...under what circumstances is Y fare higher than J (or C) class fare?
A pure "Y" would never be more than a pure "J" fare. But you might find a J1 or J8 or JP fare that is higher than the Y fare. Usually, you'll also find other Y fares, like Y1, Y8, or YP, that are lower than the equivalent J codes. These are often listed as "special" fares, but are offered year round, and have identical fare rules to "regular" fares.
The airlines in US give elites upgrades without the need for coupons/stickers. Why wouldn't AC follow?
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The only airlines I know of that have that generous of an upgrade policy are CO, NW, and HP.
Actually most of the US carriers offer free upgrades, even the big ones. You just have to know how they work.
On certain routes, they will offer "YUP" fares, which is a Y fare that will put you in the F class cabin. (These Y fares are much lower than in Canada, primarily due to competitive reasons, I suspect.)
On American Airlines, the "upgrade" comes out of the "A" inventory (similar to AC's C), and is available on certain routes (Mobile, AL to Baltimore, MD is one.) TWA offers the same type of upgrade on a lot more routes, including Vancouver to St. Louis.
Roots Air advertisements in the newspaper, it is quoting a full fare economy trip between Toronto and Vancouver to be over $3,000, on AC.
The actual AC fares are Y1-$3089, J1-$3611, Y-$8513. There are no apparent differences between the fares rules for Y1 and Y.