McKenna v. Gammon Gold Inc. et al. [Indexed as: McKenna v. Gammon Gold Inc.]

103 O.R. (3d) 451

2010 ONSC 4068

Ontario Superior Court of Justice,

Divisional Court,

Sachs J.

July 21, 2010

Civil procedure -- Class proceeding -- Certification -- Motion judge adjourning motion for certification of conspiracy claim until plaintiff delivered particulars of his special damages -- Plaintiff's motion for leave to appeal granted -- Conflicting decisions existing with respect to motion judge's decision as to necessity of providing particulars of special damages when claim for conspiracy is made in class action context -- Decision of motion judge open to very serious debate -- Clarification of pleading standard litigants must meet at certification stage where claims of civil conspiracy are asserted desirable.

Torts -- Conspiracy -- Motion judge adjourning motion for certification of conspiracy claim until plaintiff delivered particulars of his special damages -- Plaintiff's motion for leave to appeal granted -- Conflicting decisions existing with respect to motion judge's decision as to necessity of providing particulars of special damages when claim for conspiracy is made in class action context -- Decision of motion judge open to very serious debate -- Clarification of pleading standard litigants must meet at certification stage where claims of civil conspiracy are asserted desirable.

G Inc. made a public offering of ten million common shares. The plaintiff purchased shares in G Inc. pursuant to the prospectus. He subsequently brought an action against G Inc. and its senior directors and officers, alleging that they made numerous misrepresentations concerning the business and affairs of G Inc. over a ten-month period, and that the share price fell when the true state of affairs was disclosed. The plaintiff asserted the following causes of action: prospectus misrepresentation under s. 130 of the Ontario Securities Act, R.S.O. 1990, c. S.5 (the "OSA"); reckless misrepresentation; negligent misrepresentation; and conspiracy to conceal material facts from G Inc. investors. The plaintiff also sued the underwriters in respect of the public offering, alleging prospectus misrepresentation under s. 130 of the OSA, negligent misrepresentation, unjust enrichment and waiver of tort. The plaintiff sought to represent not only persons who had purchased shares under the prospectus, but also those who purchased shares on the secondary market during the ten-month class period. With respect to both prospectus purchasers and secondary market purchasers, the plaintiff sought to represent a global class comprising persons purchasing anywhere in the world. The plaintiff's motion to certify the action as a class proceeding was granted, but the action was certified as a class proceeding only in respect of the claim under s. 130 of the OSA and the claim for unjust enrichment. The motion judge found that the claim did not disclose a cause of action in fraudulent misrepresentation, adjourned the motion for certification of the conspiracy claim until the plaintiff delivered particulars of his special damages, declined to certify any part of the claim on behalf of the secondary market purchasers, declined to certify any common law misrepresentation claim and declined to certify a global class. The plaintiff brought a motion for leave to appeal.

Held, the motion should be granted in part. [page 452]

There are decisions that conflict with the motion judge's decision as to the necessity of providing particulars of special damages when a claim for conspiracy is made in the class action context. It is desirable that that issue be clarified by the Divisional Court. Moreover, the decision of the motion judge on that question was open to very serious debate. Claims of civil conspiracy are frequently asserted in price-fixing, pharmaceutical and securities class actions, and the public interest would be served if an appellate court were to clarify what pleading standard the litigants must meet at the certification stage.

There was no reason to doubt the correctness of the motion judge's decisions with respect to the misrepresentation claims and the class definition, and the decisions were not in conflict with other decisions in the sense contemplated by rule 62.02(4)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

MOTION for leave to appeal the decision of the motion judge on a motion to certify an action as a class proceeding.

Cases referred toApotex Inc. v. Plantey USA Inc., 2005 15481 (ON SC), [2005] O.J. No. 1860, [2005] O.T.C. 348, 139 A.C.W.S. (3d) 52, 5 B.L.R. (4th) 116 (S.C.J.); Carom v. Bre-X Minerals Ltd. (2000), 2000 16886 (ON CA), 51 O.R. (3d) 236, [2000] O.J. No. 4014, 196 D.L.R. (4th) 344, 138 O.A.C. 55, 11 B.L.R. (3d) 1, 1 C.P.C. (5th) 62, 103 A.C.W.S. (3d) 17 (C.A.); Charron Estate v. Village Resorts Ltd. (2010), 98 O.R. (3d) 721, [2010] O.J. No. 402, 2010 ONCA 84, 316 D.L.R. (4th) 201, 81 C.P.C. (6th) 219, 185 A.C.W.S. (3d) 68, 71 C.C.L.T. (3d) 161, 77 R.F.L. (6th) 1; Cloud v. Canada (Attorney General) (2004), 2004 45444 (ON CA), 73 O.R. (3d) 401, [2004] O.J. No. 4924, 247 D.L.R. (4th) 667, 192 O.A.C. 239, 27 C.C.L.T. (3d) 50, [2005] 1 C.N.L.R. 8, 2 C.P.C. (6th) 199, 135 A.C.W.S. (3d) 567, 2004 CarswellOnt 5026 (C.A.); Dean v. Mister Transmission (International) Ltd., [2008] O.J. No. 4372, 66 C.P.C. (6th) 287, 2008 CarswellOnt 6445, 172 A.C.W.S. (3d) 44 (S.C.J.); Elliott v. Canadian Broadcasting Corp. (1995), 1995 244 (ON CA), 25 O.R. (3d) 302, [1995] O.J. No. 1710, 125 D.L.R. (4th) 534, 82 O.A.C. 115, 38 C.P.C. (3d) 332, 62 C.P.R. (3d) 19, 55 A.C.W.S. (3d) 1090 (C.A.), affg (1993), 1994 10569 (ON SC), 16 O.R. (3d) 677, [1993] O.J. No. 3204, 108 D.L.R. (4th) 385, 52 C.P.R. (3d) 145, 44 A.C.W.S. (3d) 1297 (Gen. Div.); Hunt v. T & N plc, 1990 90 (SCC), [1990] 2 S.C.R. 959, [1990] S.C.J. No. 93, 74 D.L.R. (4th) 321, 117 N.R. 321, [1990] 6 W.W.R. 385, J.E. 90-1436, 49 B.C.L.R. (2d) 273, 4 C.C.L.T. (2d) 1, 43 C.P.C. (2d) 105, 23 A.C.W.S. (3d) 101; McCann v. CP Ships Ltd., [2009] O.J. No. 5182 (S.C.J.); McKenna v. Gammon Gold Inc., [2010] O.J. No. 1057, 2010 ONSC 1591; Muscutt v. Courcelles (2002), 2002 44957 (ON CA), 60 O.R. (3d) 20, [2002] O.J. No. 2128, 213 D.L.R. (4th) 577, 160 O.A.C. 1, 13 C.C.L.T. (3d) 161, 26 C.P.C. (5th) 206, 114 A.C.W.S. (3d) 634 (C.A.); Pysznyj v. Orsu Metals Corp., [2010] O.J. No. 1994, 2010 ONSC 1151; Quizno's Canada Restaurant Corp. v. 2038724 Ontario Ltd. (2010), 100 O.R. (3d) 721, [2010] O.J. No. 2683, 2010 ONCA 466, 2010 CarswellOnt 4305, affg (2009), 2009 23374 (ON SCDC), 96 O.R. (3d) 252, [2009] O.J. No. 1874, 70 C.P.C. (6th) 27, 250 O.A.C. 87, 178 A.C.W.S. (3d) 312 (Div. Ct.), revg (2008), 2008 8421 (ON SC), 89 O.R. (3d) 252, [2008] O.J. No. 833, 56 C.P.C. (6th) 88, 165 A.C.W.S. (3d) 785 (S.C.J.); Ramdath v. George Brown College of Applied Arts and Technology, [2010] O.J. No. 1411, 2010 ONSC 2019; Robinson v. Medtronic Inc., 2009 56746 (ON SC), [2009] O.J. No. 4366, 80 C.P.C. (6th) 87 (S.C.J.); Rumley v. British Columbia, [2001] 3 S.C.R. 184, [2001] S.C.J. No. 39, 2001 SCC 69, 205 D.L.R. (4th) 39, 275 N.R. 342, [2001] 11 W.W.R. 207, J.E. 2001-1970, 157 B.C.A.C. 1, 95 B.C.L.R. (3d) 1, 10 C.C.L.T. (3d) 1, 9 C.P.C. (5th) 1, 108 A.C.W.S. (3d) 775; Silver v. Imax Corp., 2009 72334 (ON SC), [2009] O.J. No. 5585, 86 C.P.C. (6th) 273 (S.C.J.); Western Canadian Shopping Centres Inc. v. Dutton, 1996 10432 (AB KB), [1996] A.J. No. 1165, 41 Alta. L.R. (3d) 412, 191 A.R. 265, 3 C.P.C. (4th) 329, 65 A.C.W.S. (3d) 15 (Q.B.); Yordanes v. Bank of Nova Scotia (2006), 2006 1777 (ON SC), 78 O.R. (3d) 590, [2006] O.J. No. 280, [2006] O.T.C. 81, 15 B.L.R. (4th) 220, 23 C.P.C. (6th) 7, 145 A.C.W.S. (3d) 206 (S.C.J.) [page 453] Statutes referred to Class Proceedings Act, 1992, S.O. 1992, c. 6, ss. 5, 30(2) Securities Act, R.S.O. 1990, c. S.5, ss. 130 [as am.], 138 [as am.], 138.3 [as am.], 138.8(1) [as am.] Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 62.02(4), (a)

Dimitri Lascaris and Margaret Waddell, for plaintiff/ appellant. Laura F. Cooper and Paul J. Martin, for defendants/ respondents Gammon Gold Inc., Russell Barwick, Colin P. Sutherland, Dale M. Hendrick, Fred George, Frank Conte, Kent Noseworthy, Canek Rangel, Bradley Langille and Alejandro Caraveo. Ronald G. Slaght and Nadia Campion, for defendants/ respondents BMO Nesbitt Burns Inc., Scotia Capital Inc. and TD Securities Inc.

SACHS J.: -- Introduction

[1] The plaintiff seeks leave to appeal from the order of Strathy J. dated March 16, 2010 (the "Order") [[2010] O.J. No. 1057, 2010 ONSC 1591]. This action arises from alleged misrepresentations that Gammon Gold Inc. ("Gammon"), a publicly traded gold and silver production company, and the individual defendants made that the plaintiff claims artificially inflated the price of Gammon shares.

[2] Strathy J. certified this action as a class proceeding. However, he found that the claim did not disclose a cause of action in fraudulent misrepresentation, adjourned the motion for certification of the conspiracy claim until the plaintiff delivered particulars of his special damages, declined to certify any part of the claim on behalf of the secondary market purchasers, declined to certify any common law misrepresentation claim and declined to certify a global class.

[3] The plaintiff seeks leave to appeal these findings. For the reasons that follow, I would grant the plaintiff's motion for leave to appeal the motion judge's decision with respect to the conspiracy claim. In all other respects, I would dismiss the motion.

Factual Background

[4] The defendant Gammon is a mining company and a producer of gold and silver. Gammon is incorporated under the laws [page 454] of the Province of Quebec; its registered office is in Montreal, Quebec, and its head office is in Halifax, Nova Scotia. Gammon's mining operations are carried on in Mexico.

[5] Gammon is a reporting issuer under the Securities Act, R.S.O. 1990, c. S.5 (the "OSA"). At the times relevant to this action, Gammon's shares were traded on the Toronto Stock Exchange (the "TSX"), the AMEX Stock Exchange in the United States, the Bermuda Stock Exchange and elsewhere. The individual defendants were all senior officers and/or directors of Gammon during all or part of the class period (the "Gammon defendants").

[6] Under a short-form prospectus dated April 19, 2007, Gammon made a public offering of ten million common shares. The defendants, BMO Nesbitt Burns, Scotia Capital and TD Securities, were the underwriters in respect of this public offering (the "Underwriters").

[7] The plaintiff purchased shares in Gammon pursuant to the prospectus. The plaintiff alleges that the Gammon defendants made numerous misrepresentations concerning the business and affairs of Gammon over a ten-month class period. The plaintiff also maintains that when the true state of affairs was disclosed, the Gammon share price fell.

[8] In February of 2008, the plaintiff commenced a claim for damages that he and others suffered as a result of purchasing Gammon shares at allegedly inflated prices. The plaintiff sought to represent not only persons like himself, who purchased shares under the prospectus, but also those who purchased shares on the secondary market at any time during the class period, defined as beginning on October 10, 2006 and ending on August 10, 2007. With respect to both prospectus purchasers and secondary market purchasers, the plaintiff sought to represent a global class comprising persons purchasing anywhere in the world.

[9] The plaintiff asserted the following causes of action against the Gammon defendants on behalf of the primary market purchasers: (a) prospectus misrepresentation under s. 130 of the OSA; (b) reckless misrepresentation; (c) negligent misrepresentation; and (d) conspiracy to conceal material facts from Gammon investors. [page 455]

[10] The plaintiff asserted the same causes of action against the Gammon defendants only on behalf of the secondary market purchasers, except for the cause of action under s. 130 of the OSA.

[11] The plaintiff made a claim on behalf of the primary market purchasers against the Underwriters alleging prospectus misrepresentation under s. 130 of the OSA, negligent misrepresentation, unjust enrichment and a claim that in the alternative to the claim for damages, the class members were entitled to waive the tort claim and instead "elect to claim payment of the underwriting commissions generated by the Underwriters as a result of their failure of diligence and care" (the "waiver of tort claim").

The Motion Judge's Decision

[12] The motion judge held that the action should be certified as a class proceeding only in respect of the claim under s. 130 of the OSA and in respect of the claim for unjust enrichment. The remaining claims were found not to meet the test for certification. Specifically, the motion judge held: (a) Ontario law does not recognize "reckless misrepresentation" as an independent cause of action. The motion judge accepted that a pleading of "reckless misrepresentation" may be regarded in substance as a pleading of fraudulent misrepresentation. However, he found that in this case the requisite elements of the pleading of fraudulent misrepresentation were not pleaded with sufficient specificity. (b) The motion judge found that the claim of neglegent misrepresentation, although adequately pleaded, was unsuitable for certification because the claim gave rise to individual inquiries as to reliance. First, he rejected the plaintiff's theory that reliance was not an essential ingredient of the common law tort of negligent misrepresentation. The plaintiff is not seeking to appeal this finding. The motion judge then found that, in the circumstances of this case, reliance could not be inferred on a class-wide basis. He observed that the plaintiff was alleging numerous misrepresentations with different imports, contained in numerous documents and taking different forms. In particular, the motion judge stated, at para. 161 of his reasons:

There is no basis on which reliance could be resolved as a common issue. The need to determine the issue individually would give rise to a multitude of questions [page 456] in each case concerning the representations communicated to a particular investor, the experience and sophistication of the investor, other information or recommendations made to the investor and whether there was a causal connection between the misrepresentation(s) and the acquisition of the security. The inability to determine the defendants' liability without individual inquiries as to reliance makes the proceeding unsuitable for certification in relation to the negligent misrepresentation claim. (c) The motion judge did not certify the claim of conspiracy because he found that it was "fundamental to a proper pleading of conspiracy that the plaintiff must allege damages that are separate and distinct from the damages suffered from the underlying tort itself" (para. 66). He therefore granted the plaintiff leave to amend his pleading to provide particulars of the special damages that he suffered.

[13] With respect to the class definition, the motion judge declined to certify the class definition proposed by the plaintiff. Instead, he restricted the class definition to all persons, other than excluded persons (as that term is defined), who acquired securities of Gammon pursuant to the prospectus from the underwriters located in Canada. In doing so, he concluded that the purchase of securities in a jurisdiction outside of Canada cannot, in the circumstances of this case, give rise to a reasonable expectation that the acquiror's rights would be determined by a court in Canada. He held that the absence of this reasonable expectation violates the principles of order and fairness necessary to ensure the procedural rights of the parties. Thus, any people who purchased their securities outside of Canada were not included within the class definition. He also held that a separate representative plaintiff would have to be appointed to represent class members located outside Canada who purchased their shares in Canada. The motion judge also found that if he had certified any aspect of the secondary market claim, he would have limited the class to those who acquired their shares on the TSX.

Test for Leave to Appeal

[14] Section 30(2) of the Class Proceedings Act, 1992, S.O. 1992, c. 6 (the "CPA") permits a party to appeal to the Divisional Court from a certification order, with leave of the Superior Court [page 457] as provided in the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the "Rules").

[15] Pursuant to rule 62.02(4), leave to appeal shall be granted where: (a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or (b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

The Issues Raised

[16] The plaintiff submits that the motion judge committed five errors that meet the test for leave to appeal either because there are conflicting decisions on the question or there is good reason to doubt the correctness of the order in question. The plaintiff further argues that these errors all raise issues that are of general importance that transcend the interests of the parties, or relate to an emerging area of the law and the administration of justice.

[17] The five errors alleged are (a) the motion judge erred in finding that the claim did not disclose a cause of action in fraudulent misrepresentation; (b) the motion judge erred in declining to certify any common issues with respect to the negligent misrepresentation claim, either on behalf of the primary or secondary market purchasers; (c) the motion judge erred in requiring that the plaintiff plead special damages against the Gammon defendants for the conspiracy claim; (d) the motion judge erred in failing to certify the conspiracy claim with respect to the secondary market purchasers; and (e) the motion judge erred in excluding from the class all persons who purchased Gammon shares outside of Canada.

Fraudulent Misrepresentation

[18] It is common ground between the parties that the statement of claim does not specifically assert a claim of fraudulent misrepresentation. Rather, the claim is cast as "reckless misrepresentation". [page 458] The motion judge found that "reckless misrepresentation" is not, in and of itself, a cause of action. The plaintiff does not dispute this finding. However, he argues that the pleading in question is, in substance, a pleading of fraudulent misrepresentation and that it includes the necessary elements of that cause of action.

[19] The motion judge accepted that a pleading of "reckless misrepresentation" may be regarded as being a pleading of fraudulent misrepresentation, if the necessary elements of that cause of action are pleaded. However, he found that the necessary elements of fraudulent misrepresentation were not pleaded in this case. He also found that "[t]he rule remains that fraud is a serious allegation and it must be pleaded with sufficient particularity: see Rule 25.06 of the Rules of Civil Procedure . . ." (para. 49).

[20] As noted by the motion judge, at para. 47, a "pleading of fraudulent misrepresentation requires that there be: (a) a false representation of fact; (b) made with knowledge of its falsehood or recklessly, without belief in its truth; (c) with the intention that it should be acted upon by the plaintiff; and (d) actually inducing the plaintiff to act to his or her detriment: Parna v. G. & S. Properties Ltd. 1970 25 (SCC), [1971] S.C.R. 306, (1970), 15 D.L.R. (3d) 336".

[21] The pleading in question does make a claim for a declaration that the representations were made recklessly. What it does not contain is a specific assertion that the defendants made the representations either "with knowledge of their falsehood or recklessly, without belief in its truth".

[22] The plaintiff highlights various paragraphs in the claim that they argue do plead this necessary element. In particular, they point to para. 74, which reads:

At the time at which SCI issued the April 4, 2007 Company Comment, the Gammon defendants knew or, at a minimum, were reckless in not knowing that Gammon had produced only 70,170 GEO (including 5,407 ounces of zinc precipitate) in Q1 2007, which had ended four days prior to the release of SCI's April 4, 2007 Company Comment. Further, because SCI was a member of the underwriting syndicate in the Gammon share offering of April 2007, the Gammon defendants knew, or at a minimum were reckless in not knowing, that SCI had projected on April 4, 2007 to its clients that Gammon's GEO production for Q1 2007 would be 90,000. (Emphasis added)

[23] They also refer to the following paragraphs:

-- In paras. 119, 121 and 153 of the claim, the assertion is made that certain representations were "lacking in a reasonable basis when made". According to the plaintiff, this assertion is equivalent to saying that the representations were made recklessly. [page 459]

-- In para. 160 of the claim, the plaintiff pleads that the Gammon defendants knew or ought to have known of certain material facts that were never disclosed during the class period.

-- In para. 184 of the claim, the plaintiff pleads that the defendants were advised of problems that were material to the projections that had been made about production and that they elected to withhold this information from the public, thereby causing the price of Gammon shares to become inflated.

-- In para. 228, which relates to the conspiracy claim, the plaintiff asserts that the Gammon defendants knew that "there was no reasonable assurance that the Misrepresentation and other misstatements alleged herein were materially accurate".

[24] None of these pleadings state that the defendants made statements that they knew were false or made the statements recklessly without an honest belief in their truth. Paragraph 74, which comes closest to this assertion, states that the Gammon defendants either knew or were reckless in not knowing a material fact. It then goes on to assert that they knew or were reckless in not knowing that something different was being represented to potential share purchasers. If what is meant by the last statement is that the Gammon defendants were willfully blind to what was being asserted to the public and they did not care whether what was said was true or false, this is not pleaded.

[25] The plaintiff argues that the motion judge erred in not giving a generous interpretation to the pleadings in question. In this regard, the motion judge correctly concluded that with fraud pleadings, the rules are different. As put by the motion judge, at para. 49:

Pleadings of fraud may raise issues for insurers and regulators and they have, of course, serious cost consequences if not made out. When it comes to fraud, a plaintiff is required to fish or cut bait. A defendant is entitled to know if fraud is being alleged and a plaintiff cannot hide behind ambiguous pleadings to avoid the consequences of an unsuccessful pleading of fraud.

[26] The plaintiff, in this case, when asked whether a claim of fraud was being made, indicated to the motion judge that it was not. Given this and the ambiguousness of the pleadings in question, it is my view that the motion judge was correct in concluding that the pleadings did not disclose the necessary elements of fraudulent misrepresentation. [page 460]

[27] Even if I am wrong in this conclusion, this is not an issue that meets the second part of either branch of the test for granting leave to appeal. Ultimately, this issue requires a court to review a particular pleading. It does not raise issues beyond the interests of the parties to this particular dispute, nor does it raise a matter of importance to the development of the law or the administration of justice.

Negligent Misrepresentation

[28] The motion judge found that the claim of negligent misrepresentation was properly pleaded, but refused to certify any aspect of that claim because of the need to prove individual reliance. On this motion, the plaintiff submits that, in coming to this conclusion, the motion judge failed to explain, and apparently failed to consider, why the need to prove individual reliance prevented other common issues in relation to this claim from being certified. According to the plaintiff, this failure violated the proper approach to s. 5 of the CPA that is well established in the case law -- namely, to first determine which issues are common to the class, and then to determine whether the resolution of those issues would significantly advance the litigation (Rumley v. British Columbia, [2001] 3 S.C.R. 184, [2001] S.C.J. No. 39, 2001 SCC 69; Cloud v. Canada (Attorney General) (2004), 2004 45444 (ON CA), 73 O.R. (3d) 401, [2004] O.J. No. 4294, 2004 CarswellOnt 5026 (C.A.); Quizno's Canada Restaurant Corp. v. 2038724 Ontario Ltd. (2010), 100 O.R. (3d) 721, [2010] O.J. No. 2683, 2010 ONCA 466, 2010 CarswellOnt 4305).

[29] The requirements for the tort of negligent misrepresentation are set out by the motion judge, in para. 42 of his reasons. There are five such requirements. The plaintiff accepts that while two of these requirements -- whether the representee relied in a reasonable manner on the alleged negligent misrepresentation and whether the reliance was detrimental to the representee -- would require individual determinations, the three others are common to the class and determining these three would significantly advance the litigation.

[30] The three other requirements are: establishing a duty of care based on a "special relationship" between the representor and the representee; establishing that the representation in question was untrue, inaccurate or misleading; and establishing that the representor acted negligently in making the representation. According to the plaintiff, the motion judge erred in not certifying these issues as common issues, particularly since these issues overlap with some of the issues in the claim that the motion judge did certify -- the claim under s. 130 of the OSA. [page 461]

[31] In reviewing this argument, it is important to keep in mind the evolution of the plaintiff's position with respect to the common law tort of negligent misrepresentation. First, the plaintiff indicated in his claim that he intended to deliver a notice of motion to seek leave under s. 138.8(1) of the OSA to amend his claim to plead a cause of action for misrepresentation in the secondary market as set out in s. 138.3 of the OSA. A s. 138 claim relieves a secondary market purchaser of the burden of proving reliance.

[32] By the time of the certification motion, the plaintiff had decided not to seek leave under s. 138.8(1). Instead, he argued before the motion judge that the common law tort of negligent misrepresentation did not require the plaintiff to establish reliance (the plaintiff's self-described "non- reliance theory of misrepresentation"). The motion judge rejected this theory and the plaintiff is not seeking to appeal that finding. Instead the plaintiff is arguing that, even accepting that reliance is a necessary element of the tort, the claim should have been certified.

[33] I recite this history as it supports what the motion judge recognizes in his reasons, which is that because of the necessity to establish reliance "courts have usually concluded that negligent misrepresentation claims . . . are unsuitable for certification" (para. 135). The motion judge then cited a whole series of decisions in support of this proposition.

[34] In my view, there is no reason to conclude that the motion judge erred in his assessment of the case law on this subject. In fact, it is because of this that the legislature came up with a statutory remedy for secondary market shareholders. The plaintiff has, for strategic reasons, chosen not to avail himself of this remedy. Instead, he tried to convince the motion judge that reliance was not a necessary element of negligent misrepresentation. It is only now that this argument has failed that the plaintiff argues that his action should be certified, even if reliance is a necessary ingredient of the common law tort.

[35] In his reasons, the motion judge recognized that there are cases when negligent misrepresentation claims have been certified. As put by him, at para. 137, "[e]xceptions may be made where there is a single representation made to all members of the class or there are a limited number of representations that have a common import." In fact, the motion judge certified such a case in Ramdath v. George Brown College of Applied Arts and Technology, [2010] O.J. No. 1411, 2010 ONSC 2019.

[36] In Ramdath, the motion judge did what the plaintiff now argues he should have done in this case -- he certified the first three common issues of the tort of negligent misrepresentation. [page 462] However, in doing so, he found that it was a case involving a single misrepresentation contained in a document that would likely have been communicated to every class member. He stated, at para. 103:

While I expect that each Class Member would have to establish that he or she was aware of the alleged misrepresentation and relied on it in enrolling in the Program, as a condition of recovery under this cause of action, the importance of the calendar as a contractual document, and of the Industry Designations to most students enrolling in the Program, could give rise to a presumption of reasonable reliance. For this reason, and because the same representation was made to all Class Members, this case is at the positive end of the spectrum of misrepresentation cases that are appropriate for certification.

[37] Carom v. Bre-X Minerals Ltd. (2000), 2000 16886 (ON CA), 51 O.R. (3d) 236, [2000] O.J. No. 4014 (C.A.) is another case involving multiple misrepresentations, but all the representations had a common import that was known to be false -- namely, that the company had discovered a mine with lots of gold when there was in fact no gold. Similarly, in McCann v. CP Ships Ltd., [2009] O.J. No. 5182 (S.C.J.), the representations all had one import -- that the company had misstated its income. The same was true in Silver v. Imax Corp., 2009 72334 (ON SC), [2009] O.J. No. 5585, 86 C.P.C. (6th) 273 (S.C.J.), where, at para. 177, the motion judge found that "the plaintiff's common law claims concern a single defined Representation . . . This is not a case where numerous different misrepresentations are alleged." In the case at bar, the motion judge found that there were "multiple misrepresentations" that "relate to a variety of complaints".

[38] In short, the motion judge's reasoning on this issue does not represent a departure from the case law. Further, applying that case law, there is no good reason to doubt the correctness of his decision. Given the number of representations at issue and the fact that they did not have a common import, the motion judge correctly concluded that this case was at the end of the spectrum of negligent misrepresentation cases that rendered it unsuitable for certification.

Conspiracy

[39] The plaintiff alleges that the motion judge made two errors in his treatment of the conspiracy claim. The first is that he ordered the plaintiff to provide particulars of the special damages that he suffered and adjourned consideration of the motion for certification of that claim until those particulars were provided. The second is that, despite his holding that he could "think of no more preferable procedure for the claims . . . against [page 463] the Gammon defendants for conspiracy" (para. 175), he did not certify a conspiracy claim on behalf of secondary market purchasers, nor did he adjourn the certification of the secondary market conspiracy claim pending the plaintiff's delivery of particulars as to his special damages. Further, in his reasons concerning the class definition, he concluded that it was not "appropriate to certify the secondary market claim" for reasons that would become apparent (para. 118).

[40] The motion judge found, at para. 66, that it was "fundamental to a proper pleading of conspiracy that the plaintiff must allege damages that are separate and distinct from the damages suffered from the underlying tort itself". This principle has certainly been accepted in a number of class action decisions of our court, including 2038724 Ontario Ltd. v. Quizno's Canada Restaurant Corp. (2008), 2008 8421 (ON SC), 89 O.R. (3d) 252, [2008] O.J. No. 833 (S.C.J.); Robinson v. Medtronic Inc., 2009 56746 (ON SC), [2009] O.J. No. 4366, 80 C.P.C. (6th) 87 (S.C.J.); and Apotex Inc. v. Plantey USA Inc., 2005 15481 (ON SC), [2005] O.J. No. 1860, [2005] O.T.C. 348 (S.C.J.). The motion judge cites all three of these decisions in support.

[41] In the Gammon defendants' factum, at paras. 24-25, they have this to say about the requirement to plead special damages:

The requirement to plead "special" damages is related to the doctrine of merger, whereby if the plaintiff pleads only that the defendants conspired to commit a tort and pleads that they did commit that tort, once that underlying tort has been proven, the cause of action in conspiracy will merge with that tort, and only the damages caused by that tort can be recovered. Where the plaintiff pleads that special (that is, non-duplicative) damages have been suffered by reason of the conspiracy alone, it is not clear on the face of the claim that merger will necessarily occur after trial. Alternatively, if the plaintiff pleads other unlawful acts, separate from the underlying tort, it is also uncertain whether merger will occur; the plaintiff may prove only those other wrongful acts in which case there is no other tort with which the conspiracy claim can merge.

If, however, the plaintiff fails to plead either special damages or other non-tortious unlawful acts, such that merger after trial is inevitable on the facts pleaded, the plea of conspiracy is deficient and should be struck out.

[42] In Hunt v. T & N plc, 1990 90 (SCC), [1990] 2 S.C.R. 959, [1990] S.C.J. No. 93, 74 D.L.R. (4th) 321, the Supreme Court of Canada refused to strike out a conspiracy pleading on the basis of merger, finding that questions of merger should await the trial. Several judges of our court have relied on Hunt to find that conspiracy pleadings in a class action context should not be struck because of a failure to plead special damages -- see Yordanes v. Bank of Nova Scotia (2006), 2006 1777 (ON SC), 78 O.R. (3d) 590, [2006] O.J. No. 280 (S.C.J.); and [page 464] Dean v. Mister Transmission (International) Ltd., [2008] O.J. No. 4372, 66 C.P.C. (6th) 287, 2008 CarswellOnt 6445 (S.C.J.). In Yordanes, Cullity J. put it this way, at para. 115:

The defendants' second objection was that the pleading of conspiracy must be struck for a failure to plead special damages "separate from" those flowing from the other torts pleaded. To the extent that this suggests that a plea of conspiracy will be permitted only if the damages claimed relate to losses not covered by the damages claimed in respect of other torts pleaded, I do not believe it is correct. The argument is akin to that relating to the merger of a claim for conspiracy with other torts and I believe it should be rejected at this stage of the proceedings for the same reason given by Wilson J. in Hunt v. Carey Canada Inc., (at pages 344-345) when refusing to strike a claim for conspiracy on the basis of merger.

[43] Thus, there does appear to be a debate in the case law about whether the requirement to plead special damages should await trial. In the context of this debate, it is worth noting that the Court of Appeal in Quizno's, supra, overturned the motion judge's decision and certified the conspiracy claim, finding that the issue of damages could be left for individual trials. In doing so, they do not appear to have required the representative plaintiff to provide particulars as to his special damages.

[44] In the case at bar, there is also another reason that the decision of the motion judge may be open to very serious debate. As the Gammon defendants noted, some courts have distinguished Hunt v. T & N plc, supra, on the basis of the fact that in Hunt "the unlawful means to carry out the conspiracy differed from the tort and therefore the doctrine of merger did not apply" (Elliott v. Canadian Broadcasting Corp. (1993), 1994 10569 (ON SC), 16 O.R. (3d) 677, [1993] O.J. No. 3204 (Gen. Div.), at para. 52, affd (1995), 1995 244 (ON CA), 25 O.R. (3d) 302, [1995] O.J. No. 1710, 125 D.L.R. (4th) 534 (C.A.)).

[45] In this case, the unlawful means alleged include not only alleged misrepresentations, but also manipulation of the stock options that the Gammon officers and directors had received. Further, it is not clear on the face of the pleading that the conspiracy claim for the misrepresentations will merge with any of the torts pleaded. The negligent misrepresentation claim (which was not certified) has as an essential element the necessity to prove reliance. This is not an essential element of the conspiracy claim. With respect to the claim under s. 130 of the OSA, that claim has a cap on damages that does not apply to the conspiracy claim. Finally, with respect to the secondary market shareholders, there is no other claim that was certified. Thus, there is no other claim into which the conspiracy claim could merge at trial.

[46] Finally, both the Gammon defendants and the plaintiff agree that the motion judge neither certified nor adjourned the conspiracy claim asserted on behalf of the secondary market purchasers. The reasons do not disclose a basis for why this happened. [page 465]

[47] Given the above, I find that there are decisions that conflict with the motion judge's decision as to the necessity of providing particulars of special damages when a claim for conspiracy is made in the class action context. It is desirable that this issue be clarified by the Divisional Court. I also find that the decision of the motion judge on this question is open to very serious debate. Claims of civil conspiracy are frequently asserted in price-fixing, pharmaceutical and securities class actions, and the public interest would be served if an appellate court were to clarify what pleading standard the litigants must meet at the certification stage.

Class Definition

[48] The plaintiff submits that the motion judge erred in excluding from the class persons who purchased securities from underwriters outside of Canada.

[49] In coming to his conclusion on this question, the motion judge first considered whether Ontario's connection with the claim was both real and substantial. He found that it was and, further, that it was greater than that of any other jurisdiction (para. 114). The motion judge then went on to look at the issue of "whether the principles of order and fairness support the extension of the court's jurisdiction to require class members out of the jurisdiction to either opt out or be bound by the result" (para. 115). With respect to this issue, the motion judge found that the "acquisition of those securities in a jurisdiction outside Canada would not give rise to a reasonable expectation that the acquiror's rights would be determined by a court in Canada" (para. 116).

[50] There is no suggestion that the motion judge erred by having regard to the principles of order and fairness in considering whether to certify a global class. Instead, the plaintiff argues that the motion judge did not explain why it would be fairer to include within the class a person who purchased his or her securities from an underwriter or agent in another province and not a person who did so in another country. The plaintiff also argues that excluding those who purchased their securities in another country may deprive those purchasers of the right to obtain relief for the wrongs they may have suffered. It may simply be uneconomical for them to bring individual actions. This is contrary to the principles of order and fairness and also contrary to one of the goals of class actions -- access to justice. The plaintiff argues that requiring those who purchased their shares from outside of Canada to sue separately encourages a multiplicity of proceedings, which is again antithetical to the goals of class actions. Finally, the plaintiff submits that there are a number of decisions that conflict with this aspect of the motion judge's order. [page 466]

[51] With respect to the first argument, in Muscutt v. Courcelles (2002), 2002 44957 (ON CA), 60 O.R. (3d) 20, [2002] O.J. No. 2128 (C.A.), the court expressly drew a distinction between interprovincial and international cases and recognized that the assumption of jurisdiction is more easily justified in the former. This distinction was retained as an element of the test for assuming jurisdiction in Charron Estate v. Village Resorts Ltd. (2010), 2010 ONCA 84, 98 O.R. (3d) 721, [2010] O.J. No. 402 (C.A.). Further, as a factual matter, while the securities market is regulated on a province-by-province basis, there are mechanisms in place to ensure minimal variations in the rules governing the markets across Canada.

[52] On the second point, there was evidence before the motion judge that proceedings had been commenced in the United States. In fact, in those proceedings the plaintiffs were requesting a jury trial. This evidence supports the motion judge's conclusion that in this case, people who bought their shares in another country would not reasonably expect their rights in respect of the purchase of those securities to be determined in an Ontario court.

[53] Lastly, with respect to the alleged conflict between the motion judge's decision and the decisions in other cases to certify global class actions, this is an issue that turns on the facts of each case. In other words, the same principles were applied and considered in relation to different facts and, as a result, different conclusions were reached. The motion judge's decision does not represent a departure in principle that needs to be resolved by an appellate court.

[54] In Western Canadian Shopping Centres Inc. v. Dutton, 1996 10432 (AB KB), [1996] A.J. No. 1165, 191 A.R. 265 (Q.B.), the foreign investors made their investments with the intention of travelling to Canada and voluntarily and knowingly engaged in transactions that connected them to Canada and to the Canadian government.

[55] In Ramdath, supra, the foreign students came to Canada to study and reside during their eight-month course, and their contracts with the defendant were performed in Ontario. Thus, it was reasonable to conclude that they would expect their claims in relation to that contract to be adjudicated by an Ontario court.

[56] In Pysznyj v. Orsu Metals Corp., [2010] O.J. No. 1994, 2010 ONSC 1151, the court was dealing with certification in the context of a settlement approval, with the defendant seeking the largest possible class with the broadest possible preclusive effect against future claims arising out of the same facts. Further, in that case, 97 per cent of the shares in issue were traded on the Toronto Stock Exchange, with only a de minimus number of foreign class members. [page 467]

[57] In Silver v. Imax Corp., supra, the court noted that the defendant's head office was in Ontario and that the majority of the representations were made from there. In this case, Gammon's head office is in Halifax and its business operations are carried out in Mexico. As well, the court in Imax was influenced by the fact that American proceedings had been commenced and the defendant was contesting the American court's jurisdiction to hear those proceedings, arguing that it should be declined in favour of Canada. Thus, there was a concern that if the defendants were successful in that argument and successful in resisting a global class, American investors would be left without any recourse. No such concern is present in this case.

[58] Just as there are cases where courts have certified an international class, there are cases where they have not. A recent example of the latter is the decision of Rady J. in McCann v. CP Ships Ltd., supra. As already noted, these different results turn on different facts, not conflicts in principle.

[59] For these reasons, I find that there is no reason to doubt the correctness of the motion judge's decision on this point and that the decision is not in conflict with other decisions in the sense contemplated by rule 62.02(4)(a).

Conclusion

[60] For all of these reasons, I am allowing the plaintiff's motion for leave to appeal the motion judge's decision as it relates to the conspiracy claim only. If the parties cannot agree on costs, they may make written submissions to me on this question within 14 days after the release of this decision.

Motion granted in part.