Expert-report challenge to precede authorization in Lion Electric investor case

The Quebec Superior Court has ordered that challenges to an expert report in a proposed Lion Electric investor class action be heard before the authorization hearing, finding that the securities-law claim requires a different evidentiary approach from an ordinary class-action application.

Justice Shaun E. Finn’s September 3, 2026 decision in Mulhall c. Bédard, 2026 QCCS 3235 sets the sequence for the litigation. It does not exclude or admit the disputed report, authorize the class action, decide liability or award damages.

The order directs that the preliminary hearing also address Adam B. Mulhall’s request to amend his authorization application. The judgment asks counsel to propose dates jointly rather than fixing a hearing date.

Dispute over a due-diligence report

Mulhall’s proposed action concerns allegedly false or misleading disclosures about Lion Electric’s financial condition, production capacity, order book, product quality, growth and profitability. It also alleges failures to disclose a material change associated with deteriorating liquidity. Those allegations were not proven by this ruling.

The defendants challenging the report are directors and certain officers of the company, together with firms involved in placing and underwriting its securities. Another defendant, Raymond Chabot Grant Thornton, took no position on the scheduling dispute and left it to the court.

The application proposes a Civil Code group covering securities acquisitions from May 7, 2021 to December 15, 2024, and a Securities Act group covering acquisitions from February 24, 2022 to December 15, 2024. Neither proposed group was authorized by this judgment.

In March 2026, Mulhall sought amendments to align the proposed group and allegations with expert analyses and elaborate his theory of the case. He also notified the defendants that he intended to rely on a report by Adam B. Badawi addressing due diligence.

The challenging defendants argued that the report improperly supplied legal opinions belonging to the judge’s role and, alternatively, that Badawi lacked the necessary qualifications. They wanted those objections resolved before preparing their own evidence. These were grounds advanced in support of their motions, not findings that the report was inadmissible.

Mulhall argued that excluding material before class-action authorization is exceptional and that the objections should instead be addressed at the authorization hearing.

Two permission requirements, different evidentiary burdens

Finn distinguished the procedural authorization required by article 575 of the Code of Civil Procedure from the prior permission required by section 225.4 of Quebec’s Securities Act.

For ordinary class-action authorization, the court performs a screening role. On the arguable-case requirement, sufficiently precise factual allegations are taken as true; the applicant need not prove the claim on a balance of probabilities. Defence evidence is correspondingly restricted.

The securities provision requires good faith and a reasonable possibility of success. That test calls for a more substantial examination of supporting evidence, and defendants may introduce evidence aimed at fully rebutting the applicant’s case. It remains a preliminary permission process, not a trial determining liability.

The judge explained that securities-law permission must be addressed before the procedural class-action criteria: without the required statutory permission, there is no action for the collective procedure to carry forward.

That distinction was central to his treatment of Haroch c. Toronto-Dominion Bank, a 2023 Quebec Court of Appeal decision. Haroch generally leaves objections to supporting materials until the ordinary class-action authorization hearing and permits earlier exclusion only exceptionally.

Finn did not reject that rule. He found it governed the ordinary procedural authorization context, rather than the more demanding securities-law permission sought alongside it here. He concluded that article 241, which permits pretrial challenges to expert reports, applies to the securities permission process.

Earlier hearing to clarify the evidentiary record

The court accepted that resolving admissibility first would let the defendants know what evidence they needed to answer. Otherwise, they might prepare a responding expert report without knowing whether Badawi’s report would remain in the record, making the authorization hearing unnecessarily complicated.

Finn added that proportionality and sound case management would justify the same sequence even if article 241 did not apply.

Finn also viewed the apparent absence of academic or professional training in Canadian due diligence as a reason for an early hearing, while expressly declining to prejudge Badawi’s competence or the exclusion motions. The reasons record Badawi’s response that Canadian and United States due-diligence standards are substantially similar, particularly for cross-border offerings.

The order allocates two hours to the report challenges and 35 minutes to the proposed amendments. It permits written arguments of up to 20 pages each on the challenges, due from the challenging defendants six weeks before the hearing and from Mulhall one week before it. Costs were left to follow the outcome of the proceeding.