Background
Kayne Michael Middleton brought a proposed shareholder class action against TELUS International (Cda) Inc., now known as TELUS Digital, and several of its officers and directors. His pleadings alleged that public statements made between February 16, 2023 and August 1, 2024 misrepresented the effect of the company’s shift toward artificial-intelligence-based services on its profit margins. The allegations had not been proven.
Middleton asserted statutory secondary-market misrepresentation, shareholder oppression, and negligent misrepresentation claims. Because the statutory securities claim required leave under s. 140.8 of British Columbia’s Securities Act, he filed an originating petition for leave alongside his civil claim. A case management judge ordered that the leave petition and the class-certification application be heard sequentially during the same hearing. TELUS appealed, arguing that leave had to be determined first in a separate proceeding and, alternatively, that the judge had placed undue weight on avoiding delay from separate appeals.
The Court’s Holding
The Court of Appeal dismissed TELUS’s appeal. It held that the flexible, case-specific framework established in British Columbia v The Jean Coutu Group (PJC) Inc. governs the sequencing of the leave petition and certification application. Although no valid secondary-market liability action exists until leave is granted, that requirement does not prevent a court from deciding leave first and certification second within the same hearing. The sequencing order addressed procedure and did not dilute the statutory merits-screening requirement.
The Court also found no reviewable error in the case management judge’s exercise of discretion. The judge recognized the possible inefficiency, cost, and prejudice of preparing for certification before the scope of the securities claim was settled, but reasonably concluded that those concerns were outweighed in this case by the risk of lengthy delay and multiple appeals from separate hearings, as well as some overlap in the evidence and submissions. Given the substantial deference owed to case-management decisions, TELUS’s disagreement with the weight assigned to those considerations was insufficient to justify appellate intervention.
Key Takeaways
- A statutory requirement to obtain leave before commencing a secondary-market liability claim does not mandate a separate leave hearing before all certification proceedings.
- Courts may apply the Jean Coutu factors to sequence securities-leave and class-certification applications, with judicial efficiency and timely resolution assessed in the circumstances of the particular case.
- Appellate courts will intervene in a case management judge’s discretionary sequencing decision only for a reviewable error, an unreasonable balancing of relevant considerations, or clear injustice.
Why It Matters
The decision confirms that British Columbia courts retain broad procedural discretion in proposed securities class actions. The robust statutory screening of secondary-market claims remains intact, but it does not create a categorical rule requiring leave and certification to proceed through separate hearings.
Parties seeking or resisting combined hearings must therefore ground their arguments in the specific proceeding, including its complexity, potential overlap, preparation costs, prejudice, and the risk of delay from interlocutory appeals.