Mask v. Silvercorp Metals Inc. et al.

[Indexed as: Mask v. Silvercorp Metals Inc.]

Ontario Reports

Court of Appeal for Ontario,

Strathy C.J.O., D.M. Brown and Huscroft JJ.A.

August 24, 2016

132 O.R. (3d) 161 | 2016 ONCA 641

Case Summary

Securities regulation — Misrepresentation — Statutory cause of action — Test for leave to bring action for secondary market misrepresentation under Securities Act requiring scrutiny of all evidence proffered by parties and not limited to plaintiff's evidence — Securities Act, R.S.O. 1990, c. S.5.

The plaintiff brought a proposed class action claiming that the defendant's share price was inflated by misrepresentations in its public disclosures in 2010 and 2011 and that he and other shareholders lost money when the price fell after "corrective disclosure" in 2011. The motion judge dismissed the plaintiff's motion for leave to bring a class action for secondary market misrepresentation under s. 138.3 of the Securities Act and dismissed a motion to certify the action as a class proceeding. The plaintiff appealed.

Held, the appeal should be dismissed.

The motion judge did not err in applying the "reasonable possibility of success" test for leave under the Act by analyzing the defendant's evidence and weighing it against that proffered by the plaintiff. The "reasonable possibility" requirement of the leave test requires scrutiny of the merits of the action based on all of the evidence proffered by the parties, and some weighing of the defence evidence against that adduced by the plaintiff. When he considered all the evidence, the motion judge concluded that the foundation of the plaintiff's statutory claim had been demolished by the defendant's evidence and had not been repaired by the plaintiffs.

The motion judge did not mischaracterize the claim or fail to consider relevant evidence.

The motion judge did not err in refusing the plaintiff's request for leave to amend the pleadings to plead negligence simpliciter. He was entitled to find that an amendment at that late stage would be unfair to the defendants and that, in any event, the claim was subsumed by the negligent misrepresentation pleading.

The motion judge did not err in dismissing the certification motion on the basis that the plaintiff's common law misrepresentation claim was bound to fail because it rested on the same evidentiary foundation as the statutory claim.

The motion judge's costs award of $500,000 was not excessive.

Green v. Canadian Imperial Bank of Commerce, [2015] 3 S.C.R. 801, [2015] S.C.J. No. 60, 2015 SCC 60, 77 C.P.C. (7th) 1, 391 D.L.R. (4th) 567, 478 N.R. 202, 44 B.L.R. (5th) 1, 346 O.A.C. 204, 2015EXP-3510, J.E. 2015-1921, EYB 2015-259361, 260 A.C.W.S. (3d) 25, varg (2014), 118 O.R. (3d) 641, [2014] O.J. No. 419, 2014 ONCA 90, 314 O.A.C. 315, 370 D.L.R. (4th) 402, 50 C.P.C. (7th) 113, 237 A.C.W.S. (3d) 313; Theratechnologies inc. v. 121851 Canada inc., [2015] 2 S.C.R. 106, [2015] S.C.J. No. 18, 2015 SCC 18, 382 D.L.R. (4th) 600, 470 N.R. 123, 34 B.L.R. (5th) 173, 2015EXP-1230, J.E. 2015-678, EYB 2015-250782, 251 A.C.W.S. (3d) 343, consd [page162]

Other cases referred to

Dugal v. Manulife Financial Corp., [2013] O.J. No. 5088, 2013 ONSC 6354 (S.C.J.); Goldsmith v. National Bank of Canada (2016), 128 O.R. (3d) 481, [2016] O.J. No. 146, 2016 ONCA 22, 344 O.A.C. 204, 394 D.L.R. (4th) 212, 261 A.C.W.S. (3d) 481; Hamilton v. Open Window Bakery Ltd., [2004] 1 S.C.R. 303, [2003] S.C.J. No. 72, 2004 SCC 9, 235 D.L.R. (4th) 193, 316 N.R. 265, J.E. 2004-470, 184 O.A.C. 209, 40 B.L.R. (3d) 1, [2004] CLLC Â210-025, 128 A.C.W.S. (3d) 1111; Housen v. Nikolaisen, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, 2002 SCC 33, 211 D.L.R. (4th) 577, 286 N.R. 1, [2002] 7 W.W.R. 1, J.E. 2002-617, 219 Sask. R. 1, 10 C.C.L.T. (3d) 157, 30 M.P.L.R. (3d) 1, 112 A.C.W.S. (3d) 991; Ironworkers Ontario Pension Fund (Trustee of) v. Manulife Financial Corp., [2013] O.J. No. 3455, 2013 ONSC 4083, 44 C.P.C. (7th) 80, 230 A.C.W.S. (3d) 604 (S.C.J.); L. (H.) v. Canada (Attorney General), [2005] 1 S.C.R. 401, [2005] S.C.J. No. 24, 2005 SCC 25, 251 D.L.R. (4th) 604, 333 N.R. 1, [2005] 8 W.W.R. 1, J.E. 2005-845, [2005] R.R.A. 275, 262 Sask. R. 1, 24 Admin. L.R. (4th) 1, 29 C.C.L.T. (3d) 1, 8 C.P.C. (6th) 199, 138 A.C.W.S. (3d) 852; Moore v. Getahun (2015), 124 O.R. (3d) 321, [2015] O.J. No. 398, 2015 ONCA 55, 73 M.V.R. (6th) 169, 65 C.P.C. (7th) 1, 381 D.L.R. (4th) 471, 329 O.A.C. 363, 248 A.C.W.S. (3d) 844; Musicians' Pension Fund of Canada (Trustees of) v. Kinross Gold Corp., [2014] O.J. No. 6070, 2014 ONCA 901, 61 C.P.C. (7th) 1; Silver v. Imax Corp., [2010] O.J. No. 3329, 2010 ONSC 4017, 191 A.C.W.S. (3d) 749 (S.C.J.); St. Jean v. Mercier, [2002] 1 S.C.R. 491, [2002] S.C.J. No. 17, 2002 SCC 15, 209 D.L.R. (4th) 513, 282 N.R. 310, J.E. 2002-434, REJB 2002-28009, 111 A.C.W.S. (3d) 838; Westerhof v. Gee Estate (2015), 124 O.R. (3d) 721, [2015] O.J. No. 1472, 2015 ONCA 206, 47 C.C.L.I. (5th) 246, 384 D.L.R. (4th) 343, 77 M.V.R. (6th) 181, 331 O.A.C. 129, 250 A.C.W.S. (3d) 620

Statutes referred to

Class Proceedings Act, 1992, S.O. 1992, c. 6 [as am.], s. 5(1)

Securities Act, R.S.O. 1990, c. S.5, Part XXIII.1 [as am.], ss. 138.3 [as am.], (1) [as am.], (6) [as am.], 138.8 [as am.], (1) [as am.], (2), (3)

APPEAL from the order of Belobaba J., [2015] O.J. No. 5471, 2015 ONSC 5348 (S.C.J.) dismissing a motion for leave to bring a statutory action for secondary market misrepresentation and dismissing a motion to certify an action as a class proceeding.

Joseph Groia and Matthew M.A. Stroh, for appellant.

Dana M. Peebles, Miranda Lam and Paul Davis, for respondents.

The judgment of the court was delivered by

STRATHY C.J.O.: —

A. Introduction

[1] In August and September 2011, Silvercorp Metals Inc. ("Silvercorp") was targeted by investors who "shorted" its shares, expecting to profit when the price fell.

[2] To make sure of this, one of the short-sellers anonymously released false reports on the Internet. The share price fell and [page163] he made a quick profit of $2.8 million. Silvercorp's shareholders, on the other hand, lost $288 million in equity.

[3] Twenty months later, the appellant commenced this proposed class action against the company, two executives and a mining engineering firm.[^1] He claimed that Silvercorp's share price was inflated by misrepresentations in its public disclosures in 2010 and 2011, and that he and other shareholders lost money when the price fell after "corrective disclosures" in September 2011.

[4] The class action judge dismissed the appellant's motion for leave to bring a class action for secondary market misrepresentation under s. 138.3 of the Securities Act, R.S.O. 1990, c. S.5. He also dismissed a motion to certify the action under the Class Proceedings Act, 1992, S.O. 1992, c. 6. The appellant says the motion judge erred in applying the leave test and misapprehended the evidence.

[5] For the reasons that follow, I would dismiss the appeal.

B. Facts

[6] Silvercorp is a Canadian company that owns and operates mining properties in China. Its shares trade on the Toronto and New York stock exchanges. The respondent Feng is the CEO and the respondent Tang is the former CFO.

[7] During the proposed class period -- March 1, 2010 to September 12, 2011[^2] -- Silvercorp released periodic public reports about its Ying Mining Project in China, including a technical report in each of 2010 and 2011, prepared by BK Exploration Associates ("BK"). Those reports set out the company's estimates of the silver, lead and zinc resources and reserves at the Ying Mining Project (the "BK 2010 report") and, in particular, at the SGX Mine, one of the four mines in the Ying Mining Project (the "BK 2011 report").

[8] The first anonymous Internet posting, on September 2, 2011, questioned Silvercorp's accounting and its mineral estimates, production numbers and mineral grade levels. The share price fell about 10 per cent. The second posting, on September 13, [page164] caused the share price to fall a further 20 per cent. Among other things, the posting alleged that Silvercorp had overstated the quantity and quality of its mineral resources and reserves at the project.

[9] The next day, Silvercorp issued a press release attempting to refute these allegations and to show that its revenues and production numbers were correct. "Schedule 4" to the press release reconciled production to revenue, as reported in the company's financial statements for the Ying Mining Project for the calendar years 2006 to mid-2011.

[10] The Internet postings and the decline in share price caused the B.C. Securities Commission to investigate Silvercorp's disclosures related to the Ying Mining Project. Among other things, the commission asked Silvercorp to retain an internationally recognized consulting firm to prepare new technical reports.

[11] Silvercorp retained AMC Mining Consultants (Canada) Ltd. ("AMC"), one of the world's largest independent mining consultancy firms. In June 2012, Silvercorp released AMC's updated technical report (the "AMC 2012 report"). This report summarized Silvercorp's reported ore production (over the period 2005 to 2011) and updated the estimates of future ore production, based on exploration and development work that had been completed by Silvercorp since the release of the BK 2011 report.

[12] The B.C. Securities Commission did not pursue its investigation of Silvercorp after the delivery of the AMC 2012 report. Nor did it require Silvercorp to restate its financial statements. It did, however, pursue the shareholder responsible for the anonymous internet postings, ultimately concluding that while his conduct was "unsavory" and "morally unsupportable", he had not committed a prohibited act.[^3]

C. The Pleading

[13] In his second fresh as amended statement of claim, filed on August 15, 2014, the appellant advanced three claims: (1) a statutory and a common law claim for misrepresentation; (2) a statutory claim for failure to make timely disclosure; and [page165] (3) a common law claim in negligence alleging that Silvercorp co-authored and published the BK 2010 and 2011 reports that it knew or should have known had not been prepared in accordance with industry standards or properly audited.

[14] The statement of claim in a class action under s. 138.3 of the Securities Act serves two important purposes. First, it identifies the misrepresentations on which the statutory claim is based and gives particulars of the alleged correction of those misrepresentations. Second, it defines the scope of the class action. It thus provides the framework for the application of the leave test under s. 138.8 and of the test for certification under s. 5(1) of the Class Proceedings Act, 1992.

[15] A statement of claim asserting the statutory cause of action under s. 138.3(1) of the Securities Act should set out, with particularity, (a) the specific misrepresentation(s) on which the claim is based; (b) the document(s) or statement(s) containing the representation(s); (c) the date(s) of the representation(s); (d) the date(s) on which the misrepresentation(s) was (were) publicly corrected; and (e) the document(s) or statement(s) containing the corrections. Further particulars may be required depending on the nature of the documents containing the representations and the parties sought to be joined as defendants.

[16] The appellant's statement of claim lacked focus and particularity. First, it did not identify which words or figures, in which documents and on which dates, were untrue and, therefore, constitute misrepresentations. Instead, it referred to about a dozen corporate disclosures over 18 months.

[17] Nevertheless, the motion judge exercised his discretion and granted the appellant's request, made during final argument, for an order under s. 138.3(6) of the Securities Act to treat the multiple misrepresentations as a single misrepresentation. The motion judge did so on the basis that the alleged misrepresentations had a common subject matter dealing with [at para. 25] "mining resource estimates, production numbers or grade levels".

[18] Second, the pleading failed to link the alleged misrepresentation to any corrective disclosure, or identify what correction was made, and when. This issue was, to some extent, addressed when the motion judge granted the appellant's motion to file evidence, after the hearing, of the September 13 anonymous Internet posting, concluding that a document of this nature could qualify as "corrective disclosure" and, further, that it defined the end of the class period.

[19] What emerges from the statement of claim, however, is that the appellant alleged that Silvercorp had misrepresented [page166] the quality and quantity of its mineral resources and reserves in its public disclosures, understating the quantity of ore it was milling and overstating the quality of the minerals it was producing. Put another way, it was alleged that Silvercorp was artificially keeping its production levels up by mining more, lower quality ore, than it was disclosing.

D. The Expert Evidence

[20] The plaintiff's key expert witness was Mohan Srivastava, a professional geologist. His first report, dated June 12, 2013, criticized the quality of BK's work and claimed that it resulted in Silvercorp underreporting the amount of material delivered to the mill from the SGX Mine and overestimating the grade of the ore being produced. He described this as "high grading", namely, "scrambling to get extra tonnage through the mill in order to maintain metal production targets when grades turn out to be lower than expected". He stated that the 2010 and 2011 BK reports should have commented on the discrepancies between previous predictions and actual production. Nowhere in his first report, however, did Mr. Srivastava identify misrepresentations in Silvercorp's disclosures forming the basis of the statutory claim.

[21] Silvercorp filed a report by Eugene Puritch, P.Eng., a mining geologist, who opined that Mr. Srivastava's criticisms of BK were irrelevant, inaccurate and unsupported. He also expressed the opinion that Silvercorp was not "high grading".

[22] However, the core of the plaintiff's case, and the defendant's rebuttal of it, came in subsequent reports, the first prepared by Silvercorp's expert, Patrick Stephenson, dated April 17, 2014, and the second, a further report, prepared on behalf of the appellant, by Mr. Srivastava, dated August 20, 2014.

[23] Mr. Stephenson was AMC's principal geologist and had been personally involved in the preparation of the AMC 2012 report. His affidavit responded to the appellant's pleading concerning that report. He deposed that AMC had not concluded that Silvercorp had "overstated" the quantity or quality of its mineral production at the Ying Mining Project for the years 2009 to 2011. He stated that there was "no material discrepancy" between the production figures reported in the AMC 2012 report and the figures contained in Silvercorp's public disclosures for 2010 and 2011. He explained the reasons for the apparent differences between the figures, including the use of different periods (calendar year versus fiscal year), the use of different measurement units (dry tonnes versus the inclusion of moisture), and the use of different mine areas and different [page167] mines. Further, as the motion judge noted, AMC was asked to take into account updated exploration and production information developed since the preparation of the BK 2011 report.

[24] Mr. Stephenson concluded that when the figures were adjusted to take these differences into account, there were no material differences between the production numbers (by tonnage and grade) reported by Silvercorp in its contemporaneous public disclosures, and the production numbers in the AMC 2012 report.

[25] Mr. Srivastava's second report was delivered four months after Mr. Stephenson's. It purported to address the differences between Silvercorp's disclosures during the class period, as summarized in Schedule 4, and those contained in the AMC 2012 report. He stated that the mine production data reported in the two documents did not match, and that the differences were material. He concluded that this supported the allegation that Silvercorp had been overstating the grades of silver and the revenues at the Ying Mining Project.

[26] However, nowhere in Mr. Srivastava's second report or affidavit did he address Mr. Stephenson's evidence that purported to explain and reconcile the figures contained in the two documents.

E. The Motion Judge's Reasons

[27] In first addressing the leave requirements under s. 138.8, the motion judge referred to the decision of the Supreme Court of Canada in Theratechnologies inc. v. 121851 Canada inc., [2015] 2 S.C.R. 106, [2015] S.C.J. No. 18, 2015 SCC 18 and the decision of this court in Green v. Canadian Imperial Bank of Commerce (2014), 118 O.R. (3d) 641, [2014] O.J. No. 419, 2014 ONCA 90,[^4] expressing the question before him as follows [at para. 38]:

. . . after considering all of the evidence presented by the parties, does any part of the plaintiffs' case have a reasonable or realistic chance of success at trial. Or is the plaintiffs' case so weak or has it been so successfully rebutted by the defendants that it has no reasonable possibility of success?

[28] The motion judge then identified as the primary focus of the appellant's claim, that the AMC 2012 report showed that the representations about mineral production and grade levels set out in the BK 2010 and 2011 reports, and as further [page168] documented in Schedule 4, were overstated and untrue. Specifically, the appellant alleged that the earlier figures inflated the share price, causing damage to shareholders when the truth was allegedly revealed.

[29] The motion judge found that Mr. Srivastava's evidence -- that the AMC 2012 report showed that the mineral production and grade levels set out in the BK 2010 and 2011 reports were overstated and untrue -- was completely undermined by Mr. Stephenson's evidence. Mr. Stephenson's evidence was that, properly understood, the figures used in the AMC 2012 report and the BK 2010 and 2011 reports were substantially the same. The motion judge noted that Mr. Stephenson was not cross-examined on this aspect of his evidence. Nor was he contradicted by Mr. Srivastava in his second report.

[30] The motion judge concluded that Mr. Srivastava had failed to make necessary adjustments to the figures to compare them -- he was comparing apples to oranges. He stated, at para. 52:

Given that the detailed evidence of Mr. Stephenson, who was directly involved in the preparation of the 2012 AMC Report, stands completely uncontroverted I am obliged to find on the allegation of misrepresentation that the plaintiff has not cleared the OSA leave standard. This is not a case of battling experts. We have a participant expert (Stephenson) who was responsible for the AMC 2012 Report and who explains how and why the report is about oranges and another expert (Srivastava) who ignores the AMC explanation altogether and continues to assume that he is dealing with apples.

[31] The motion judge found [at para. 54] that the appellant's misrepresentation claim was "so weak or has been so successfully rebutted by the defendants that it has no reasonable possibility of success".

[32] The motion judge also found that there was no support, either in the pleadings or in the evidence, for the claim that Silvercorp had failed to make timely disclosure of material changes in its production figures.

[33] Based on this court's decision in Musicians' Pension Fund of Canada (Trustees of) v. Kinross Gold Corp., [2014] O.J. No. 6070, 2014 ONCA 901, the motion judge found that the common law misrepresentation claim was destined to fail and should not be certified. He also found that the plaintiff's negligence pleading was essentially a pleading of negligent misrepresentation, which was duplicative and should not proceed.

F. Analysis

[34] In its appeal, the appellant argues that the motion judge erred, in respect of his leave ruling, by [page169]

(a) misapplying the test for leave under s. 138.8 of the Securities Act and misapprehending the evidence on the motion;

(b) mischaracterizing the nature of the appellant's claim as a comparison between Schedule 4 and the AMC 2012 report and, consequently, failed to consider other relevant evidence, including the shortcomings in the BK 2010 and 2011 reports and the appellant's claim that Silvercorp knew or should have known that the reports were negligently prepared;

(c) refusing the appellant's request for leave to amend the pleadings to plead negligence simpliciter; and

(d) excluding a draft affidavit of Mr. Stephenson and certain e-mail communications.

(1) Did the motion judge err in applying the leave test?

[35] Under s. 138.8(1) of the Securities Act, leave of the court is required to proceed with a statutory misrepresentation claim. Leave will only be granted if the court is satisfied that (a) the action is brought in good faith and (b) there is a reasonable possibility that the action will be resolved at trial in favour of the plaintiff.

[36] The appellant's central argument is that the motion judge applied a higher leave standard than that set out by the Supreme Court of Canada, which requires only that the plaintiff show "a plausible analysis of the applicable legislative provisions, and some credible evidence in support of the claim" (emphasis added): Theratechnologies Inc. v. 121851 Canada Inc., at para. 39; Canadian Imperial Bank of Commerce v. Green, [2015] 3 S.C.R. 801, [2015] S.C.J. No. 60, 2015 SCC 60, at para. 121. The appellant argues that the motion judge misapplied the test set out in Theratechnologies by weighing the evidence on a balance of probabilities, turning the leave application into a mini-trial, contrary to the Supreme Court's direction, at para. 39, in Theratechnologies.

[37] I begin with the standard of review. The standard on pure questions of law is correctness: Housen v. Nikolaisen, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, 2002 SCC 33, at para. 8. Questions of mixed fact and law lie along a spectrum. Where an error can be attributed to the application of an incorrect standard, a mischaracterization of a legal test or a similar error in principle, such an error can be characterized as an error in law, subject to a correctness standard of review: Housen v. Nikolaisen, at paras. 33, 36. [page170]

[38] In this case, the application of the leave test to a body of facts is a question of mixed fact and law. The issue, as framed, raises questions about the motion judge's characterization of the legal test and asserts that he applied an overly onerous test. As such, it attracts a correctness standard of review.

[39] The appellant argues that once the plaintiff establishes both a plausible analysis of the legislation and some credible evidence, the test is satisfied and leave should be granted. The appellant further argues that the motion judge acknowledged that he had raised "some credible evidence" when, after summarizing the appellant's evidence, and in particular the evidence of Mr. Srivastava, he said, at para. 44:

If this was the entirety of the evidence, I would have granted leave under s. 138.8 of the OSA. The plaintiff would have established a reasonable possibility of success at trial. But for this: Mr. Srivastava did not respond to or even mention the earlier AMC [Stephenson] affidavit filed by the defendants.

[40] The appellant submits the motion judge should have stopped there. He argues that by analyzing Silvercorp's evidence and weighing it against that proffered by the appellant, the motion judge, in effect, imposed an obligation on the appellant to fully respond to the affidavit evidence presented by Silvercorp. This approach, the appellant argues, is inconsistent with the purpose and spirit of the legislation to screen out only plainly unmeritorious claims.

[41] I do not accept the appellant's submission that scrutiny of the evidence on a leave application should be so limited. In my view, the "reasonable possibility" requirement of the leave test requires scrutiny of the merits of the action based on all the evidence proffered by the parties. Far from undermining the objective of the legislation, such scrutiny of the entire body of evidence is necessary to give effect to the purpose of the screening mechanism.

[42] As noted in several decisions of this court, s. 138.8(1) was enacted to address concerns that existing safeguards were not sufficient to prevent unmeritorious claims: Goldsmith v. National Bank of Canada (2016), 128 O.R. (3d) 481, [2016] O.J. No. 146, 2016 ONCA 22, at paras. 26-28; Green v. Canadian Imperial Bank of Commerce, supra (C.A.); Kinross. Abella J. noted in Theratechnologies Inc., at para. 38, that in response to this concern s. 138.8 was meant to create a "robust deterrent screening mechanism so that cases without merit are prevented from proceeding" and, further, that the assessment requires a "reasoned consideration of the evidence to ensure that the action has some merit" (emphasis added). [page171]

[43] It follows from these comments that a "reasoned consideration of the evidence" must include scrutiny of the evidence proffered by both sides, and some weighing of the defence evidence against that adduced by the plaintiff. To suspend the analysis when the plaintiff has presented a case that could satisfy the "reasonable possibility" test is inconsistent with the leave test acting as a "robust deterrent screening mechanism". Abella J.'s endorsement of Belobaba J.'s comments in Ironworkers Ontario Pension Fund (Trustee of) v. Manulife Financial Corp., [2013] O.J. No. 3455, 2013 ONSC 4083 (S.C.J.), that s. 138.8 should operate as more than just a "speed bump", is a clear indicator that the motion judge must do more than simply ascertain whether the plaintiff has presented evidence of a triable issue. Instead, the motion judge must review all the evidence adduced by both parties to ascertain whether there is "a reasonable or realistic chance that the action will succeed": Theratechnologies, at paras. 38 and 39.

[44] Moreover, as this court noted in Kinross, at para. 56, and Goldsmith, at para. 33, the statute itself confirms that some weighing of the evidence is anticipated by the express provisions of the Securities Act. Subsection 138.8(2) contemplates that both parties "shall" file affidavit evidence setting out the material facts on which each intends to rely on the leave application. Further, s. 138.8(3) explicitly provides for the right to cross-examine the deponents of the affidavits filed. These mechanisms would be meaningless if, as the appellant suggests, leave must be granted where the plaintiff's evidence, viewed in isolation, could satisfy the "reasonable possibility of success at trial" test. I agree with Cronk J.A.'s comments, at para. 56 of Kinross, adopted by Pardu J.A. in Goldsmith, at para. 33, that such a restrictive treatment of the evidence would render the leave requirement hollow.

[45] The judge was not limited to a consideration of the plaintiff's evidence. He was required to consider the evidence of both parties, keeping in mind the relatively low merits-based threshold, and the limitations of the record before him. He was entitled, indeed required, to undertake a critical evaluation of all the evidence and this necessarily required some weighing of the evidence, drawing of appropriate inferences and the finding of facts established by the record: see Theratechnologies, at paras. 38-39; Kinross, at paras. 52, 54-55, 59.

[46] Apart from the issue of weighing the evidence, the appellant argues that the motion judge, in concluding that the appellant had failed to satisfy the leave requirement, made erroneous findings which led him to conclude that the appellant had no [page172] chance of success at trial. First, the appellant argues the motion judge erred in concluding that the plaintiff had not challenged Mr. Stephenson's affidavit evidence, finding that his evidence was "uncontroverted". Second, the appellant argues that there was no basis for the motion judge to conclude that Mr. Stephenson's affidavit "so successfully rebutted" Mr. Srivastava's affidavit because Mr. Stephenson was not retained as an expert on the issues before the court, but rather, only to address factual matters and address erroneous claims about the AMC 2012 report.

[47] I do not accept either submission. The motion judge concluded that Mr. Stephenson, although cross-examined at length, had not been cross-examined on the factual corrections and clarifications he made in his affidavit, corrections and clarifications which went to the factual heart of Mr. Srivistava's opinion. Specifically, Mr. Stephenson, the very person responsible for the AMC 2012 report, stated that the plaintiff had "mischaracterized and misunderstood a number of statements made by or attributed to AMC" and that the production numbers, when properly understood, revealed "no discrepancy" between the AMC 2012 report and the production numbers in Silvercorp's MD&As for 2010 and 2011 (summarized in Schedule 4).

[48] It was open to the motion judge to examine the factual underpinnings of Mr. Srivistava's opinion and conclude, based on the evidence before him, that the opinion had been completely undermined by flawed factual assumptions.

[49] In sum, the motion judge did what he was required to do. He drilled down to the foundation of the appellant's statutory claim -- that the AMC 2012 report showed that Silvercorp's statutory disclosures, as reflected in Schedule 4, overstated Silvercorp's production and grade levels. When he considered all the evidence, he concluded that the foundation had been demolished by the defendant's evidence and had not been repaired by the plaintiff's.

(2) Did the motion judge mischaracterize the claim or ignore relevant evidence?

[50] The appellant's second argument is that the motion judge misapprehended the nature of the claim and treated it as a comparison of Schedule 4 and the AMC 2012 report. The appellant argues this characterization ignored other relevant evidence about the flaws in the BK 2010 and 2011 reports and, specifically, the argument that Silvercorp knew or should have known that those reports, used to promote the SGX Mine, were negligently prepared. In support of this argument, the appellant [page173] relies on Mr. Srivastava's first report, which was critical of BK's methodology, and on the fact that the B.C. Securities Commission began an investigation into Silvercorp based, in part, on its concerns about BK's compliance with mining reporting standards.[^5]

[51] Issues involving a judge's interpretation of the evidence are questions of mixed fact and law and should not be overturned absent palpable and overriding error: Housen v. Nikolaisen, at paras. 36-37; St. Jean v. Mercier, [2002] 1 S.C.R. 491, [2002] S.C.J. No. 17, 2002 SCC 15, at paras. 48-49. Similarly, findings of fact and inferences of fact may be interfered with on appeal only where there is a palpable and overriding error: Housen v. Nikolaisen, at paras. 10, 25; L. (H.) v. Canada, [2005] 1 S.C.R. 401, [2005] S.C.J. No. 24, 2005 SCC 25, at para. 76.

[52] Applying this standard, I do not accept the appellant's submission that the motion judge mischaracterized his claim. The motion judge said, at para. 12 of his reasons:

[T]he gist of the plaintiff's complaint is that the AMC 2012 Report shows that the earlier representations about mineral production and grade levels as set out in the BK 2010 and 2011 Reports and as further documented in Schedule 4, were over-stated and, in a word, untrue. The allegation of misrepresentation arises, in essence, from a comparison of the AMC 2012 Report with Schedule 4.

[53] I agree. The focus of the appellant's negligent misrepresentation claim was indeed the alleged discrepancies between Schedule 4 (which set out Silvercorp's disclosures of tonnage, production and grades, for the years 2006 to June 2011, as contained in its financial statements) and the AMC 2012 report.

[54] I do not accept the appellant's submission that the motion judge, in focusing his analysis on the key documents, ignored other evidence relevant to the appellant's argument that the BK 2010 and 2011 reports were negligently prepared. First, the motion judge was aware of the allegations, specifically mentioning the reports at paras. 42 and 53 of his reasons. He mentioned them again in his reasons denying certification of the negligence claim, finding, at para. 66:

Put simply, the negligence pleading -- that [Silvercorp] co-authored and published technical reports that overstated the quantity and quality of mineralized ore that in turn resulted in shareholder losses when these alleged misrepresentations were corrected -- is in substance a pleading of negligent misrepresentation. [page174]

[55] Second, the motion judge specifically considered the exchange of letters between Silvercorp and the B.C. Securities Commission (which referenced possible negligence in the preparation of the BK 2010 and 2011 reports) as another possible source of evidence of misrepresentation, but concluded that the discrepancies noted by the B.C. Securities Commission were not enough to clear the leave hurdle.

[56] Finally, Mr. Srivastava's first report did not speak to any specific misrepresentations and was of no significance to the statutory misrepresentation claim.

[57] Based on the evidence before him, or the lack of evidence, the motion judge concluded that the allegations of negligence in the preparation of BK's reports were not sufficient to clear the leave hurdle. The appellant has failed to demonstrate any palpable and overriding error in his assessment of the evidence.

[58] To conclude, the motion judge did not mischaracterize the claim or fail to consider relevant evidence. He dealt with the case presented by the appellant and the evidence presented by the appellant and he found it wanting. The appellant's attempt on appeal to refocus the pleading and the evidence does not succeed.

(3) Did the motion judge err in refusing the appellant's request for leave to amend the pleadings to plead negligence simplicter?

[59] The motion judge dismissed the appellant's motion to amend the statement of claim to plead negligence simpliciter with greater clarity. He found that an amendment at that late stage would be unfair to the respondent and, in any event, the claim was subsumed by the negligent misrepresentation pleading. The appellant now contends that the negligence simpliciter claim is "an allegation that the BK Technical Reports were prepared negligently and cannot be relied upon". The allegation that the reports were negligently prepared does not give rise to a separate cause of action against the respondents. I find no error in the motion judge's ruling.

(4) Evidentiary rulings

[60] The appellant challenges two evidentiary rulings. First, the motion judge struck from the record three e-mails sent by Mr. Klohn, one of the principals of BK, to Silvercorp. They were attached to an affidavit of one of the appellant's lawyers. The motion judge ruled that the e-mails were hearsay, their author was available to give evidence and the e-mails did not meet the [page175] "necessity" requirement. I see no error in this conclusion. The e-mails were, in any event, of marginal probative value.

[61] The appellant also takes issue with the motion judge's refusal to admit an earlier draft of Mr. Stephenson's affidavit on the ground that he was a "participant expert". In so doing, he referred to the decisions of this court in Westerhof v. Gee Estate (2015), 124 O.R. (3d) 721, [2015] O.J. No. 1472, 2015 ONCA 206, at paras. 6, 61-64, 70 and 81-82; and Moore v. Getahun (2015), 124 O.R. (3d) 321, [2015] O.J. No. 398, 2015 ONCA 55, at para. 70.

[62] I see no error in the motion judge's ruling. As this court held, at para. 60 of Westerhof:

. . . a witness with special skill, knowledge, training, or experience who has not been engaged by or on behalf of a party to the litigation may give opinion evidence for the truth of its contents without complying with rule 53.03 where:

The opinion to be given is based on the witness's observations of or participation in the events at issue; and

The witness formed the opinion to be given as part of the ordinary exercise of his skill, knowledge, training and experience while observing or participating in such events.

[63] As discussed above, Mr. Stephenson's affidavit addressed certain mischaracterizations of a report he prepared, in his capacity as principal geologist for AMC. His observations were ". . . derived from [his] observation[] of or involvement in the underlying facts": Westerhof, at para. 61. He was not retained as an expert witness for Silvercorp. In any event, the motion judge also noted that the earlier draft was not necessary for the purpose for which the appellant was advancing it, namely, to show that Silvercorp had retained AMC as a direct response to the concerns raised by the B.C. Securities Commission, a fact that had already been acknowledged by Silvercorp.

G. Ancillary Issues

[64] I turn to two ancillary issues.

(1) Certification

[65] Relying on this court's decision in Kinross, the motion judge dismissed the certification motion, concluding that the common law misrepresentation claim was bound to fail, because it rested on the same evidentiary foundation as the statutory claim. There were no oral submissions on this issue and I agree with the motion judge's conclusion, for the reasons he gave. [page176]

(2) Costs appeal

[66] The appellant appeals the motion judge's costs award of $500,000. He says the amount is excessive and that the motion judge erred in principle in not giving effect to access to justice considerations and the objectives of Part XXIII.1 of the Securities Act.

[67] The motion judge considered this argument and concluded that access to justice considerations that may prevail on a certification motion are less applicable to a leave motion under Part XXIII.1, which involves a significant merit-based analysis.

[68] I see no error in principle in this conclusion. Nor can I say it is plainly wrong. See Hamilton v. Open Window Bakery Ltd., [2004] 1 S.C.R. 303, [2003] S.C.J. No. 72, 2004 SCC 9, at para. 27. The motion judge's decision on costs reflected his experience with class actions in general and with securities class actions in particular. It also reflected his familiarity with this proceeding, having case managed it from the outset. The costs awarded were in line with decisions in other cases: see Silver v. Imax Corp., [2010] O.J. No. 3329, 2010 ONSC 4017 (S.C.J.) ($385,000); Dugal v. Manulife Financial Corp., [2013] O.J. No. 5088, 2013 ONSC 6354 (S.C.J.) ($467,234 payable forthwith and a further $100,000 payable in the cause). I would therefore defer to the exercise of the motion judge's discretion on costs.

H. Conclusion and Order

[69] For the foregoing reasons, I would dismiss the appeal. It is therefore unnecessary to address the cross-appeal. I would award costs of the appeal to the respondents in the amount of $75,000, inclusive of disbursements and all applicable taxes.

Appeal dismissed.

Notes

[^1]: The plaintiff released the engineering firm, BK Exploration Associates, from the action in 2014, in exchange for its agreement to co-operate with the plaintiff, but without monetary compensation.

[^2]: The proposed class period begins with the publication of a press release announcing the results of the BK 2010 report and ends the day before the September 13 negative Internet posting that caused the 20 per cent drop in the company share price.

[^3]: The primary short-seller and author of the negative Internet postings made $2.8 million the day after the September 13 share price collapse. Acting on a detailed complaint by Silvercorp in February 2013, the B.C. Securities Commission charged him with fraud and conduct contrary to the public interest. These charges were dismissed in May 2015, after a lengthy hearing. The commission acknowledged that the Internet postings had been carefully crafted to drive down the price of Silvercorp shares.

[^4]: The Supreme Court's decision in Green had not been released at the time of the hearing in the court below.

[^5]: Referred to as National Instrument 43-101.

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