Case information

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Civil liability — Fault — Causal link — Investors participating in Immigrant Investor Program offered by the Quebec government — Investors alleging that persons involved in creating investment opportunity responsible for financial loss incurred as a result of investors exercising security on hypothecated immovables — Whether trial judge committed palpable and overriding errors or erred in finding that respondents not at fault or that, even assuming fault, damages not causally connected — Whether Court of Appeal should have allowed appeal.

The applicants are part of a group of investors who participated in the Immigrant Investor Program offered by the Quebec Ministère de l’Immigration et des Communautés culturelles. Under the Regulation respecting the selection of foreign nationals, they had the option of making a five year secure investment of 500,000$ or a three year unsecured investment of 250,000$. They chose the latter option. Their total investment of 1 500 000 $, structured as a debenture and approved by the government, was to yield a return of 8 percent per annum and was secured by a first ranking hypothec on six immovable properties belonging to Dranel inc. but formerly owned by Marzim inc. Eventually, the original property were substituted for other residential units under the supervision of the respondent Fiducie Desjardins Inc. The interest was duly paid for the first two years, but as of 1993, the investors were advised that there would be default in the payment of principal and interest. In early 1995, they exercised their hypothecary right over the residential properties and initiated a sale by judicial authority. They obtained an aggregate price of 1 133 000 $. The investors then initiated proceedings against the broker, Wood Gundy (now CIBC World Markets Inc.), the trustee, Fiducie Desjardins Inc., and the principals of Marzim and Dranel, Christophe and Manuel Folla, who were involved in creating the investment opportunity. The investors claimed that the respondents were responsible for their financial losses.

The Superior Court dismissed the action on the grounds that the applicants did not prove that the respondents had committed any fault and that, even assuming fault, the depreciation of the properties was due to the natural occurrence of a downturn in the real estate market in the early 1990s. The Court of Appeal dismissed the appeal.