Brunette v. Legault Joly Thiffault 2018 SCC 55

Decision Date: December 7, 2018
Neutral Citation: 2018 SCC 55
On Appeal From: Court of Appeal of Quebec
Case Information: 37566

Breakdown of the Decision:

• Majority Opinion: Justice Malcolm Rowe dismissed the appeal. Chief Justice Wagner and Justices Abella, Moldaver, Karakatsanis, Gascon, Brown, and Martin agreed.
• Dissenting Opinion: Justice Suzanne Côté would have allowed the appeal, arguing the trust had sufficient interest to sue and should have let a trial judge decide the claim.

Summary of the Case:

Background:

• Mr. Brunette and Mr. Maynard managed a trust that owned 100% of the shares in a holding company. This holding company, in turn, owned shares in companies collectively known as Groupe Melior, which operated seniors’ homes.
• In 2009, Groupe Melior faced unexpected tax bills, leading to the bankruptcy of most of its companies. Consequently, the holding company and the trust became worthless.

Claims:

• Mr. Brunette and Mr. Maynard claimed that lawyers and accountants provided poor advice and failed to inform the trust about potential issues with the tax structure, leading to the financial downfall.
• They sued the lawyers and accountants for $55 million on behalf of the trust.

Legal Issue:

• The core issue was whether the trust, represented by Mr. Brunette and Mr. Maynard, had the right (or “interest”) to sue the accountants and lawyers.
• Under Quebec’s civil law and common law across Canada, shareholders typically cannot sue for damages to a company in which they hold shares, unless the wrongdoer owes a separate duty to the shareholders.

Court Decisions:

• Both the trial judge and the Court of Appeal dismissed the case, stating that the trust had no direct interest to sue.
• The Supreme Court’s majority agreed, concluding:
• The harm was directly to the Groupe Melior companies, not the trust.
• The lawyers and accountants owed no duty to inform or advise the trust directly.
• The loss of value in the trust was indirect and the same as the loss suffered by Groupe Melior, which only the companies could claim.

Dissent:

• Justice Côté believed the trust had a sufficient interest to bring the lawsuit and that the matter should be decided at trial.

Key Takeaways:

• Shareholder Rights: Shareholders typically cannot sue for indirect losses due to company harm.
• Duty and Harm: Direct duty and harm are necessary to establish a right to sue in such contexts.
• Corporate Structure Impact: Business structures that protect trusts from liabilities also limit their ability to claim rights to sue for corporate harms.

This decision reinforces the principle that indirect losses from corporate harm do not grant shareholders the right to sue, emphasizing the separation between corporate and shareholder interests in legal claims.