Trustees of the Drywall Acoustic Lathing and Insulation Local 675 Pension Fund et al. v. SNC-Lavalin Group Inc. et al., 2015 ONCA 718

• Judge: Hoy, A.C.J.O., Weiler and Huscroft, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: July 08, 2015
• Jurisdiction: Ontario
• Citations: 2015 ONCA 718;(2015), 340 O.A.C. 271 (CA)

Drywall Acoustic v. SNC-Lavalin (2015), 340 O.A.C. 271 (CA)

MLB headnote and full text

Temp. Cite: [2015] O.A.C. TBEd. OC.031

The Trustees of the Drywall Acoustic Lathing and Insulation Local 675 Pension Fund and 0793094 B.C. Ltd. (plaintiffs/appellants) v. SNC-Lavalin Group Inc., Ian A. Bourne, David Goldman, Patricia A. Hammick, Pierre H. Lessard, Edythe A. Marcoux, Lorna R. Marsden, Claude Mongeau, Gwyn Morgan, Michael D. Parker, Hugh D. Segal, Lawrence N. Stevenson, Gilles Laramée, Michael Novak, Pierre Duhaime, Riadh Ben Äissa and Stéphane Roy (defendants/respondents)

(C59951; M45104; 2015 ONCA 718)

Indexed As: Trustees of the Drywall Acoustic Lathing and Insulation Local 675 Pension Fund et al. v. SNC-Lavalin Group Inc. et al.

Ontario Court of Appeal

Hoy, A.C.J.O., Weiler and Huscroft, JJ.A.

October 28, 2015.

Summary:

Pursuant to s. 138.3(1) of Part XXIII.1 of the Securities Act, the plaintiffs commenced a class action against SNC-Lavalin Group Inc. (SNC), its officers and directors, alleging misrepresentation in secondary market disclosure documents. The plaintiffs obtained leave to bring the claim as required by s. 138.8(1). The allegations of wrongdoing initially included (1) improper agreements between SNC and various agents, pursuant to which SNC made payments totalling $56 million USD; and (2) criminal activity by two former SNC employees relating to SNC's activities in Bangladesh. As criminal and regulatory investigations continued, information of a wider scale of alleged wrongdoing became available. The plaintiffs applied for leave to amend their claim to add further particulars of the wrongful conduct underlying the claim. The defendants opposed most of the amendments, arguing that the plaintiffs were seeking to add new allegations of misrepresentation and accordingly fresh leave was required under s. 138.8(1). They also argued that the limitation period in s. 138.14(1) barred the plaintiffs from pursuing these new allegations.

The Ontario Superior Court, in a decision with neutral citation 2015 ONSC 256, denied leave for most of the proposed amendments and dismissed the causes of action arising from those amendments. The plaintiffs appealed, arguing that the motion judge erred in concluding that (1) the plaintiffs could not make the amendments without bringing a new leave application; and (2) s. 138.14(1) barred those disallowed amendments as out of time.

The Ontario Court of Appeal allowed the appeal only to the extent of permitting the plaintiffs to draft an amended pleading regarding SNC's alleged misrepresentation by omission in failing to disclose the $56 million USD payments and the criminal activity connected to the project in Bangladesh. The plaintiffs could then attend before the motion judge to determine whether it was properly pleaded. The court would not interfere with the motion judge's conclusion that leave was required for the balance of the amendments, and that s. 138.14(1) barred those amendments as out of time.

Courts - Topic 7446

Provincial courts - Ontario - Court of Appeal - Jurisdiction - General - The plaintiffs commenced a class action against the defendants pursuant to s. 138.3(1) of the Ontario Securities Act - A motion judge dismissed the plaintiffs' motion to amend their claim - The plaintiffs appealed - The defendants challenged the jurisdiction of the court to hear the appeal - They argued that the order at issue was both interlocutory (to the extent that it dismissed the motion to amend because the amendments required leave under s. 138.8(1)), and final (to the extent that it dismissed the causes of action arising from the refused amendments because they were statute-barred by s. 138.14(1)) - The defendants submitted that an appeal from the interlocutory portion of the order had to be heard by the Divisional Court with leave - The Ontario Court of Appeal rejected this argument - The defendants were relying on the motion judge's reasons to artificially parse the order under appeal - Appeals laid from orders, not reasons - The motion judge's order permanently prohibited the plaintiffs from advancing the refused amendments and pursuing the underlying claims, and therefore constituted a final order - See paragraphs 10 to 13.

Fraud and Misrepresentation - Topic 2502

Misrepresentation - General principles - Elements of actionable misrepresentation - [See Fraud and Misrepresentation - Topic 4084 ].

Fraud and Misrepresentation - Topic 2705

Misrepresentation - What constitutes misrepresentation - Falsity by omission - [See Fraud and Misrepresentation - Topic 4084 ].

Fraud and Misrepresentation - Topic 4084

Practice - Pleadings - What must be pleaded - Pursuant to s. 138.3(1) of Part XXIII.1 of the Securities Act, the plaintiffs commenced a class action against SNC-Lavalin Group Inc. (SNC), its officers and directors, alleging misrepresentation in secondary market disclosure documents - The plaintiffs obtained leave to bring the claim as required by s. 138.8(1) - The allegations of wrongdoing initially included (1) improper agreements between SNC and various agents, pursuant to which SNC made payments totalling $56 million USD; and (2) criminal activity by two former SNC employees relating to SNC's activities in Bangladesh - As criminal and regulatory investigations continued, information of a wider scale of alleged wrongdoing became available - The plaintiffs applied for leave to amend their claim to add further particulars of the wrongful conduct underlying the claim - The motion judge denied leave for most of the proposed amendments and dismissed the causes of action arising from those amendments - He found that the amendments advanced discrete misrepresentation claims which required a fresh leave application under s. 138.8(1) and, further, that the amendments were statute-barred by s. 138.14(1) - The Ontario Court of Appeal allowed the plaintiffs' appeal only to the extent of permitting them to draft an amended pleading regarding SNC's alleged misrepresentation by omission in failing to disclose the $56 million USD payments and the criminal activity connected to the project in Bangladesh - The court rejected the defendants' argument that where the alleged misrepresentation was a misrepresentation by omission, a plaintiff had to plead and prove that the defendants had knowledge of the omitted material fact - Neither the definitions of "misrepresentation" nor "material fact" in s. 1(1) of the Act included a knowledge requirement - See paragraphs 61 to 66.

Limitation of Actions - Topic 4402

Statutory causes of action - Actions given to party aggrieved by any statute - [See Securities Regulation - Topic 5 ].

Practice - Topic 2111

Pleadings - Amendment of pleadings - Prohibition against adding new action or "claim" which is statute barred - [See Securities Regulation - Topic 5 ].

Practice - Topic 2141

Pleadings - Amendment of pleadings - To plead fraud, misrepresentation, malice, intent, etc. - [See Fraud and Misrepresentation - Topic 4084 and first Securities Regulation - Topic 5364 ].

Practice - Topic 2143

Pleadings - Amendment of pleadings - Circumstances when amendment denied - [See all Securities Regulation - Topic 5364 ].

Practice - Topic 5729

Judgments and orders - Final judgments and orders - What constitute - [See Courts - Topic 7446 ].

Practice - Topic 8984

Appeals - When appeal available - From final judgment or order - [See Courts - Topic 7446 ].

Securities Regulation - Topic 5

General principles - Civil action for breach of statute (incl. limitation period) - Pursuant to s. 138.3(1) of Part XXIII.1 of the Securities Act, the plaintiffs commenced a class action against SNC-Lavalin Group Inc. (SNC), its officers and directors, alleging misrepresentation in secondary market disclosure documents - The plaintiffs obtained leave to bring the claim as required by s. 138.8(1) - As criminal and regulatory investigations continued, information of a wider scale of alleged wrongdoing became available - The plaintiffs applied for leave to amend their claim to add further particulars of the wrongful conduct underlying the claim - The motion judge denied leave for most of the proposed amendments and dismissed the causes of action arising from those amendments - He found that the amendments advanced discrete misrepresentation claims which required a fresh leave application under s. 138.8(1) and, further, that the amendments were statute-barred by s. 138.14(1) - The Ontario Court of Appeal held that the motion judge did not err in concluding that s. 138.14(1) barred the disallowed amendments as out of time - The plaintiffs were granted leave to commence a particular action, namely, one asserting that representations in the impugned documents were false because of evidence that amounts had been paid to agents and that SNC was engaged in criminal activity respecting projects in Bangladesh - The plaintiffs did not obtain leave to pursue claims founded on other misrepresentations - Those claims were therefore part of a different "action" and were subject to the limitation period in s. 138.14(1) - See paragraphs 69 to 75.

Securities Regulation - Topic 6

General principles - Securities legislation - Nature of - [See second and third Securities Regulation - Topic 5364 ].

Securities Regulation - Topic 5361

Trading in securities - Civil liability (incl. secondary market disclosure) - General - [See Fraud and Misrepresentation - Topic 4084 ].

Securities Regulation - Topic 5362

Trading in securities - Civil liability (incl. secondary market disclosure) - Application of legislation (incl. exemptions) - [See second and third Securities Regulation - Topic 5364 ].

Securities Regulation - Topic 5364

Trading in securities - Civil liability (incl. secondary market disclosure) - Leave to commence action - Pursuant to s. 138.3(1) of Part XXIII.1 of the Securities Act, the plaintiffs commenced a class action against the defendants, alleging misrepresentation in secondary market disclosure documents - The plaintiffs obtained leave to bring the claim as required by s. 138.8(1) - As criminal and regulatory investigations continued, information of a wider scale of alleged wrongdoing became available - The plaintiffs applied for leave to amend their claim to add further particulars of the wrongful conduct underlying the claim - The motion judge denied leave for most of the proposed amendments and dismissed the causes of action arising from those amendments - He found that the amendments advanced discrete misrepresentation claims which required a fresh leave application under s. 138.8(1) and, further, that the amendments were statute-barred by s. 138.14(1) - The Ontario Court of Appeal allowed the plaintiffs' appeal in part - The motion judge did not err in principle in his approach - When a plaintiff sought leave to amend a statement of claim after receiving leave under s. 138.8(1) and after the expiry of the limitation period in s. 138.14(1), the motion judge had to consider the precise misrepresentation that was pleaded for the purpose of obtaining leave - The motion judge had to focus on the facts the plaintiff pleaded that made the representation a misrepresentation - The plaintiff had to lead sufficient evidence to satisfy the leave requirement for each discrete allegation of misrepresentation - With one exception, there was no basis to interfere with the motion judge's decision that the refused amendments constituted discrete misrepresentation claims - See paragraphs 43 and 44 and 56 to 68.

Securities Regulation - Topic 5364

Trading in securities - Civil liability (incl. secondary market disclosure) - Leave to commence action - Pursuant to s. 138.3(1) of Part XXIII.1 of the Securities Act, the plaintiffs commenced a class action against the defendants, alleging misrepresentation in secondary market disclosure documents - The plaintiffs obtained leave to bring the claim as required by s. 138.8(1) - As criminal and regulatory investigations continued, information of a wider scale of alleged wrongdoing became available - The plaintiffs applied for leave to amend their claim to add further particulars of the wrongful conduct underlying the claim - The motion judge denied leave for most of the proposed amendments and dismissed the causes of action arising from those amendments - He found that the amendments advanced discrete misrepresentation claims which required a fresh leave application under s. 138.8(1) and, further, that the amendments were statute-barred by s. 138.14(1) - The plaintiffs appealed, arguing that a fresh leave application should only be required if the proposed pleading fundamentally altered the action for which leave was granted - The Ontario Court of Appeal held that the motion judge's decision was consistent with the objectives of the leave requirement, Part XXIII.1 and the Act generally - Part XXIII.1 included various defences and other important limitations that tempered the goals of providing access to justice for aggrieved secondary market investors and deterring disclosure violations - "Section 138.8(1) is intended to be a 'robust deterrent screening mechanism' ... The approach that the [plaintiffs] urge would permit a plaintiff which has met the leave test in s. 138.8(1) to significantly expand the scope of its action to include discrete, untested allegations of misrepresentation that are without merit. Permitting this would, in my view, frustrate the objective of the leave requirement. The threat of expanded litigation has the possibility of affecting the settlement dynamic - the very matter that the leave requirement sought to address." - See paragraphs 45 to 51.

Securities Regulation - Topic 5364

Trading in securities - Civil liability (incl. secondary market disclosure) - Leave to commence action - Pursuant to s. 138.3(1) of Part XXIII.1 of the Securities Act, the plaintiffs commenced a class action against the defendants, alleging misrepresentation in secondary market disclosure documents - The plaintiffs obtained leave to bring the claim as required by s. 138.8(1) - As criminal and regulatory investigations continued, information of a wider scale of alleged wrongdoing became available - The plaintiffs applied for leave to amend their claim to add further particulars of the wrongful conduct underlying the claim - The motion judge denied leave for most of the proposed amendments and dismissed the causes of action arising from those amendments - He found that the amendments advanced discrete misrepresentation claims which required a fresh leave application under s. 138.8(1) and, further, that the amendments were statute-barred by s. 138.14(1) - The Ontario Court of Appeal found that it was significant that the defendants had not opposed the first leave motion, and that this was something to be encouraged - If a defendant who did not oppose leave based on one set of allegations and on the evidence that the plaintiffs advanced in support of those allegations could be exposed to a "procedural bail-and-pile-on tactic", defendants would be more inclined to oppose leave motions - This would increase the cost of litigation and be contrary to the goal of Part XXIII.1, which was facilitating and enhancing access to justice for investors - See paragraph 55.

Cases Noticed:

Green et al. v. Canadian Imperial Bank of Commerce et al. (2014), 314 O.A.C. 315; 118 O.R.(3d) 641; 2014 ONCA 90, leave to appeal granted [2014] N.R. TBEd. Motion 289 (S.C.C.), refd to. [para. 2, footnote 1].

Theratechnologies Inc. et al. v. 121851 Canada Inc. (2015), 470 N.R. 123; 382 D.L.R.(4th) 600; 2015 SCC 18, refd to. [para. 51].

Trustees of the Millwright Regional Council of Ontario Pension Trust Fund v. Celestica Inc. et al., [2014] O.T.C. Uned. 1057; 49 C.P.C.(7th) 12; 2014 ONSC 1057, refd to. [para. 52].

Gould v. Western Coal Corp. et al., [2012] O.T.C. Uned. 5184; 7 B.L.R.(5th) 19; 2012 ONSC 5184, refd to. [para. 66].

Statutes Noticed:

Securities Act, R.S.O. 1990, c. S-5, sect. 1(1) [para. 66]; 138.14(1) [para. 70]; sect. 138.8(1) [para. 50].

Counsel:

A. Dimitri Lascaris, Douglas Worndl and Anthony O'Brien, for the appellants;

Steve Tenai and Vasuda Sinha, for the respondents, SNC-Lavalin Group Inc., Ian A. Bourne, David Goldman, Patricia A. Hammick, Pierre H. Lessard, Edythe A. Marcoux, Lorna R. Marsden, Claude Mongeau, Gwyn Morgan, Michael D. Parker, Hugh D. Segal and Lawrence N. Stevenson;

Clifford Lax, Q.C., for the respondent, Gilles Laramée;

Rebecca Wise, for the respondent, Michael Novak;

Scott Kugler and Max Muñoz, for the respondent, Pierre Duhaime;

Laura Young, for the respondent, Stéphane Roy.

This appeal was heard on July 8, 2015, before Hoy, A.C.J.O., Weiler and Huscroft, JJ.A., of the Ontario Court of Appeal. Hoy, A.C.J.O., delivered the following judgment for the court on October 28, 2015.