Executive Summary: Key Legal and Evidentiary Issues

• The Court of Appeal for British Columbia dismissed TELUS's appeal from a case management judge's sequencing order in a proposed securities class action.
   
• Mr. Middleton, a TELUS Digital shareholder, sought to have his petition for leave to pursue a secondary market misrepresentation claim heard at the same hearing as his certification application.
   
• TELUS argued that the Jean Coutu sequencing framework could not apply because a secondary market liability claim filed without leave is a legal nullity.
   
• Justice Riley held that the case management judge correctly applied the non-exhaustive Jean Coutu factors in ordering a combined hearing.
   
• Appellate deference required upholding the judge's weighing of those factors, including the risk of delay from separate interlocutory appeals.
   
• No monetary award was at issue in this decision, which addressed only the procedural sequencing of the leave petition and the certification application.
   

Facts of the case

This appeal arose from a proposed class action against TELUS International (Cda) Inc. ("TELUS Digital") and 15 named officers and directors, collectively referred to as TELUS. Mr. Middleton, a TELUS Digital shareholder who acquired shares during a proposed class period running from February 16, 2023 to August 1, 2024, alleges that TELUS Digital and certain officers and directors made public statements misrepresenting the profit margin implications of the company's move toward AI-based services. On December 12, 2024, Mr. Middleton filed a notice of civil claim advancing three causes of action: a statutory claim of secondary market misrepresentation under section 140.3 of the Securities Act, a shareholder oppression claim under section 227 of the Business Corporations Act, and a common law claim of negligent misrepresentation. The secondary market liability claim was pleaded conditionally, since it required leave under section 140.8 of the Securities Act, and Mr. Middleton filed an accompanying petition seeking that leave. On June 27, 2025, he applied for an order that his leave petition be heard concurrently with his certification application under section 4(1) of the Class Proceedings Act. TELUS opposed this, arguing that leave had to be obtained before any other steps, including certification, could be taken. A case management judge heard the application on August 6, 2025, and in reasons issued August 21, 2025 (indexed at 2025 BCSC 1611), ordered that the leave petition and the certification application be heard "sequentially in the same hearing." TELUS was granted leave to appeal that sequencing decision on December 11, 2025.

Policy and legislative provisions at issue

The appeal centred on the framework for sequencing preliminary applications in proposed class actions set out in British Columbia v The Jean Coutu Group (PJC) Inc., 2021 BCCA 219. That framework identifies a non-exhaustive list of factors, including delay in proceeding to certification, the potential for a preliminary application to dispose of or narrow the proceeding, the cost of pre-certification procedures, the potential for delay from interlocutory appeals, the complexity and interplay of issues, whether an outcome would promote settlement, the interests of judicial efficiency, and the fair and efficient determination of the proceeding. Also central was section 140.8 of the Securities Act, which requires a plaintiff to obtain leave before commencing a secondary market liability claim by showing the action is brought in good faith and has a reasonable possibility of success at trial. TELUS contended this leave requirement is a "robust deterrent screening mechanism," a description drawn from the Supreme Court of Canada's discussion of an analogous Quebec provision in Theratechnologies Inc. v 121851 Canada Inc., 2015 SCC 18, and argued this qualitative distinction meant the Jean Coutu framework should not govern the sequencing of a leave petition at all.

Reasoning and analysis

Writing for a unanimous panel, Justice Riley first addressed whether the Jean Coutu framework applied. He rejected TELUS's submission that a secondary market claim filed without leave is a nullity that forecloses any sequencing analysis, distinguishing the cases TELUS relied on, Larouche v Pure Gold Mining Inc. and 0116064 B.C. Ltd. v Alio Gold Inc., on the basis that Mr. Middleton had properly brought his claim before the court by way of a petition for leave, unlike the plaintiffs in those cases. Justice Riley also found no principled or practical basis for treating the leave requirement as removing this case from the Jean Coutu framework, noting that Jean Coutu itself rejected a similar attempt to treat a jurisdictional issue as a threshold matter requiring separate resolution outside the discretionary sequencing analysis. He observed that Ontario courts have taken varying approaches to sequencing leave and certification in secondary market cases, and that the procedural history of Tietz v Cryptobloc Technologies Corp., where leave and certification proceeded separately over roughly five years with intervening appeals, illustrated the case-specific nature of sequencing decisions rather than establishing any fixed practice. Turning to whether the case management judge erred in weighing the Jean Coutu factors, Justice Riley held that the judge had not, as TELUS argued, collapsed his analysis into the single issue of delay. Rather, the judge identified two competing considerations, the risk of delay from separate appeals versus the potential inefficiency and unnecessary cost of a combined hearing, and reasonably concluded that the delay concern was more pressing in the circumstances of this case. Justice Riley distinguished the errors identified in Jean Coutu itself, which involved an opioid cost-recovery action against roughly four dozen defendants that he characterized as exceptional in scale and complexity, from the more contained claim against a single corporate defendant and its officers and directors at issue here.

Ruling and overall outcome

The Court of Appeal dismissed TELUS's appeal, upholding the case management judge's order that the leave petition and certification application proceed sequentially at the same hearing. Justice Riley concluded that the judge did not err in applying the Jean Coutu framework and did not commit a reviewable error in weighing the relevant factors, since TELUS had not shown the judge's weighing was unreasonable or tainted by error. The successful party on the appeal was the respondent, Mr. Middleton. The decision does not involve any monetary award, damages, or costs order; it resolves only a procedural question about the sequencing of the leave petition and the certification hearing, and no dollar figure is stated or determinable from the judgment.