2012 Canadian Securities Class Action Update
Tuesday, March 12, 2013
Ward Branch in Class actions, securities

By: Ward Branch and Ahmad Erfan

2012 was a fascinating year for securities class actions. From monumental decisions on leave and certification, to carriage fights and insolvency proceedings, the class action bar was treated to extensive commentary from the courts about how securities cases are to be prosecuted and defended. In our first ever Canadian Securities Class Action Update, we look back at all the cases that helped shape securities class action law in Canada over the past year.

LEAVE TO COMMENCE SECONDARY MARKET MISREPRESENTATION ACTION, AND CERTIFICATION

Sharma v. Timminco Ltd., 2012 ONCA 107: In a monumental decision that will have significant impact on the prosecution and defence of securities class actions in Canada, the Ontario Court of Appeal held that the tolling provisions of the Ontario Class Proceedings Act, 1992, do not operate to suspend the three year limitation period applicable to the statutory cause of action for secondary market misrepresentation provided by Part XXIII.1 of the Ontario Securities Act. The plaintiffs had commenced action on May 14, 2009 alleging misrepresentations by the defendants that adversely affected the share value of Timminco Limited in the secondary market. The misrepresentations were alleged to have occurred between March 17, 2008 and November 11, 2008. The statement of claim asserted two common law causes of action - negligence and negligent misrepresentation - and a statutory cause of action under s.138.3 of the Securities Act.

By early 2011, the plaintiffs had not yet sought leave of the court to commence an action under s.138.3. Part XXIII.1 imposes a limitation period of three years from the first misrepresentation for the commencement of the action, as well as a requirement that such an action be commenced only with leave of the court. Given that the first alleged misrepresentation occurred on March 17, 2008, the plaintiffs faced a limitation issue. They therefore moved for an order declaring that the limitation period was suspended pursuant to the tolling provisions of the Class Proceedings Act, 1992. Justice Perell, the case management judge in the class proceeding, granted the order, and the defendants appealed. The Court of appeal stated as follows:

"The suspension provision in s. 28(1) of the CPA provides that "any limitation period applicable to a cause of action asserted in a class proceeding is suspended in favour of a class member on the commencement of the class proceeding". These words must be read in their grammatical and ordinary sense, in the full context of the scheme of the CPA, its object and the intention of the legislature. [citation omitted] ... Without leave having been granted, a s. 138.3 cause of action cannot be enforced. It cannot be invoked as a legal right. Section 138.14 says as much. Thus, giving the suspension provision in s. 28(1) of the CPA its ordinary meaning, the s. 138.3 cause of action cannot be said to be asserted in the respondent's class proceeding since no leave has been granted.

The respondent argues that it is significant that s. 28(1) requires not that a cause of action be "commenced", but only that it be "asserted". However, this choice of language is entirely appropriate. A cause of action is not commenced. That is a concept applicable not to a cause of action but to the litigation in which it is asserted.

Thus, in my view as applied to the s. 138.3 cause of action, the grammatical and ordinary meaning of the s. 28(1) suspension provision is that without leave being granted the cause of action cannot be said to be asserted in a class proceeding."

The Court found that this interpretation was consistent with the purposes of the tolling provisions of the class proceeding legislation (to protect class members from the operation of limitation periods without the need to themselves pursue individual actions) and the limitation provisions of the securities legislation (to ensure that secondary market claims proceeded with dispatch). Further, the Court rejected the plaintiff's interpretation of the legislation, as it would put a class plaintiff in a better position (in relation to the limitation period) than he would have been in had he commenced an individual action.

Accordingly, the Court of Appeal concluded that for a secondary market misrepresentation cause of action to be "asserted" in a class proceeding, so as to trigger the tolling provisions of the class proceedings legislation, leave must first be granted. Since the plaintiff had not obtained leave, the tolling provision had not been triggered. This in essence, disposed of the plaintiff's secondary market claim, as it was barred by the expiry of the limitation period.

Leave to appeal to the Supreme Court of Canada was dismissed.

This decision has been the subject of widespread debate among the class action bar. While defence counsel view the decision as creating certainty for companies and facilitating more efficient litigation, the plaintiff’s bar has pointed out that the decision causes undue prejudice to investors and impedes the aims of the Securities Act – namely, to protect investors from fraudulent or unfair practices and to foster fairness, efficiency and confidence in capital markets. As will be seen below, Canadian courts have also struggled with applying Timminco.

Green v. Canadian Imperial Bank of Commerce, 2012 ONSC 3637: Application for leave and certification in proposed class action against CIBC dismissed. Justice Strathy concluded that the plaintiffs had met the test for leave in s. 138.3 of the Ontario Securities Act and the test for certification in s. 5(1) of the Ontario Class Proceedings Act, 1992. However, relying on the Ontario Court of Appeal's decision in Timminco (which was released during the hearing of the CIBC leave/certification application), Justice Strathy held that the plaintiffs' right to pursue the Securities Act cause of action was time-barred, as leave was not obtained prior to the expiry of the three year limitation period. With respect to the plaintiff's request for an order nunc pro tunc or pursuant to the “special circumstances” doctrine, Justice Strathy held, with obvious regret and sympathy for the plaintiff, that the court did not have jurisdiction to revive a limitation period that had expired due to the failure to obtain leave within three years under either principle.

Ultimately, as the Securities Act claim had no possibility of success and as no other cause of action was available to the plaintiffs (the cause of action for negligent misrepresentation was properly pleaded, but was not suitable for certification because the issue of reliance could not be address on a class-wide basis), certification would serve no purpose and both motions were dismissed.

Silver v. Imax Corp., 2012 ONSC 4881: Defendants' motion to dismiss the claims of the plaintiffs for secondary market misrepresentation on the ground that they were barred by the three year limitation period in the Ontario Securities Act was dismissed. This was another motion arising out of the decision of the Ontario Court of Appeal in Timminco. Relying on Timminco, the defendants in Silver contended that as leave was granted to proceed with the statutory claims more than three years after the misrepresentations alleged in the statement of claim, the statutory claims were time barred and had to be dismissed.

Justice van Rensburg agreed with the defendants that Timminco's impact on securities litigation in Ontario was broad and potentially far-reaching:

"The effect of Timminco is that, no matter what the plaintiff pleads in the original Statement of Claim in relation to the statutory cause of action, the limitation period continues to run at least until leave is granted. It is not sufficient to defeat the limitation period that the claim is pleaded and that leave may be obtained at some later point. If that were the case, there would never had been any question of the operation of s. 28 of the CPA or suspending the limitation period in Timminco.

While the facts of this case are more sympathetic, Timminco did not simply turn on the fact that no motion for leave had been commenced by the plaintiffs. The decision was expressed more broadly, and leads to the inevitable conclusion that, unless the order granting leave and the amendment to the claim to assert the statutory cause of action can be given effect within the limitation period, the statutory claims in these proceedings would be statute-barred."

Justice van Rensburg noted that the facts of the case before it were somewhat different than in Timminco. The evidence was that the plaintiffs had moved expeditiously to advance the motion for leave, and had not only delivered their notice of motion and completed the record, but had argued the motion within three years of the alleged misrepresentations. "There was nothing more the plaintiffs could have done to comply with the limitation period. The reasons for the delay were outside the control of the plaintiffs, having to do with the complexity of the issues that were being considered by the court for the first time, and delays occasioned during the leave motion, in particular the fact that the decision was under reserve when the limitation period expired."

Justice van Rensburg acknowledged that the question it was essentially faced with was whether there was something that could be done now to avoid the harsh result of an intervening limitation period barring the statutory claim, where there was never any question that the statutory claim was being pursued and the plaintiffs proceeded with dispatch. She concluded that the Court could exercise its inherent jurisdiction to grant an order nunc pro tunc that its order granting leave be amended to provide that leave was effective as of the last day of the hearing of the leave motion. Justice van Rensburg held: "In my view, the present case fits squarely within authorities for making a nunc pro tunc order where the plaintiffs' rights have abated through no fault of their own, while a decision has been reserved by the court. If the order granting leave is effective the date of final argument, there is no question of expiry of the limitation period. The prejudice to the plaintiffs caused solely by the court's own schedule, is avoided."

Accordingly, the Court in Silver was able to use the specific facts of the case to get around the potentially harsh effect of the Timminco decision.

Trustees of Millwright Regional Council of Ontario Pension Trust Fund v. Celestica Inc., 2012 ONSC 6083: This is another motion by the defendants to dismiss the claim against them on the basis that the plaintiffs failed to obtain leave within the three year limitation period stipulated s.138.14 of the Ontario Securities Act, and that the plaintiffs’ claim did not disclose a cause of action. The main question before the Court was whether it had jurisdiction to relieve against the prescribed limitation period pursuant to the doctrine of special circumstances.

Justice Perell commenced his analysis by acknowledging that he was bound by the decision of the Ontario Court of Appeal in Timminco. He also accepted the reality that the plaintiffs’ Part XXIII.1 claims were statute-barred. However, he went on to conclude that, as a matter of statutory interpretation, the limitation period associated with Part XXIII.1 claims was subject to the “special circumstances” doctrine, that the special circumstances doctrine provided a limited jurisdiction to make orders nunc pro tunc that had the effect of reviving a still-borne and statute-barred cause of action, and that the special circumstances doctrine could be applied to the circumstances of this case.

In coming to these conclusions, Justice Perell expanded the scope of application of the special circumstances doctrine, which had previously been adopted by Justice van Rensburg in Silver v. Imax:

“As I will discuss further below, I agree with Justice van Rensburg’s ultimate conclusion that the jurisdiction associated with the Latin maxim actus curiae neminem gravabit (“an act of the court shall not prejudice no man”) along with the court’s power to make orders nunc pro tunc can be used to extend the time for bringing a Part XXIII.1 claim, for which leave is required under s. 138.8 of the Ontario Securities Act. However, I do not agree with her that the special circumstances doctrine is not also available in appropriate circumstances.

In the above passage, which is obiter dictum from Imax, Justice Van Rensburg would limit the special circumstances doctrine to circumstances where a plaintiff seeks to amend his or her pleading to add a genuinely new, i.e. different, cause of action that does not require leave to be asserted. Given, as will be explained further below, the special circumstances doctrine considers whether the defendant was aware or ought to have been aware of the likelihood of the claim, the difference of the new claim is not a reason to preclude the availability of the doctrine nor is the factor that leave is required a reason to preclude the special circumstances. The leave requirement just intensifies the operation of the limitation period, and thus a leave requirement is not a reason for precluding the operation of the special circumstances doctrine, assuming it was otherwise available.

Indeed, I would argue that the presence of the factors that Justice Van Rensburg identifies as precluding the availability of the special circumstances are a fortiori factors that justify extending the doctrine if it were necessary to do so. If the special circumstances can be fairly employed in circumstances where a genuinely different cause of action is being added by amendment to the plaintiff’s pleading, then, a fortiori, it should be employed in circumstances where the defendant is confronting a claim that he or she expected to confront if leave were granted.”

Further, Justice Perell held that Justice van Rensberg’s reasoning with respect to the availability of orders nunc pro tunc was equally applicable to orders under the special circumstances doctrine:

“Thus, in Imax, having concluded that the jurisdiction to make orders nunc pro tunc was available, and having concluded earlier in her judgment […] that the case fit within authorities for making a nunc pro tunc order where the plaintiffs' rights have abated through no fault of their own, Justice van Rensburg made an order nunc pro tunc with the result that the plaintiffs’ action was not statute-barred.

Although the case was decided on the basis of the court’s nunc pro tunc jurisdiction, I think that the Imax case equally could have been decided the same way based on the special circumstances doctrine. I also think that the Imax decision supports my own analysis in the case at bar.

I conclude that the special circumstances doctrine potentially applies to the limitation period in s. 138.14 of the Ontario Securities Act.”

Gould v. Western Coal Corp., 2012 ONSC 5184: This is the first Ontario case in which the Court dismissed a plaintiff’s motion for leave to commence a secondary market misrepresentation action under Part XXIII.1 of the Securities Act on the basis of the evidence (as opposed to a Timminco-style limitation argument). The Court also dismissed the plaintiff’s motion to certify proceeding as a class action in relation to claims for oppression, conspiracy and secondary market misrepresentation.

In essence, the plaintiff in this case argued that the defendants had fabricated a financial crisis within the defendant company’s business in order to artificially depress the company’s stock price, so that they could enhance their shareholdings in the company at a fraction of what the shares were worth. The plaintiff claimed that, as part of this scheme, the defendants created false cash flow projections and made inappropriate write-downs, causing the company’s auditors to insist that a November 14, 2007 quarterly financial statement be qualified by a note that there was “substantial doubt about the ability of the Company to meet its obligations as they come due.” The plaintiff asserted that this contrived and unduly pessimistic news – which implied a real risk of insolvency – caused a loss of confidence in the company, causing investors to sell their securities and resulting in a dramatic drop in the share price. This in turn allowed the defendants to acquire or increase their interests in the company at a discounted price, thereby diluting the shareholdings of other stockholders.

The Court concluded that leave should not be granted because the plaintiff’s claim had no reasonable possibility of success at trial. The Court came to this conclusion for the following reasons:

  1. The alleged misrepresentation was merely a factual statement that disclosed the requisite doubt about the company’s ability, using its own resources, to meet its obligations, but expressed management’s confidence that outside financing would be obtained;
  2. The plaintiff’s expert evidence with respect to the need to disclose material uncertainties was not consistent with the plain meaning of the relevant GAAP principles and accounting standards; further, the disclosure in question did not portray an “impending insolvency” or an “unavoidable threat” of insolvency, as suggested by the plaintiff’s expert; it simply stated, in accordance with GAAP, that the statements had been prepared on a going concern basis, but that readers should be alerted to the fact that uncertainties exist concerning events or conditions that cast significant doubts upon the ability of the company to continue as a going concern;
  3. The plaintiff and his expert played fast and loose with terminology and improperly equated the going concern note disclosure with the abandonment of going concern accounting;
  4. The evidence of those directly involved in the preparation of the financial statements and public disclosures pointed to the conclusion that the going concern note was the product of a reasoned, thorough and careful consideration of the company’s financial circumstances, the requirements of GAAP and the company’s obligations to its shareholders and investors; the individuals involved in the preparation, review and approval of the disclosures were knowledgeable and experienced in such matters and discharged their obligations in a conscientious manner; further, there was no evidence that would support the plaintiff’s suggestion that the disclosures were made with the intent to misrepresent the company’s financial condition; and

Turning to the motion for certification and the claim in conspiracy, the Court noted that the plaintiff had failed to properly plead the elements of unlawful means conspiracy. Specifically, the pleading failed to set out the alleged agreement among the conspirators with particularity, lumped the defendants together, failed to provide full particulars of the unlawful acts committed by each defendant and gave no particulars of damages. Further, the Court concluded that there was no basis in fact for the existence of any common issues relating to the conspiracy claim.

Finally, with respect to the plaintiff’s oppression claim, the Court concluded that the oppression remedy applicable to this dispute was a creation of the British Columbia Business Corporations Act (the company was incorporated in BC). The statute conferred the remedy and described the manner in which it was to be enforced. The Court concluded that it had no jurisdiction to grant the remedy sought by the plaintiff because the statute expressly granted jurisdiction to the BC Supreme Court. It rejected the plaintiff’s position that, since the Court had territorial jurisdiction over the defendants, subject matter jurisdiction could be “bootstrapped” on. The Court simply did not have jurisdiction over the subject matter. The oppression claim was therefore struck.

As such, the plaintiff’s motions for leave and certification were both dismissed.

Zaniewicz v. Zungui Haixi Corp., 2012 ONSC 6061: The plaintiffs in this proposed securities class action sought leave under Part XXIII.1 of the Ontario Securities Act against certain defendants who had not defended the action and who were noted in default in August, 2012. The plaintiffs had entered into a standstill agreement with the remaining defendants, and it was agreed that the leave and certification motions relating to those defendants would take place at a later date.

Justice Perell granted the plaintiffs’ motion for leave, noting that the test for leave was “a relatively low threshold” on the evidence that the parties put before the court. Since the defendants in question were noted in default, they were deemed to admit the truth of all allegations of fact made in the plaintiffs’ Fresh as Amended Statement of Claim. These deemed admissions were held to be sufficient to satisfy the test for leave under the Ontario Securities Act. Accordingly, leave to proceed against these defendants under Part XXIII.1 of the Securities Act was granted.

Round v. MacDonald, Dettwiler and Associates Ltd., 2011 BCSC 1416, affirmed, 2012 BCCA 456: In the first British Columbia case to examine the test for leave to commence an action under the secondary market liability provisions of the British Columbia Securities Act, the Court denied the plaintiff's leave motion, holding that there was no possibility that the intended action, as framed, could succeed at trial. The action was concerned with allegations of misrepresentation by the defendant company about a proposed sale of a key asset, and failure to make timely disclosure of material changes that related to the prospect of the sale receiving ministerial approval.

The Court dismissed the plaintiff's application for leave for two reasons. First, the material facts capable of giving rise to a cause of action were concluded before the relevant statutory provisions came into effect. There was nothing in the legislation to suggest that the Legislature intended the causes of action it created to apply either retroactively or retrospectively to completed matters. Second, the plaintiff's interest in the securities of the defendant was not acquired in the secondary market. She acquired her shares through her participation in an employee share purchase plan, whereby shares were distributed from the defendant's treasury to members of the plan. Accordingly, the plaintiff did not fall within the scope of "a person who acquires or disposes" of shares of an issuer in the secondary market and, as a result, she had no cause of action against the defendant.

Having come to these conclusions, the Court found it unnecessary to address the remaining arguments of the plaintiff or issue a definitive decision on the meaning of the test for granting leave. That being said, the Court made a number of concluding remarks that may be of assistance to those prosecuting or defending secondary market liability claims in British Columbia. In particular, the Court rejected the plaintiff's contention that, given that it is the very first step a plaintiff must take in a secondary market misrepresentation action, the bar for granting leave should be set lower than the test for certification. The Court referred to the relevant provisions of the legislation, and went on to hold as follows:

"Taken together, several propositions emerge from these sections. Taken together, several propositions emerge from these sections. First, the leave application involves a review of evidence. Each side is required to provide evidence of material facts upon which each intends to rely. Secondly, the analysis must involve a weighing and balancing of the evidence of each side. It is not sufficient for the court simply to rely on material filed by the plaintiff. Thirdly, the test involves an assessment of the merits of the proposed action on the evidence. The court must analyze the evidence to decide whether it is satisfied that the "reasonable possibility" test is satisfied. Fourthly, weighing and testing the evidence to determine whether there is a reasonable possibility that the action will be resolved at trial in favour of the plaintiff is different from the test involved in certification of class actions or the test for summary judgment. Given Ms. Round's argument, this last point deserves a little more analysis.

The test for certifying class actions is not a merits test. The only "merits" component of the test is that the pleadings state a cause of action. Beyond that, the focus is on whether the pleadings reveal common issues and whether it is preferable that those common issues be certified and resolved at a trial of the common issues. The court does not analyze or weigh the likelihood of success at trial or in the action generally in deciding whether to certify the action. In this case, it is clear that the court must weigh evidence in order to assess the likelihood of success at trial. That is necessarily a merits-based analysis. Accordingly, the test for granting leave is entirely distinct from and different to the test on certification. The one provides no guidance to the other. I do not agree, therefore, that the test for granting leave is necessarily a lower test than for certifying a class action.

Similarly, more is required to grant leave than to identify a triable issue. Whether there is a triable issue does not typically involve weighing and assessing, rather than identifying, evidence. The statute mandates an approach to granting leave very different from deciding whether there is a triable issue. Cases dealing with summary judgment do not, therefore, provide any real assistance in applying the leave test. Much the same can be said for other thresholds tests such as identifying the existence of a prima facie case that exist in other areas of the law.

Establishing a reasonable possibility of success at trial involves more than merely raising a triable issue or articulating a cause of action. Equally, it does not require a plaintiff to demonstrate that it is more likely than not that he or she will succeed trial. But it is clear, in my view, that the test is intended to do more than screen out clearly frivolous, scandalous or vexatious actions. An action may have some merit, and not be frivolous, scandalous or vexatious, without rising to the level of demonstrating that the plaintiff has a reasonable possibility of success."

The plaintiff’s appeal to the BC Court of Appeal was dismissed. The Court of Appeal agreed with the lower court’s finding that there was no reasonable possibility of the plaintiff succeeding at trial because (1) the relevant events occurred before the statutory cause of action existed and the legislation could not apply retrospectively, and (2) the plaintiff had no cause of action, as she did not acquire or dispose of her shares on the secondary market.

One other interesting aspect of this case is that both the lower court and the Court of Appeal agreed that the no-costs regime under the BC Class Proceedings Act is not engaged before the hearing of the class action certification application. As such, the defendant was awarded its costs of the leave motion.

The secondary market liability provisions of the BC Securities Act are still in their infancy stage, and it will be some time before the test for leave is fully developed in this province. It is likely that, as more cases are brought under the secondary market liability sections of the BC Securities Act, the courts will provide further guidance on how the test should be interpreted and applied.

Drywall Acoustic Lathing and Insulation Local 675 Pension Fund (Trustees) v. SNC-Lavalin Group Inc., 2012 ONSC 5288: Unopposed motion for leave and certification in SNC-Lavalin securities class action. Leave was granted to commence an action for secondary market misrepresentation. The proceeding was certified as a class action. The plaintiffs discontinued their claims for an oppression remedy and for damages for common law negligence. This was approved by the Court, even though the claim under the Securities Act, unlike the claims for oppression and negligence, was associated with a "cap" on damages. In this regard, Justice Perell stated: "Speaking metaphorically, I agree that in the circumstances of this case, a cause of action in the hand is worth far more than two appealable causes of action in the bush. Accordingly, I grant leave to discontinue".

Sorenson v. Easyhome Ltd., 2012 ONSC 1946: Certification and leave to commence a secondary market misrepresentation action granted in proposed securities class action on consent of the parties.

121851 Canada inc. c. Theratechnologies inc., 2012 QCCS 699: Secondary market securities case was certified. The Court did emphasize that securities law leave requirement was higher than "colour of right" test under Quebec's certification rule Art. 1003. The court concluded: "In view of the Policy 51-201, the position advanced by [the plaintiff] suggests a reasonable possibility of success since the argument is serious and deserves careful consideration by the Tribunal. Obviously, the award may well lead to the eventual dismissal of the action, but since the factual and legal context to be the subject of legal debate reveals the presence of a serious issue to discuss and there is a reasonable chance successful, the Tribunal must allow the use."

Paris c. Lafrance, 2011 QCCS 4619: Securities class action was certified.

McKenna v. Gammon Gold Inc., 2012 ONSC 379: In an endorsement addressing certain residual issues arising out of the certification of the conspiracy claim in this class action, the Court clarified that early seller cannot be excluded from the class definition because, at least until such time as there are findings concerning the nature of the conspiracy and acts done in furtherance of the conspiracy, it could not be said with certainty that early sellers had suffered no damages as a result of the conspiracy. Further, the court set the class period with respect to the conspiracy claim and approved the appointment of the plaintiff as a representative on behalf of both primary and secondary market purchasers in relation to the conspiracy claim.

CARRIAGE

Smith v. Sino-Forest Corporation, 2012 ONSC 24: Carriage of proposed class action against Sino-Forest Corporation granted to Siskinds LLP and Koskie Minsky LLP over Kim Orr Barristers PC and Rochon Genova LLP. In doing so, the Court found that the attributes of counsel, the retainer and resources, funding, alleged conflicts of interest and the correlation between the plaintiffs and the defendants were all neutral factors. The key determining factors leading to the Court's decision included the attributes of the proposed representative plaintiffs, the definitions of class membership and class period, and the bundle of issues the Court referred to as "theory of the case, causes of action, joinder of defendants, and prospects of certification".

Of note, the Court found that one of the principal weaknesses of the claim advanced by Kim Orr Barristers was the pleading of fraudulent misrepresentation. The Court found that a pleading of fraudulent misrepresentation action added needless complexity and costs:

"Turning to the pleading of fraudulent misrepresentation, when it is far easier to prove a claim in negligent misrepresentation or negligence, the claim for fraudulent misrepresentation seems a needless provocation that will just fuel the defendants' fervor to defend and to not settle the class action. Fraud is a very serious allegation because of the moral and not just legal turpitude of it, and the allegation of fraud also imperils insurance coverage that might be the source of a recovery for class members."

Interestingly, only a few months after the release of this decision, the Ontario Securities Commission concluded its own investigation of Sino-Forest and issued allegations of fraud against the company and its executives. In a statement released on May 22, 2012, the OSC stated: "OSC Staff allege that Sino-Forest and members of its overseas management engaged in numerous deceitful and dishonest courses of conduct connected with the purported purchase and sale of timber in the People's Republic of China. Staff allege that Sino-Forest provided grossly misleading disclosure to investors and that certain former executives attempted to mislead Staff's investigation."

Simmonds v. Armtec Infrastructure Inc., 2012 ONSC 44: Carriage of proposed class action against Armtec Infrastructure Inc. granted to Sutts Strosberg LLP over Siskinds LLP. The key factors leading to the Court's decision included the nature and scope of the causes of action advanced, the theories advanced in support of those causes of action, the best interests of the class members, what is fair to the defendants and what is consistent with the policy objectives of the Class Proceedings Act, 1992.

Locking v. Armtec Infrastructure Inc., 2012 ONCA 774: The Ontario Court of Appeal held that it did not have jurisdiction to hear appeal from the lower Court’s carriage decision. Jurisdiction to do so rested with the Divisional Court with leave.

The Court concluded that because appeals from carriage decisions were not specifically addressed by the Class Proceedings Act, 1992, the avenue of appeal would be governed by the Courts of Justice Act. The Courts of Justice Act distinguishes interlocutory orders, which are appealed to the Divisional Court, from final orders, which are appealed to the Court of Appeal.  The Court determined that the carriage order was interlocutory as it did not impact the plaintiff’s access to the court system, just the format by which it would proceed.

Simmonds v. Armtec Infrastructure Inc., 2012 ONSC 5228: Leave to appeal granted to the Divisional Court from the decision of Ontario Superior Court of Justice granting carriage of proposed securities class action to Sutts Strosberg LLP. The Court noted that there are conflicting decisions with respect to the principles to be applied when determining carriage motions. “Some decisions suggest that competing theories are to be assessed only to weed out those that are patently weak, while others support a more rigorous review, albeit on a preliminary basis.”

Moreover, the Court found that the lower Court’s analysis and hence its decision were open to serious debate. Specifically, it could be argued that the lower Court’s analysis was internally inconsistent because “[b]readth of the proceeding was determined to be an advantage when it came to naming of defendants and the class period but a disadvantage with respect to the inclusion of “early sellers” and causes of action founded on waiver of tort and unjust enrichment”. In other words, “comprehensiveness and cohesiveness each prevailed half the time.” 

Locking v. Armtec Infrastructure Inc., 2012 ONSC 7274: The appellants sought leave to appeal to the Divisional Court on two issues: (1) whether the motion judge erred in his analysis of the theories and attributes of two competing class actions, and (2) if so, whether the motion judge erred in his disposition of the carriage motion. The Divisional Court granted leave to appeal. The appellants sought leave to appeal with respect to several other issues, but the Divisional Court refused to grant leave to appeal in respect of those issues. Even so, the appellant’s notice of appeal and factum made extensive reference to those other issues. The moving parties requested an order directing the appellant to deliver a revised notice of appeal and a fresh factum limited to the two issues properly before the Court. The requested order was granted.

Locking v. Armtec Infrastructure Inc., 2013 ONSC 331: Appeal from the decision of the lower Court granting carriage of the proposed securities class action to Sutts Strosberg LLP and staying the proposed action commenced by Siskinds LLP. The Ontario Divisional Court rejected the appellant’s argument that the motion judge erred in “parsing” the action too finely and assessing the merits of the actions, contrary to the test established in Setterington v. Merck Frosst Canada Ltd., noting:

“[25]  It is always preferable on a carriage motion to avoid any analysis of the merits of including or excluding a particular claim or defence and the strategy of counsel in doing so. However, it is apparent from reviewing the authorities that some carriage motions are incapable of being resolved by merely considering whether claims have “glaring deficiencies” or can be said to be “frivolous”. Sometimes it is necessary for the motion judge to conduct a more detailed and nuanced analysis, because there is no other way to properly distinguish between the actions and choose the proceeding that is in the best interests of the class. That does not mean that in doing so that motion judge has departed from the test established in Setterington, or the principles underlying that decision. We do not consider those cases that have undertaken such an analysis to have adopted a different test. Neither are we of the view that the motion judge in this case adopted a different test. Both the test he identified and the approach he took were fully consistent with Setterington.”

The Divisional Court went on to find that there was no legal error or misdirection as to facts by the motion judge and no basis to interfere with the exercise of his discretion.

APPEALS

Abdula v. Canadian Solar Inc., 2012 ONCA 211: This appeal concerned the question of whether a federal corporation that conducted the majority of its business in China and traded shares only on the NASDAQ could fall within the definition of "responsible issuer" under the Ontario Securities Act. The Ontario Court of Appeal dismissed the corporate defendant's appeal and concluded that the defendant was a "responsible issuer" pursuant to s.183.1(b) of the Securities Act. As the defendant's shares were not publicly traded in Ontario, it was not a "reporting issuer" for the purposes of s.183.1(a) of the Securities Act. However, the definition of "responsible issuer" under s.138.1 included both a "reporting issuer" and "any other issuer with a real and substantial connection to Ontario, any securities of which are publicly traded." The Court of Appeal concluded that "when the words 'publicly traded' in paragraph (b) of the definition of 'responsible issuer' are read in their entire context and in their grammatical and ordinary sense, harmoniously with the scheme of the OSA, the object of the OSA and the intention of the legislature, gleaned from the legislative history and the words chosen by the legislature, they do not mean 'publicly traded in Canada'." Since the corporate defendant was an issuer with a real and substantial connection to Ontario, and since its shares were publicly traded on the NASDAQ, it met the definition of "responsible issuer" under the Securities Act and was therefore subject to the statutory tort provisions of the Securities Act.

The Defendants' application for leave to appeal to the Supreme Court of Canada was dismissed.

Coulson v. Citigroup Markets Canada Inc., 2012 ONCA 108: Appeal from the decision of the motion judge holding that the plaintiff’s claim was barred by the limitation period in s.138 of the Ontario Securities Act and was not saved by the suspension of limitation periods provided in s.12 of the Class Proceedings Act, 1992. The underlying facts in the case were as follows: In November 1997, the corporate defendant made a public offering of its common shares in the United States and Canada. The prospectus contained certain alleged misrepresentations. On May 5, 1998, Joseph Menegon commenced a proposed class action against the defendants asserting claimed under s.130 of the Securities Act and common law negligent misrepresentation. The Ontario Superior Court of Justice dismissed Mr. Menegon’s action on March 6, 2002, holding that Mr. Menegon could not bring the s.130 claim as he purchased his shares in the secondary market, not from the primary distribution, and that he did not have a claim for negligent misrepresentation. Mr. Menegon’s appeal was dismissed by the Ontario Court of Appeal on January 9, 2003 and leave to appeal to the Supreme Court of Canada was dismissed on July 17, 2003. On July 8, 2003, the plaintiff commenced this action. The s.130 statutory cause of action is subject to a strict limitation period of 180 days after the plaintiff first had knowledge of the facts giving rise to the cause of action, or 3 years after the date of the transaction that gave rise to the cause of action.

Since the misrepresentations were made in November 1997 and publicized in the spring of 1998, the plaintiff’s action was clearly time-barred unless that bar was suspended by the Menegon action because of s.28 of the Class Proceedings Act, 1992. On the motion before the lower Court, the motion judge had found that the appeal in the Menegon action was about the common law cause of action and not about the s.130 statutory cause of action. Consequently, any suspension provided by s.28 ended with the decision dismissing the Menegon action and the lapse of the appeal period from it without an appeal being taken on the issue.

The Court of Appeal agreed with this analysis, and rejected the proposition that the suspension of the limitation period was continued by the appeal from dismissal:

“To summarize, it is clear that the Menegon appeal did not seek a reversal of the dismissal of the s. 130 statutory misrepresentation claim.  Thus s. 28(2) of the CPA did not continue the suspension of the limitation period provided by s. 138 of the OSA during the Menegon appeal.  It resumed running as soon as the time expired for appeal from the dismissal on March 6, 2001, of the s. 130 statutory misrepresentation claim.  The appellant’s identical claim was long out of time when his action was commenced on July 8, 2003.”

The appeal was therefore dismissed.

Dobbie v. Arctic Glacier Income Fund, 2012 ONSC 773: Leave to appeal from the decision of the motion judge granting the defendants’ motion requesting that certain portions of the Statement of Claim be struck (Rule 21 motion), granting the plaintiffs’ motion for leave to commence an action for secondary market representation and certifying the action as a class proceeding. On the Rule 21 motion, the Court denied leave with respect to the motion to strike the plaintiffs’ claims for secondary market misrepresentation claim and conspiracy, but granted leave with respect to the claims for negligent misrepresentation and negligence, as these claims raised issues relating to duty of care and reliance requiring appellate consideration.

Having reached these conclusions respecting the motion for leave to appeal the Rule 21 order, the Court was satisfied that the motion for leave to appeal the certification order was also to be granted. “The conclusions in relation to the Rule 21 order impact the certification requirement set out in s.5(1)(a), the definition of the Class, the delineation of the common issues and the question of whether the representative plaintiffs fairly and adequately represent the interests of the Class.”

Finally, the Court denied leave to appeal the motion judge’s order that the plaintiffs met the leave test under s.138.3(1) of the Securities Act, but did grant leave with respect to two individual defendants in relation to certain limited issues relating to their involvement in any alleged wrongdoing.  

Fischer v. IG Investment Management Ltd., 2012 ONCA 47: Appeal from the decision of the Divisional Court certifying "market timing" class action was dismissed. The principal issue before the Court of Appeal was whether the settlements procedure carried out under the supervision of the Ontario Securities Commission was the preferable procedure for dealing with the claims of the class members. The Court of Appeal rejected the reasoning of the trial court, as it focused on the substantive outcome of the OSC proceedings, rather than considering the regulatory nature of the OSC's jurisdiction and its remedial powers, as well as the lack of participatory rights afforded to affected investors by the OSC proceedings. "A consideration of these two particular characteristics compels the conclusion that the OSC proceedings would not fulfill the CPA goal of providing class members with access to justice in relation to their claims. Thus, the OSC proceedings cannot constitute a preferable procedure to the proposed class action for the purposes of the CPA." The decision of the Divisional Court's certifying the action was upheld. On June 28, 2012, the Supreme Court of Canada granted the defendant’s appeal from the Court of Appeal’s judgment.

Menard c. Matteo, 2012 QCCA 2027: The defendant's application for leave to appeal requesting clarification of the plaintiff's pleadings in a securities class action dismissed.

BANKRUPTCY AND INSOLVENCY

Timminco Ltd. (Re), 2012 ONSC 2515: The class action plaintiff brought a motion for an order lifting the stay of proceedings to allow him to continue his action against the defendants. The plaintiff argued that the stay could be lifted to permit the class action to proceed on the condition that any potential execution excluded the company’s assets. As a practical result, this would limit recovery in the class action to the proceeds of the D&O insurance policies, or in the event that the insurers declined coverage because of fraud, to the personal assets of those officers and directors found responsible for the fraud. The plaintiff submitted that this outcome was consistent with the judicial principle that the CCAA is not meant as a refuge insulating insurers from providing appropriate indemnification.

Counsel for the company pointed out that although the company continued to operate as a going concern, its management team was substantially reduced and lifting the stay would require the management team to spend significant amounts of their time dealing with the class action as opposed to focusing on the CCAA proceedings and the sale process.

After weighing the competing interests of, and potential prejudice to, each side, the Court dismissed the motion, holding that at this time, the primary focus had to be on the sales process and that it was important for the executive team to devote its energy to ensuring that the sales process was conducted in accordance with the prescribed timelines. A delay in the sales process could well have a negative impact on the creditors of Timminco. As such, the balance of justice favored leaving the stay or proceedings in place.

Sino-Forest Corporation (Re), 2012 ONSC 4377: The CCAA Court held that the claims brought against the insolvent company in several class action lawsuits on behalf of current and former shareholders of the company, and the indemnity claims brought by the company’s underwriters and auditors, were “equity claims” that were subject to the stay of proceedings under the CCAA.

Sino-Forest Corporation (Re), 2012 ONCA 816: Appeal dismissed from the decision of the CCAA court holding that the claims of shareholders were "equity claims" that were subject to the stay of proceedings. The Court of Appeal arrived at its decision based on "the expansive language used by Parliament, the language Parliament did not use, the avoidance of surplusage, the logic of the section, and what, from the foregoing, we conclude is the purpose of the 2009 amendments [to the CCAA]".

Sino-Forest Corporation (Re), 2012 ONSC 6275: The Ad Hoc Committee of Purchasers of Sino-Forest securities, including the representative plaintiffs in the proposed class action, applied to lift the stay of proceedings imposed under the CCAA as against Sino-Forest's auditors, underwriters and formers directors of the company in order to allow the leave and certification motions to proceed in the proposed class action. The Court denied the motion, noting as follows:

“As I stated in Timminco Limited (Re) 2012 ONSC 215 (CanLII), 2012 ONSC 215 at [17]: Courts will consider a number of factors in assessing whether it is appropriate to lift a stay, but these factors can generally be grouped under three headings: (a) the relative prejudice to parties; (b) the balance of convenience; and (c) where relevant, the merits (i.e. if the matter has little chance, there may not be sound reasons for lifting the stay). See Canwest Global Communication (Re), [2011] O.J. No. 1590 (S.C.J.).

In the circumstances of this case, I see little prejudice to the Class Action Plaintiffs if the stay were to be maintained for a short period of time which could result in clarity being brought to the proceedings. Although there is a concern that memories of key witnesses will fade with the passage of time, I have not been persuaded that maintaining the stay for a short period of time will be detrimental to the Class Action Plaintiffs on that account.

On the issue of the limitation period, clearly this is an issue that has to be kept in mind, but maintaining the stay for a short period of time would not appear to negatively impact the Class Action Plaintiffs.

On the other hand, the concerns raised by counsel on behalf of the auditors and the underwriters have persuaded me that, the balance of convenience favours these parties, and at this time, they need to focus on issues arising out of the appeal of the Equity Claims Decision as well to focus on the Plan itself.

Accordingly, it seems to me that, having taken into account the relative prejudice to the parties and the balance of convenience, it is reasonable and appropriate to maintain the stay at this time, on the basis that the issue can and should be re-evaluated shortly after the scheduled meeting of creditors to consider the Plan, but in any event, no later than December 10, 2012.

Further, although the appeal of the Equity Claims Decision and the upcoming meeting of creditors and possible sanction hearing does not have any direct impact on the three former directors, I am of the view that it is appropriate to also maintain the stay with respect to these individuals so that the Class Actions can ultimately proceed in a more organized fashion.”

Sino-Forest Corporation (Re), 2012 ONSC 7014: In the lead up to the motion to sanction the plan of compromise in the Sino-Forest insolvency proceedings, counsel for certain institutional equity funds who had suffered financial loss as a result of Sino-Forest saga (and who are not represented by class counsel in the Sino-Forest class action) asked for an adjournment of the sanctioning motion. The Court found that the funds’ motion was premature and that the issues they had raised about the propriety of the settlement terms (particularly as they pertained to certain anticipated settlements in the class action) could be addressed on the return of the motion to approve the specific settlement and releases. The motion to adjourn was denied.

Sino-Forest Corporation (Re), 2012 ONSC 7050: Plan of compromise was sanctioned by the Ontario Superior Court. Although the proposed form of the plan did not settle the class action claims, the class action plaintiffs did not oppose the plan. The plan did contain terms that would be engaged if certain conditions were met (including if the proposed class action settlement with Sino-Forest’s auditors received court approval). As part of the settlement the noteholder class action claimants will be entitled to their pro rata shares of 25% of the litigation trust interests arising out of the plan.

THIRD PARTY FINANCING

Smith v. Sino-Forest, 2012 ONSC 2937: Third party financing in securities class action against Sino-Forest granted. As with previously approved third party financing agreements, the third party financer will receive a commission of 7% of the amount of settlement or judgment, after deduction of lawyers' fees and disbursements and any administration expenses, capped at a maximum of $10 million.

SERVICE

Zaniewicz v. Zungui Haixi Corp., 2012 ONSC 4904: In this proposed securities class action alleging misconduct in trading the shares of Zungui Haixi Corporation on the TSX, the plaintiff brought a motion for an order for substituted service. Some of the defendants were residents of the People's Republic of China which only allowed service through the Chinese government - a slow and expensive process. In order to begin the action within the limitation period, the plaintiff was granted an order for substituted service to the defendants' last known address.

Gray v. SNC-Lavalin Group Inc., 2012 ONSC 3735: The plaintiffs in this proposed securities class action sought to substitutionally serve two individuals outside of Ontario. The Court recognized the 3 year limitation period for obtaining leave to commence a secondary market misrepresentation, and accepted that as a result of Sharma v. Timminco, the limitation period was not suspended by the Class Proceedings Act, 1992, and that there was a deadline for a court decision for the leave motion. Further, all other defendants had been served. The plaintiffs had also attempted to serve the two individual defendants locally, but had failed to do so. Finally, they had made attempts to serve one of the individuals in Switzerland (where he was incarcerated) in accordance with the Hague Convention.

The Court was satisfied that the criteria for substituted service had been satisfied but for the possible complication that one of the defendants was a detainee in a Hague Convention state. The Court accepted that where service is made outside Ontario in a signatory state of the Hague Convention, the service will not be effective unless it is compliant with the requirements of the Convention. It further held that an order for substituted service cannot be made when the person to be served resides in a jurisdiction that is signatory to the Hague Convention. “Service in a country that is a signatory to the Hague Convention must be done exclusively in accordance with the Hague Convention.” Ultimately, however, the Court managed to get around Hague based on the fact that the individual defendant, while detained in Switzerland, was normally a Canadian resident and so the rule from Khan Resources did not apply to him. Order for substituted service was therefore granted.

MOTION TO STRIKE

Frank v. Farlie, Turner & Co., LLC, 2011 ONSC 5519: This decision pertains to a procedural motion to strike certain claims in a securities class action. The Court struck out the claim of punitive damages against directors and officers. In their action against the directors and officers of the company, the plaintiffs had agreed to withdraw their common law claims and only pursue their statutory claims under Part XXIII.1 of the Ontario Securities Act. They also claimed $20 million in punitive damages. The Court held that Part XXIII.1 of the Securities Act did not support a claim for punitive damages and that holding otherwise would allow plaintiffs to circumvent the cap on liability under the Act:

“[…] the argument that persuades me is the officers and directors' argument that it is plain and obvious that a claim for punitive damages supported only be the predicate wrongdoing of a breach of Part XXIII.1 of the Ontario Securities Act is inconsistent with the scheme of Part XXIII.1, which carefully calibrates and achieves a balance between compensation for a director's or officer's contraventions of the Act and discouraging persons from becoming officers and directors.

I agree that allowing a claim for punitive damages would circumvent the policies of Part XXIII.1 of the Act of having caps on the quantum of purely compensatory damages and lifting those caps in exceptional circumstances.

The case at bar demonstrates how both policies of the Act would be circumvented by an award of compensatory damages. Visualize: if the court were to determine that a director contravened Part XXIII.1 of the Act, the director's liability would be capped, but that cap would be lifted if the court were persuaded that the contravention of the Act deserved the condemnation of punitive damages. If the court were to determine that a director contravened Part XXIII.1 knowingly, then the cap on compensatory damages would be lifted and then the exposure to liability of the director would be further extended beyond compensatory damages to add a claim for punitive damages, which are non-compensatory but serve a different purpose.”

The Court also struck out the claims against one defendant – an ex-director of the company – for failure to plead the constituent elements of a cause of action, without leave to amend, and stayed the action against another defendant on the ground that Ontario did not have jurisdiction simpliciter over the claim against them.

Ravary c. Fonds mutuels CI inc., 2012 QCCS 5771: The defendants brought motions seeking numerous orders relating to the plaintiff's certified securities class action, including an application to strike portions of the plaintiff's statement of claim, a request for clarification of the plaintiff's claims, a request for particulars, and an order to dismiss the action. All motions were dismissed.

MISCELLANEOUS MOTIONS

Silver v. Imax Corp., 2012 ONSC 1047: The Court granted standing to a class member – a US Merger Fund who was lead plaintiff in pending US proceedings – to participate in the motion respecting the notice campaign in the Canadian class action. On the motion respecting the notice campaign, the Court heard from the parties and the Merger Fund about the content, timing and form of notice. With respect to the timing of the motion, the Merger Fund argued that no notice should be issued until the US proceedings caught up with the Canadian proceedings, and that any notice should await the outcome of a motion to amend the class, to be issued with notice of a settlement in the US proceeding. The Court disagreed, holding that notice of certification of a class proceeding should ordinarily be given to class members as soon as practicable, and that delay in notice is inconsistent with the need to protect the procedural rights of class members, as well as the respect for their “litigation autonomy”. Given the likelihood that the US proceedings and anticipated settlement could result in significant delays, the Court ordered that notice be published promptly in the Canadian litigation.

With respect to the content of the notice, the Court held that the notice should refer to the US proceedings and provide contact information for recipients to obtain more information about such proceedings. Further, the court held that class members should specifically be advised that it is unnecessary to opt out of the Ontario proceedings in order to participate in the US proceedings.

Smith v. Sino-Forest Corp., 2012 ONSC 1924: Motion by the plaintiffs in proposed class action for orders requiring the defendants to deliver statements of defence and for the certification and leave motions to be heard together. Justice Perell ordered that, with the exception of an anticipated funding motion, there would be no other motions before the leave and certification without leave of the court, and that the leave and certification motions would be heard together.

With respect to the delivery of the statement of defence, Justice Perell acknowledged that as a general rule, it is desirable that pleadings be closed prior to the certification motion. He also noted that, with respect to actions for secondary market misrepresentation, which require leave of the court, a defendant who files an affidavit in the leave motion cannot thereafter protest that it would be unfair to require it to file a statement of defence. “Delivering an affidavit under s.138.8 is essentially the same as delivering a statement of claim or defence.”

Practically speaking, Justice Perell saw three potential types of defendants in cases requiring leave to commence an action for secondary market misrepresentation:

(a)  those defendants who delivered a s.138.8(2) affidavit under the Securities Act: these defendants must deliver a statement of defence;

(b)  those defendants against whom there are no secondary market disclosure allegations and who thus have no right or need to deliver a s.138.8(2) affidavit and who choose to deliver a statement of defence: these defendants may, if so advised, simply plead in the normal course; and

(c)  those defendants against whom there are secondary market disclosure allegations and who do not deliver a s.138.8(2) affidavit but who deliver a statement of defence: with respect to these defendants, Justice Perell noted that Rule 25.07 of the Ontario Rules of Civil Procedure, which provided the rules of pleading applicable to defences, did not accommodate s.138.8 of the Securities Act. However, relying on s.12 of the Class Proceedings Act, 1992 (which authorizes the court to make any order it consider appropriate respecting the conduct of a class proceeding to ensure its fair and expeditious determination), Justice Perell found he had jurisdiction to revise the procedure for a class proceeding to accommodate s.138.8 by “notionally adding” a new sub-rule to Rule 25.07 to the effect that, in a proposed class proceeding for which leave is also being sought to commence action under s.138.3 of the Securities Act, “in a defence, a party who does not file an affidavit pursuant to Rule 138.3(2) and who delivers a statement of defence shall decline to either admit or deny the allegations of fact referable solely to his or her liability for secondary market disclosure and not referable to any other pleaded cause of action.”

Accordingly, Justice Perell ordered that a statement of defence be delivered by any defendant that delivered an affidavit with respect to the leave motion, and that any other defendant was at liberty to deliver a statement of defence. Justice Perell noted that the delivery of a statement of defence was without prejudice to the defendant’s right to bring a Rule 21 motion or to challenge whether the plaintiff had shown a cause of action as required by s.5(1)(a) of the Class Proceedings Act, 1992.

COSTS

Frank v. Farlie, Turner & Co., LLC, 2012 ONSC 6715: The defendant sought partial indemnity costs of $43,643.20 for successful motion to strike the plaintiff's claim for punitive damages. The plaintiff submitted that no costs should be awarded as the case raised a novel point of law and was a matter of public interest. The Court ordered no costs on the grounds that it was reasonable for the plaintiff to resist the defendant's motion, and that it would have made this order regardless of which party had been successful.

Silver v. Imax Corp., 2012 ONSC 4064: This is the cost decision arising out of two underlying motions. In the first motion, the Court granted leave to a class member Merger Fund to participate in the motion for approval of the form, content and timing of the notice of certification. In the second motion, the Court dismissed the Merger Fund’s requests that the notice campaign be delayed pending further progress in the US proceedings. The Court partially granted the Merger Fund’s requests with respect to the content of the notice, although no one was entirely successful on the issue of the content of the notice.

The Court held that no costs would be awarded on the motions. It noted that, while there was no absolute bar against awarding costs against class members, in the circumstances of this case, there was no justification for awarding costs against the Merger Fund:

“In determining costs in class proceedings, courts apply the normal rules under s. 131 of the Courts of Justice Act and rule 57.  In general, costs follow the event, and the amount of costs should be proportionate to the issues and complexity of the matter determined, and consistent with the reasonable expectations of the parties.  Section 31(1) of the CPA introduces other factors for consideration, providing that the court may consider whether the class proceeding was a test case, raised a novel point of law or involved a matter of public interest.

The most important factor in this case is the novelty of the questions that were before the court.  The certified class is global and includes persons who are “overlapping” class members, who are included in the proposed class in proceedings pending in the United States.  In my certification decision I adverted to the fact that the litigation plan initially proposed lacked detail with respect to the form, substance and distribution of notice to non-resident class members.  The form of notice that was acceptable to the defendants and proposed for court approval before TMF became involved did not address the global nature of the class.  Ultimately, the court was invited to address the content of the notice so as to increase the likelihood that any disposition of these proceedings would be recognized in the U.S. and binding on non-resident class members.  This issue, at the notice of certification stage, had not been previously considered by an Ontario court.

While TMF was unsuccessful in its “overarching objective” to delay the notice, the plaintiffs were unsuccessful in their contention that the notice should make no reference at all to the U.S. Proceedings.

At the time the motion was brought a certification motion was pending in the U.S. Proceedings.  In the months that followed however, a proposed settlement was reached in the U.S. Proceedings.  This development led to a very real concern about potential confusion for overlapping class members, and the need to ensure that the notice in these proceedings would preserve their litigation autonomy.  In all of the circumstances, including the developments that occurred in the U.S. Proceedings, which impacted on the question of notice in this jurisdiction, it would not be appropriate to award costs in favour of any party.”

 

Ward Branch, Partner Branch MacMaster LLP 1410 - 777 Hornby Street Vancouver, B.C. V6Z 1S4 P: 604.654.2966 | F: 604.684.3429 Web: www.branchmacmaster.com/ward-branch<http://www.branchmacmaster.com/ward-branch> Twitter: http://twitter.com/#!/wbranch99

This message is intended only for the use of the individual or entity to which it is addressed, and may contain information that is privileged, confidential and exempt from disclosure under applicable law. No waiver of privilege, confidence or otherwise is intended by virtue of communications via the internet. If the reader of this message is not the intended recipient, or the employee or agent responsible for delivering the message to the intended recipient, you are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please notify us immediately by telephone.

 

Article originally appeared on Branch MacMaster LLP: Barristers & Solicitors (http://www.branchmacmaster.com/).
See website for complete article licensing information.