledging that the place in which the contract had been entered into was a relevant factor to establish jurisdiction under article 3148(3) CCQ , relying once again on Infineon , the judge held that it was not the only relevant factor to be considered.

She emphasized that she was also required to determine whether the alleged pecuniary loss flowed directly from such contract and whether the alleged loss was suffered in Quebec and resulted from a material event that occurred in Quebec. She concluded that it was not the case.

[ 29 ] She insisted that Chandler had chosen to argue a single cause of action and a single series of acts and omission for all three instruments contemplated in the proceedings and concluded that “the theoretical connecting factor relating only to where the Notes were acquired is insufficient, too remote and too tenuous to engage the jurisdiction of the Court under Article 3148(3) C.C.Q. ”. [23] [ 30 ] Finally, she addressed Chandler’s argument based on

section 236.1 of the Quebec Securities Act (“ QSA ”). [24] Firstly, she emphasized that the action was based on extra-contractual liability and not on securities legislation and did not relate to the distribution of securities. Secondly, she distinguished the distribution of securities by VVCI from that of Volkswagen and indicated that it could not serve as a basis to assert jurisdiction over Volkswagen, pursuant to

Section 236.1 QSA . Thirdly, she considered that, by enacting

section 236.1 QSA , the legislator could not have intended to circumvent the application of the rules of private international law provided for under

article 3148 CCQ . [25] [ 31 ] Lastly, while having concluded that Quebec courts did not have jurisdiction over the matter, she went on to examine the argument of forum non conveniens prior to concluding that had she recognized the authority of Quebec courts over the matter, she would have refused to decline jurisdiction in favour of Germany for the Shares and of the United States for the ADRs, as proposed by Volkswagen.

Indeed, after pointing out that two factors would favour other jurisdictions, namely the location where the securities were traded (in the United States and in Europe) and the applicable law (which could not be Quebec law), she recognized that a number of factors would weigh in favour of retaining jurisdiction in this province and would justify her refusal to decline jurisdiction, absent a demonstration that the other forums proposed (Germany or the United States) would clearly be more appropriate or fairer, more efficient or would be in the best interest of justice or of the class that is located in Quebec.

ISSUES [ 32 ] In appeal, Chandler submits that the judge committed several reviewable errors. For one, she failed to correctly apply

section 236.1 QSA to establish the jurisdiction of Quebec courts.

Alternatively, she failed to recognize that Volkswagen had attorned to the jurisdiction of the Quebec courts pursuant to article 3148(5) CCQ and that the criteria of article 3148(3) CCQ had been met, given that an injury was suffered in Quebec and that a fault was also committed in this province. [ 33 ] In an incidental appeal, Volkswagen argues that, should this Court conclude in favour of the authority of Quebec courts over the matter, it should set aside the judge’s ruling with respect to the doctrine of forum non conveniens and decline jurisdiction in favour of foreign courts. [ 34 ] The issues in appeal can be reordered and broken down into the following five questions: 1.

Did the judge err by concluding that Volkswagen did not attorn to the jurisdiction of Quebec authorities, as set out in article 3148(5) CCQ ? 2. Did she err by concluding that no injury was suffered in Quebec, as set out in article 3148(3) CCQ ? 3. Did she err by concluding that a fault was not committed in Quebec, as set out in article 3148(3) CCQ ? 4. Does the Superior Court of Quebec have jurisdiction to hear this matter by virtue of

section 236.1 QSA ? 5. In the event the Court concludes in favour of the jurisdiction of Quebec courts over the matter, did the judge err in concluding that

article 3135 CCQ and the forum non conveniens doctrine would not lead the Court to decline jurisdiction? ANALYSIS 1. Did the judge err by concluding that Volkswagen did not attorn to the jurisdiction of Quebec authorities, as set out in article 3148(5) CCQ ? [26] [ 35 ] Chandler claims that because Volkswagen waived its right to raise the issue of territorial jurisdiction at the authorization stage, it implicitly chose to submit to the Superior Court’s jurisdiction for the trial on the merits and that the judge erred in not recognizing that it had attorned to the jurisdiction of Quebec courts.

He asserts that this Court’s judgment in FCA Canada inc. c. Garage Poirier & Poirier inc . [27] supports his position. [ 36 ] However, in that case, while the Court did recognize that pre-authorization and authorization judgments form part of the same “proceeding”, it did so in the context of a ruling on the opportunity of granting leave to appeal of a judgment rendered at the pre- authorization stage. In doing so, the Court relied on earlier comments in Centrale des syndicats du Québec c. Allen , [28] also made in the course of assessing the appropriateness of granting leave to appeal.

Hence, neither cases can be interpreted as eliminating the well- recognized distinction, from a procedural perspective, between the authorization stage and the merits of the case, [29] so as to successfully argue that Volkswagen waived its right to raise a declinatory exception at the authorization stage. [ 37 ] An implied submission must be obvious. [30] Chandler’s claim of an implied submission on the part of Volkswagen for the entire class action proceeding is groundless.

As pointed out by the judge, Volkswagen expressed the intention to contest the jurisdiction of Quebec courts, as soon as the Originating Application was filed.

It authorized its counsel to accept service of the proceedings “under reserve of its rights to contest the jurisdiction of this Court”, while serving an application to dismiss at the earliest opportunity. [ 38 ] In my opinion, the judge’s conclusion that Volkswagen did not attorn to the jurisdiction of Quebec courts as a result of having waived its right to raise a declinatory exception based on lack of jurisdiction at the authorization stage is well-founded.

She underlined that the language used of the Authorization Judgment specifically referred to Volkswagen’s waiver of right as having occurred at the authorization stage . [31] In the judgment under appeal, she ruled that, by doing so, Volkswagen had not waived its right to contest the jurisdiction of Quebec courts at the merits stage . [32]

[ 39 ] This is consistent with Infineon , [33] where the Supreme Court acknowledged that the determination of jurisdiction at the authorization stage is not res judicata and that the issue of territorial jurisdiction can be raised again on the merits . At the authorization stage, the judge had not been not tasked with the determination of whether Volkswagen had waived its right to contest jurisdiction on the merits.

Her judgment certainly cannot be interpreted as having decided the issue. [34] [ 40 ] In the absence of a demonstrated error in the judge’s reasoning or in her conclusion regarding the absence of attornment to Quebec courts, this ground of appeal must be set aside. 2. Did the judge err by concluding that no injury was suffered in Quebec, as set out in article 3148(3) CCQ ? [ 41 ] Each of the connecting factors listed in article 3148(3) CCQ [35] are independent and must be considered separately.

They are not cumulative. [36] [ 42 ] The judge considered all three securities globally, and based on the Bernier Report, she held that, concerning the Shares and the ADRs, the injury resulted from contracts entered into in Europe and in the United States. While she recognized that the contracts for the purchase of the Notes may have been entered into in Quebec, she found this connection to be too weak to support the conclusion that every class member had suffered an injury in Quebec.

The fact that the Note holders suffered an injury in Quebec could not establish jurisdiction over the holders of the Shares and ADRs. She wrote: [37] [93] The Court therefore has to determine the real situs of the injury alleged by Mr. Chandler .

Based on Infineon , the place where the contract for the acquisition of the securities was concluded is a relevant juridical fact for that purpose, and this, notwithstanding if VW was a party or not to the contract. [94] In that respect, the Court agrees with VW that the alleged economic injury resulting from a decrease in value of the Shares and of the ADRs would normally occur in the jurisdiction where the Class members purchased and sold these securities because, indeed, it is typically an important juridical fact from which the pecuniary loss would flow . [95] So, where were the securities at issue purchased and sold? [96] With respect to the Shares and the ADRs, contrary to the allegations of Mr.

Chandler, the evidence adduced by VW demonstrates that the Shares are purchased and sold on market exchanges in Europe and that the ADRs are purchased and sold on the OTC markets in the United States . [97] According to the uncontested expert report of Mr. Jean-François Bernier pertaining to regulatory and operational matters in the securities industry, an investor residing in Québec cannot execute a trade himself in VW’s Shares.

The Shares publicly trade solely in Europe and can only be bought and sold by a non-Canadian broker who is an approved trading member, subscriber or participant to one of those European marketplaces. The trade is therefore executed outside of Québec . [98] Mr. Bernier explains that the same applies to the purchase and sale of ADRs. VW ADRs are publicly traded solely in the United States OTC markets, and can only be bought and sold by a United States broker-dealer who is an approved trading member, subscriber or participant to the United States OTC markets.

Again, the trade is executed outside of Québec . [99] With respect to the Shares and the ADRs, the Court finds that the place where these securities were acquired is an important juridical fact from which the pecuniary loss flowed.

Consequently, the economic injury relating to the decrease in value of the Shares and the ADRs was not suffered in Québec . (Emphasis added; citations omitted) [ 43 ] Her conclusion is once again consistent with the principles of Infineon [38] whereby to confer jurisdiction on Quebec courts, a purely economic injury, or damage, must be substantially suffered and not merely recorded in Quebec. [39] Here, class members merely recorded an economic injury in the province.

They did not suffer any substantial injury in Quebec within the meaning of article 3148(3) CCQ . [ 44 ] In Sanexen Services environnementaux inc. c.

Englobe Corp. , [40] this Court emphasized the need to establish a connection of one or more material facts to Quebec so as to tie the resulting economic damage to this province [41] and gave examples of material facts that can help locate where purely economic damage was substantially suffered: [38] Certes, tenter de situer le préjudice matériel qui consiste en une perte de revenus ou de profits, bien meuble intangible, dans un lieu ou sur un territoire physique, ne sera pas toujours évident.

On pourra toutefois établir au moyen d’une preuve l’endroit où a été conclu le contrat constituant véritablement la source du préjudice , celui où aurait été exercée l’activité qui aurait généré les revenus et les profits prétendument perdus , où aurait été localisée la machinerie ou la main-d’œuvre impliquée dans l’activité génératrice, ou encore où le paiement aurait été exigible du débiteur. Ce ne sont que des exemples de facteurs de rattachement possibles; il peut y en avoir d’autres sans doute.

Il appartiendra aux juges d’instance d’apprécier et de pondérer les facteurs prouvés pour déterminer l’endroit, ou plus précisément le district judiciaire, où le préjudice économique allégué par un demandeur aura été subi. Chaque cas en sera évidemment un d’espèce. (Emphasis added; references omitted) [ 45 ] The Supreme Court has repeatedly stressed that a class action can succeed only if each claim it covers, taken individually, could serve as a basis for court proceedings: [42]

[52] This Court has stated on several occasions that a class action is merely a procedural vehicle and that its use does not have the effect of changing the substantive rules applicable to individual actions ( Bisaillon v. Concordia University , 2006 SCC 19 , [2006] 1 S.C.R. 666, at para. 17 ; Dell Computer Corp. v. Union des consommateurs , 2007 SCC 34 , [2007] 2 S.C.R. 801, at paras. 105-8 ; St. Lawrence Cement , at para. 111). In other words, the class action mechanism cannot be used to make up for the absence of one of the constituent elements of the cause of action.

A class action can succeed only if each claim it covers, taken individually, could serve as a basis for court proceedings . [52] Notre Cour a affirmé à plusieurs reprises que le recours collectif ne constitue qu’un moyen procédural et que son utilisation n’a pas pour effet de modifier les règles de fond applicables au recours individuel ( Bisaillon c. Université Concordia , 2006 CSC 19 , [2006] 1 R.C.S. 666, par. 17 ; Dell Computer Corp. c. Union des consommateurs , 2007 CSC 34 , [2007] 2 R.C.S. 801, par. 105-108 ; Ciment du Saint-Laurent , par. 111).

En d’autres termes, on ne peut s’autoriser du mécanisme du recours collectif pour suppléer à l’absence d’un des éléments constitutifs du droit d’action. Le recours collectif ne pourra réussir que si chacune des réclamations prises individuellement justifiait le recours aux tribunaux. (Emphasis added) [ 46 ] In 2012, this Court made a similar observation in Telus Mobilité c.

Comtois : [43] [23] It is also well established that class action proceedings do not empower the Quebec Superior Court to exercise jurisdiction over a person as a member of the group where it could not do so if it dealt with an individual claim from the said person. (References omitted) [ 47 ] In the case at hand, the location of the economic injury is determined by the location of the conclusion of the contract for the purchase of the securities.

Contrary to Chandler’s proposition, the relevant contract for the purpose of determining the location of the injury is not the contract entered into between the Quebec resident and the investment dealer registered in Quebec or the Canadian broker. The sole fact that a Quebec investor may have given an order to purchase in Quebec cannot serve to transform his purchase in Europe or in the United States into a contract entered into in Quebec by virtue of

article 1387 CCQ . The Bernier Report provides helpful insight regarding the circumstances of the purchase of the Shares and the ADRs: [44] Shares Québec Resident (submits order to buy or sell) → investment dealer registered in Québec (routes order to buy or sell to Non-Canadian Broker) → Non-Canadian Broker (executes trade) → International (Non-Canadian) Stock Exchanges and OTC marketplaces ADRs Québec Resident (submits order to buy or sell) → Canadian Broker (routes order to buy or sell to U.S. Broker-Dealer) → U.S. Broker-Dealer (executes trade) → U.S.

OTC Markets Group (All emphasis added) [ 48 ] Chandler has not demonstrated any palpable or overriding error on the part of the judge in concluding that the injury flows from the location where the Shares and ADRs were purchased and sold, being where the activity at the origin of the loss of profit occurred. [45] [ 49 ] The contracts for the purchase of Shares and ADRs were entered into abroad, where the non-Canadian broker executed the order as an agent. [46] The non-Canadian broker acted as an agent of the investment dealer registered in Quebec or the Canadian broker, not the Quebec investor. [47] The non-Canadian broker bought or sold the Shares or the ADRs abroad, on behalf of the Quebec or Canadian broker, for the Quebec investors. [48] While Quebec investors enter into the Order Contract, which is a service contract with their Quebec or Canadian broker, such contract is not directly at the origin of the injury suffered. [49] [ 50 ] As far as the Notes that were privately distributed in Quebec are concerned, [50] it is true that the contract at the origin of the injury was entered into in this province.

However, this is not sufficient to establish jurisdiction in this matter. [ 51 ] The judge insisted on the need to assess the class jurisdiction globally: [51] [47] …there is only one class that has been defined pursuant to the Authorization judgment and VW never suggested or requested that subclasses should be created. Its attempt to segregate the jurisdictional analysis according to the nature of the security held by the Class members constitutes an indirect review of the Authorization judgment and of Class definition judgment.

Applications for leave to appeal both these judgments have been dismissed . [48] Second, although it may be possible at a later stage of these proceedings that the Class as defined pursuant to the Authorization judgment be divided into subclasses and that the claim be dismissed against one of the subclasses and not another, for the purposes of the jurisdictional analysis, that eventuality does not change the fact that only one cause of action is alleged by Mr. Chandler with respect to

all VW securities, not three distinct causes of action respecting three distinct types of securities. [49] In any event, even if more than one cause of action was at issue , in Poppy Industries Canada Inc. , the Court of Appeal indicated that jurisdiction must be determined globally, and not segmented for each cause of action. As such, jurisdiction over one of the causes of action suffices to grant jurisdiction over the whole proceeding: […] (Emphasis added; references omitted) [ 52 ] She took the approach that the entire class must have the same connecting factor .

In other words, the connecting factor must provide a real and substantial link between the province and the entire class: [52] [101] That said, it is not contested that the Notes were only privately issued to qualified or accredited investors in Québec under a prospectus exemption and that no public distribution took place in Québec. It is also established that the VCCI Notes have never been listed for exchange. Finally, as indicated above, the only evidence filed by the parties is that VCCI privately distributed Notes to only 13 unique accredited investors in Québec .

It may be that other issuances took place, but the parties, and Mr.

Chandler in particular, on whom the burden of proof lies, elected not to adduce additional evidence in this regard. [102] Notwithstanding these facts as well as the fact that VW did not issue the Notes and that it is not a party to any contract relating to the acquisition of the Notes, based on Infineon , the private issuance of the Notes by VCCI in Québec to a limited number of qualified or accredited investors is a factor to be considered to determine whether the Québec courts have jurisdiction under Article 3148(3) CCQ However, as indicated above, that is not the only relevant factor.

To paraphrase Infineon , the Court must look at whether “the alleged pecuniary loss flowed directly from the contract” and whether the alleged loss was suffered in Québec “as the result of a material event that occurred in Québec” (our emphasis). [103] Here, the consideration of all the relevant facts leads the Court to conclude that the events relied upon by Mr. Chandler are insufficient to ground the Québec courts’ jurisdiction. As strenuously argued by Mr.

Chandler, this case is not founded on three causes of action corresponding to each type of security at issue, but on a single cause of action and a single series of acts and omission which allegedly had an impact on VW securities as a whole . Given the way that Mr.

Chandler framed his claim, the fact that it indiscriminately targets holders of all types of security and the findings of the Court relating to the manner and circumstances around the acquisition of the securities, including the Shares, the ADRs and the Notes, the Court believes that the theoretical connecting factor relating only to where the Notes were acquired is insufficient, too remote and too tenuous to engage the jurisdiction of the Court under Article 3148(3) CCQ . (Emphasis added; references omitted) [ 53 ] Chandler argues that, by doing so, the judge improperly distinguished the public and private issuance of Notes.

Somewhat surprisingly, he further adds that, in any event, these Notes issued privately to thirteen private investors in Quebec should have no bearing on the outcome of his application, given that they were issued after the end of the class period. In fact, in his view, the actual number of Note holders is irrelevant to the determination of whether they suffered an injury in Quebec. [ 54 ] Here, the judge was of the view that the fact that the Note holders entered into a contract in Quebec was insufficient to conclude that an injury had been suffered in Quebec by every class member.

Chandler has failed to demonstrate that this reasoning is flawed.

In my opinion, by following the Supreme Court’s approach in Infineon regarding the need to tie a purely economic injury to one or more material facts that are tied to Quebec, so as to ensure the connection is not too weak or theoretical, [53] the Superior Court judge did not commit any error. [ 55 ] Moreover, to conclude that the Note holders alone serve to bring the matter within the authority of the Superior Court, while the Share and the ADR holders suffered no injury in Quebec would, in my view, amount to jurisdictional overreach and run contrary to the principles of international comity, especially where the number of Note holders is unknown or is believed to be low and where Chandler himself acknowledges that the thirteen accredited investors mentioned by the judge did not acquire the Notes during the class period, in which case, they would not even qualify as members of the class. [ 56 ] Given the foregoing, I propose that Chandler’s second ground of appeal also be set aside. 3.

Did the judge err by concluding that a fault was not committed in Quebec, as set out in article 3148(3) CCQ ? [ 57 ] Chandler asserts that Volkswagen committed a fault in Quebec given that it “sent marketing materials and Impugned Documents which contained the misrepresentations alleged herein to Québec investors in order to induce them to purchase [Volkswagen] vehicles and securities”. [ 58 ] He argues that the judge “failed to address the fact that [Volkswagen] made misstatements to the AMF and to Québec investors in [its] base prospectuses”.

He claims that the judge erred in fact when she wrote that the “prospectuses [were] remitted to the Autorité des marches financiers by VCCI” and that Volkswagen only “guaranteed the Notes issued by VCCI”, while failing to notice that the prospectuses identify Volkswagen not only as the guarantor, but also as the issuer of Notes. [ 59 ] Moreover, Chandler claims that, even if it the Court were to conclude that Volkswagen was not the issuer of the Notes, it would have to conclude that it nonetheless committed a fault in this province by sending documents to the AMF and to Quebec investors which contained misrepresentations and omissions of material facts. [ 60 ] Finally, Chandler argues that the judge erred in law by reversing the burden of proof, placing the onus on him to prove that issuances of Notes, other than thirteen private issuances, took place in Quebec.

[ 61 ] Firstly, Chandler’s argument rests on the Notes and prospectuses sent to the AMF. That argument cannot support a fault committed by Volkswagen with respect to the purchase of Shares and ADRs. [ 62 ] Moreover, Chandler’s argument is based on the assertion that Volkswagen remitted the base prospectuses to the AMF, but the letters exchanged with the AMF do not support this assertion.

Based on the evidence in the record, the judge did not err in finding that VCCI issued the Notes and that it was VCCI, and not Volkswagen, that had remitted the prospectuses to the AMF. [54] She was also right in concluding that the prospectuses remitted by VCCI , not Volkswagen, cannot constitute the basis for a fault committed in Quebec by Volkswagen . [ 63 ] Although some Impugned Documents may have been available in Quebec, there is no evidence that they were prepared in Quebec or that a decision to publish them had been made in Quebec.

They were prepared entirely in Germany. [ 64 ] In Van Breda , the Supreme Court had emphasized that a “real and substantial connection” is needed between the province and the issue in dispute [55] and had also cautioned that, in some instances, recognizing connecting factors that are too broad could amount to granting “universal jurisdiction”. [56] [ 65 ] Professor Catherine Walsh draws a parallel between the reasoning of LeBel, J. in Van Breda concerning potential jurisdictional overreach and the reasoning of Kasirer, J.A. (as he then was) in Infineon : [57] Transposed to a Québec context, Justice Lebel’s reasoning [in Van Breda ] implies that continuing bodily injury suffered in Québec from an injury initially suffered abroad may not, standing alone, mean that “damage was suffered in Québec” for the purposes of article 3148(3).

To conform to the constitutional limits on jurisdictional authority , some additional relevant connection to Québec might also need to be present such as the formation of a related contract or a related business activity of the defendant. This is supported by the evident parallel between Justice LeBel’s reasoning in Van Breda and Justice Kasirer’s analysis in Infineon Technologies on the need for the existence of a material fact connecting financial loss alleged to have been suffered [in] Québec to the province in extra contractual claims by Québec residents.

Justice Kasirer’s justification for requiring a material factual connection to Québec – to avoid equating the assumption of jurisdiction with the victim’s domicile in Québec – parallels the concern with jurisdictional overreach that would seem to underpin Justice LeBel’s reasoning in Van Breda . (Emphasis added) [ 66 ] Much in the same way here, in order to avoid jurisdictional overreach, the requirement of one or more material facts tying the connecting factor to the province should be held to apply where the fault alleged is one of misrepresentation by omission. [ 67 ] The “mere allegations” that Volkswagen sent some documents, or that these documents were accessible by investors in Quebec, are insufficient here to conclude that a fault was committed in Quebec.

Chandler does not allege that Volkswagen sent documents specifically to Quebec investors and, in addition and as previously noted, the base prospectuses referring to documents that contained the alleged misstatements were issued by VVCI and not by Volkswagen. [ 68 ] Chandler therefore has failed to demonstrate that the Superior Court judge erred in concluding that there are no material facts that specifically tie the fault of misrepresentation by omission to this province. [58] Chandler’s third argument must therefore also be set aside. 4.

Does the Superior Court of Quebec have jurisdiction to hear this matter by virtue of

section 236.1 QSA ? [ 69 ] Chandler claims the judge erred in concluding that the class action is not based on facts “related to the distribution of a security” within the meaning of

section 236.1 QS A , which reads as follows: [59] 236.1 Any action under this Title or any action under the ordinary rules of law in respect of facts related to the distribution of a security or to a take-over bid or issuer bid may be brought before the court of the plaintiff’s residence . In matters pertaining to the distribution of a security, the laws of Québec are applicable where the subscriber or purchaser resides in Québec, regardless of the place of the contract. Any contrary stipulation as to the jurisdiction of the courts or the applicable legislation is without effect . 236.1 L’action fondée sur le présent

titre ou l’action intentée selon le droit commun pour des faits reliés au placement d’une valeur ou à une offre publique d’achat ou de rachat peut être portée devant le tribunal de la résidence du demandeur . En ce qui concerne le placement d’une valeur, la loi du Québec est applicable dès lors que le souscripteur ou l’acquéreur réside au Québec, indépendamment du lieu du contrat. Toute stipulation contraire concernant la compétence des tribunaux ou la loi applicable est sans effet . (Emphasis added) [ 70 ] Chandler argues that the class action is contemplated by

section 236.1 QS A , being an action brought on behalf of investors who are residents of Quebec, under the ordinary rules of law, and related to the distribution of a security. [ 71 ] The Superior Court judge dealt with

article 236.1 QSA in the following way: [60]

[106] The case law on

Section 236.1 of the Securities Act is scarce and, as readily admitted by Mr. Chandler, there is no case law supporting his position that the Court’s jurisdiction can be founded on this provision. Based on the wording of

Section 236.1 and the remedial nature of the Securities Act which must receive a large and liberal

interpretation, he nevertheless posits that so long as the purchaser of a VW security resides in Québec, the Québec courts have jurisdiction, regardless of the place where the purchase was concluded. [107] The Court disagrees because

Section 236.1 of the Securities Act contains an important qualification: the action must be “related to the distribution of a security” or, in French, “ pour des faits reliés au placement d’une valeur ”. [108] In the Court’s view, this class action is not “related to the distribution of a security” within the meaning of

Section 236.1 of the Securities Act . The class action relates to misrepresentations or omissions of VW in relation to the compliance of certain of its vehicles with the applicable emissions standards and the consequences of these acts and omissions on the value of VW securities. The action is not based on securities legislation nor does it relate to the distribution of securities. Rather, invoking the general extra-contractual civil liability regime in Québec codified in

Article 1457 CCQ, the action alleges that VW committed a civil extra-contractual fault for which Mr. Chandler seeks compensatory damages for the loss in the value of VW securities resulting from alleged misrepresentations and omissions. [109] Furthermore, for the reasons outlined above, the distribution of securities in Québec by VCCI cannot be considered as being the distribution of securities by VW and cannot serve as a basis for asserting jurisdiction over VW pursuant to

Section 236.1 of the Securities Act . [110] The Court considers that if the intention of the legislator by enacting

Section 236.1 of the Securities Act had been to modify the application of the rules of private international law in Québec and of

Article 3148 CCQ as suggested by Mr. Chandler, a clearer language would have been used. (References omitted) [ 72 ] Chandler asserts that the judge failed to take into account the meaning of the reference to “the ordinary rules of the law” found in

section 236.1 QSA and that she also failed to analyze the term “distribution” as defined in

section 5 QSA , where the notion of “endeavour to obtain subscribers or acquirers” is repeatedly used.

Section 5 QSA reads as follows: [61] “distribution” means (1) the endeavour to obtain, or the obtaining , by an issuer, of subscribers or acquirers of his securities; (2) the endeavour to obtain, or the obtaining , by a firm underwriter, of purchasers for securities he has underwritten; […] (5) the endeavour to obtain, or the obtaining , by a subscriber or purchaser of securities which he acquired outside Québec, of purchasers for such securities in Québec, except on a stock exchange or on the over-the-counter market; […] (7) the endeavour to obtain, or the obtaining , by an agent, of subscribers or purchasers of securities being distributed in accordance with subparagraphs 1 to 6; (8) the giving in guarantee by an issuer of securities issued by him for that purpose; […] «placement»: 1° le fait, par un émetteur, de rechercher ou de trouver des souscripteurs ou des acquéreurs de ses titres ; 2° le fait, par le preneur ferme, de rechercher ou de trouver des acquéreurs de titres qui ont fait l’objet de la prise ferme; […] 5° le fait, par le souscripteur ou l’acquéreur qui a acquis ses titres à l’extérieur du Québec, de rechercher ou de trouver des acquéreurs au Québec , sauf sur une bourse ou sur le marché hors cote; […] 7° le fait, par un intermédiaire, de rechercher ou de trouver des souscripteurs ou des acquéreurs de titres faisant l’objet d’un placement en vertu des paragraphes 1° à 6°; 8° le fait, par un émetteur, de donner en garantie des titres émis par lui à cette fin; […] (Emphasis added) [ 73 ] Relying on the language of

section 5 QSA , Chandler argues that the action is based on Volkswagen’s dissemination of public statements and documents in an “endeavour to obtain acquirers of its securities”. He invokes the allegations of his own Originating Application, that Volkswagen “admitted to having distributed securities from Quebec pursuant to

section 12 of the QSA and informed the AMF of such” and that, as a result, it is deemed to have made a distribution of securities to the public pursuant to sections 68(1) (1) and 68(1)

(4) QSA . [ 74 ] However these allegations refer to letters issued by the AMF that acknowledge receipt of VCCI’s filings with the AMF and not of Volkswagen.

[ 75 ] Chandler argued at the time of the hearing that, because Volkswagen irrevocably and unconditionally guaranteed the Notes, the situation would be one contemplated by paragraph 8 of

section 5 , which defines the term “distribution” as “ the giving in guarantee by an issuer of securities issued by him for that purpose”. [ 76 ] In doing so, he relied once again on the text of the letters addressed by VCCI’s attorneys to the AMF, in the context of a request to be allowed to distribute VCCI Notes to prospective investors “outside Québec”, which do not support his proposition, as per the extract reproduced below: [62] “Please accept this letter as formal notice pursuant to the second paragraph of

Section 12 of the Securities Act (Québec) (the “ Act ”) from our client, VW Credit Canada, Inc. / Crédit VW Canada, Inc. (“ VCCI ”), of its intention to distribute euro medium term notes (“ VCCI NOTES ”) under the Programme to prospective investors outside Québec . Under this multi-issuer Programme, Volkswagen Aktiengesellschaft (“ VWAG ”), Volkswagen International Finance N.V., VW Credit, Inc, and VCCI (collectively, the “ Volkswagen Group ” and each, an “ Issuer ”) may issue notes (collectively, “ Notes ”).

Notes to be issued under the Programme (other than Notes issued by VWAG) are irrevocably and unconditionally guaranteed by VWAG . The method of distribution of each Tranche of Notes will be stated in the applicable final terms supplement (the “ Final Terms ”) relating to each tranche of Notes issued under the Programme. Distribution Without Prospectus Set out below is the information required by

Section 115 of the Regulation passed under the Act for the purpose of applying the second paragraph of

Section 12 of the Act : […] (Emphasis added) [ 77 ] Indeed, the letters mention that “[ Volkswagen] is irrevocably and unconditionally guaranteeing notes issued “under the Programme (other than Notes issued by [Volkswagen])”. They also confirm that the Notes were issued by VCCI and not Volkswagen, a situation not contemplated by paragraph 8 of

section 5 and that these Notes were intended to be sold outside of the province of Quebec under a prospectus exemption, bringing them outside the scope of a distribution of securities in Quebec . [ 78 ] In order to qualify Volkswagen’s actions as a “distribution of securities” within the definition found under

section 5 QSA , Chandler also argues that Volkswagen’s misrepresentations presuppose some form of positive action to obtain acquirers. However, in my opinion, misrepresentations on the compliance of vehicles with the applicable emissions standards can hardly be held to qualify as positive actions to obtain acquirers. [ 79 ] This Court’s recent ruling in Langford Sharp v. Autorité des marchés financiers [63] serves as useful comparison and is an example of an endeavour to obtain acquirers of securities in Quebec.

In that case, the alleged goal was to lure investors into buying the shares through a pump-and-dump scheme. [64] [ 80 ] Hence, Chandler’s argument that the judge would have overlooked the applicability of

section 236 QSA , must be dismissed.

While the action is undeniably initiated before the Quebec Superior Court, on behalf of Quebec residents and under the ordinary rules of law, it fails to meet the third requirement because it does not relate to the distribution of securities, as the Superior Court judge concluded. [ 81 ] The judge came to this conclusion after pointing that there is very little jurisprudence on the precise meaning of “distribution”. [65] Her conclusion is also consistent with the Bernier Report, which stands for the proposition that Volkswagen did not distribute securities in the province [66] and that VCCI was the entity that privately distributed the Notes in Quebec. [67] Chandler has failed to demonstrate that the judge’s

interpretation of the expression “related to the distribution of a security” is flawed. [ 82 ] A reading of

section 236.1 QSA , as proposed by Chandler, would allow a Quebec resident, based on his residence alone, to bring an action before the Quebec courts for any securities acquired abroad regardless of the circumstances. In my view, this would lead to jurisdictional overreach. In fact, such a broad basis of jurisdiction with no other connection to the province would likely be unconstitutional. [68] [ 83 ] Moreover, as the Superior Court judge pointed out, the fact that VCCI privately distributed the Notes cannot serve as a basis to apply

section 236.1 QSA against Volkswagen. As previously mentioned, Chandler’s argument rests on the incorrect premise that the Notes were issued by Volkswagen. It contradicts the Bernier Report, which explained the role of Volkswagen as compared to that of VCCI at the time the Notes were issued, and stated that Volkswagen did not distribute securities in the province [69] and that VCCI was the entity that privately distributed the Notes in Quebec. [70] [ 84 ] The Bernier Report also pointed out that, while

section 11 QSA [71] sets out the requirement that a person who intends to distribute securities prepare a prospectus, the prospectus requirement was not triggered in this case, thereby suggesting that there was no distribution within the meaning of

section 5 QSA . [ 85 ] Consequently,

section 236.1 QSA cannot be held to apply to a class action related to the distribution of securities with no connection to the province . [72] This is especially so because the QSA , as a constitutional requirement, must apply within the province . [73] [ 86 ] Again, the situation must be distinguished from that in Langford Sharp , where there was indeed a meaningful connection between the alleged fault of misrepresentation by omission and the province of Quebec: press releases at the root of the alleged pump- and-dump scheme had been issued in Montreal, [74] the issuer of the shares had a business address in Montreal and the company issuing

the shares was a reporting issuer in this province. [75] [ 87 ] For these reasons, I also propose to dismiss this last ground of appeal. [ 88 ] Given that Chandler has failed to convince me that the judge committed any reviewable error that would warrant the Court’s intervention by dismissing the action for want of jurisdiction, I would propose to dismiss the appeal with legal costs. [ 89 ] In light of my conclusion regarding the absence of jurisdiction of Quebec courts over the matter, there is no basis for addressing the argument of forum non conveniens raised in the incidental appeal.

Hence, I would also propose to dismiss the incidental appeal, but without legal costs, under the circumstances. GENEVIÈVE MARCOTTE, J.A.