The Trustees of the Labourers' Pension Fund of Central and Eastern Canada et al. v. Sino-Forest Corporation et al.

110 O.R. (3d) 173
2012 ONSC 1924

Ontario Superior Court of Justice

Perell J.
March 26, 2012

Civil procedure -- Class proceedings -- Certification -- Plaintiffs bringing proposed class action and moving for leave to assert causes of action pursuant to ss. 138.3 and 138.8 of Securities Act -- Leave motion and certification motion ordered to be heard together -- Securities Act, R.S.O. 1990, c. S.5, ss. 138.3, 138.8.

Civil procedure -- Class proceedings -- Pleadings -- Plaintiffs bringing proposed class action and moving for leave to assert causes of action pursuant to ss. 138.3 and 138.8 of Securities Act -- Defendants objecting to delivering statement of defence before leave motion and certification motion were heard -- Pleadings should generally be completed before certification motion -- Defendants who delivered affidavit pursuant to s. 138.8(2) of Securities Act ordered to deliver statement of defence -- Delivery of statement of defence not precluding defendant from bringing Rule 21 motion at leave and certification motion or from contesting that plaintiffs had shown cause of action -- Securities Act, R.S.O. 1990, c. S.5, ss. 138.3, 138.8.

The plaintiffs brought a proposed class action against the defendants, alleging that the defendants made misrepresentations in the primary and secondary markets. They also claimed against some of the defendants for a corporate oppression remedy, negligence, negligent misrepresentation, conspiracy and unjust enrichment. They had moved for leave to assert causes of action pursuant to ss. 138.3 and 138.8 under Part XXIII.1 of the Securities Act . The plaintiffs brought a motion for an order requiring the defendants to deliver a statement of defence. The defendants objected to filing a statement of defence before the certification motion and before leave was granted pursuant to s. 138.8 of the Securities Act. The plaintiffs also sought to have the certification motion and the leave motion under s. 138.8 of the Securities Act heard together. The defendants submitted that a series of motions should be scheduled, beginning with the leave motion, followed by Rule 21 (of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 ) motions, followed by the certification motion.

Held, the motion should be granted in part.

It was the clear intention of the legislature that the pleadings be closed before certification. It would not be contrary to law or a denial of due process to order the pre- certification delivery of a statement of defence. While it would be inappropriate to order all the defendants to deliver a statement of defence to a secondary market claim under the Securities Act , it would be proper to order any defendant who delivered an affidavit pursuant to s. 138.8(2) of the Act to also deliver a statement of defence. Any other defendant may, if so advised, deliver a statement of defence. The delivery of the statement of defence was not a fresh step, and any defendant who did so was not precluded from bringing a Rule 21 motion at the leave and certification motion or from contesting that the plaintiffs [page174] had shown a cause of action under s. 5(1) (a) of the Class Proceedings Act, 1992, S.O. 1992, c. 6 .

It would be fair and efficient to hear the certification motion and the leave motion together. If a sequential approach were adopted, there would be appeals at each stage, leading to increased delay.

MOTION for an order requiring the defendants to deliver a statement of defence.

Cases referred to
Pennyfeather v. Timminco Ltd. (2011), 107 O.R. (3d) 201, [2011] O.J. No. 3286, 2011 ONSC 4257 ; Sharma v. Timminco Ltd., [2012] O.J. No. 719, 2012 ONCA 107 ; Sharma v. Timminco Ltd., [2010] O.J. No. 469, 2010 ONSC 790 , consd

Other cases referred to
1176560 Ontario Ltd. v. Great Atlantic & Pacific Co. of Canada Ltd. (2004), 2004 16620 (ON SCDC) , 70 O.R. (3d) 182, [2004] O.J. No. 865, 184 O.A.C. 298, 50 C.P.C. (5th) 25, 129 A.C.W.S. (3d) 455 (Div. Ct.), affg (2002), 2002 6199 (ON SC) , 62 O.R. (3d) 535, [2002] O.J. No. 4781, [2002] O.T.C. 963, 28 C.P.C. (5th) 135, 118 A.C.W.S. (3d) 530 (S.C.J.) [Leave to appeal granted (2003), 2003 36393 (ON SCDC) , 64 O.R. (3d) 42, [2003] O.J. No. 1089, 169 O.A.C. 343, 121 A.C.W.S. (3d) 655 (S.C.J.)]; Ainslie v. CV Technologies Inc. (2008), 2008 63217 (ON SC) , 93 O.R. (3d) 200, [2008] O.J. No. 4891, 304 D.L.R. (4th) 713, 171 A.C.W.S. (3d) 964 (S.C.J.) [Leave to appeal granted 2009 7165 (ON SC) , [2009] O.J. No. 730 (Div. Ct.)]; Anderson v. Wilson (1999), 1999 3753 (ON CA) , 44 O.R. (3d) 673, [1999] O.J. No. 2494, 175 D.L.R. (4th) 409, 122 O.A.C. 69, 36 C.P.C. (4th) 17, 89 A.C.W.S. (3d) 441 (C.A.) [Leave to appeal to S.C.C. refused [1999] S.C.C.A. No. 476]; Bell v. Booth Centennial Healthcare Linen Services, [2006] O.J. No. 4646, 153 A.C.W.S. (3d) 828 (S.C.J.) ; Cannon v. Funds for Canada Foundation, [2010] O.J. No. 314, 2010 ONSC 146 ; Cetinalp v. Casino, [2009] O.J. No. 5015 (S.C.J.) ; Dobbie v. Arctic Glacier Income Fund, [2011] O.J. No. 932, 2011 ONSC 25 , 3 C.P.C. (7th) 261; Garland v. Consumers' Gas Co., [2004] 1 S.C.R. 629, [2004] S.C.J. No. 21, 2004 SCC 25 , 237 D.L.R. (4th) 385, 319 N.R. 38, J.E. 2004-931, 186 O.A.C. 128, 43 B.L.R. (3d) 163, 9 E.T.R. (3d) 163, 130 A.C.W.S. (3d) 32, revg (2001), 2001 8619 (ON CA) , 57 O.R. (3d) 127, [2001] O.J. No. 4651, 208 D.L.R. (4th) 494, 152 O.A.C. 244, 19 B.L.R. (3d) 10, 110 A.C.W.S. (3d) 21 (C.A.); Glover v. Toronto (City), [2008] O.J. No. 604 (S.C.J.) ; Healey v. Lakeridge Health Corp., [2006] O.J. No. 4277, 38 C.P.C. (6th) 145, 152 A.C.W.S. (3d) 372 (S.C.J.) ; Hunt v. Carey Canada Inc., 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; Kang v. Sun Life Assurance Co. of Canada, [2011] O.J. No. 4792, 2011 ONSC 6335 ; Mangan v. Inco Ltd. (1996), 1996 8202 (ON SC) , 30 O.R. (3d) 90, [1996] O.J. No. 2655, 10 O.T.C. 231, 3 C.P.C. (4th) 342, 64 A.C.W.S. (3d) 921 (Gen. Div.); Silver v. Imax Corp., 2009 72334 (ON SC) , [2009] O.J. No. 5585, 86 C.P.C. (6th) 273 (S.C.J.) [Leave to appeal refused (2011), 105 O.R. (3d) 212, [2011] O.J. No. 656, 2011 ONSC 1035 , 80 B.L.R. (4th) 228 (Div. Ct.)]

Statutes referred to
Class Proceedings Act, 1992, S.O. 1992, c. 6, ss. 5(1) (a), 12 , 28 , 35
Securities Act, R.S.O. 1990, c. S.5, ss. 130 [as am.], (3), (4), (5), Part XXIII.1 [as am.], ss. 138.3 [as am.], 138.8 [as am.], (2)

Rules and regulations referred to
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.04 , 20, 21, 25.06(1) , 25.07

Kirk M. Baert and Michael Robb, for plaintiffs.
Michael Eizenga, for Sino-Forest Corporation, Simon Murray, Edmund Mak, W. Judson Martin, Kai Kit Poon and Peter Wang.
Emily Cole and Megan Mackey, for Allan T.Y. Chan.
Peter Wardle and Simon Bieber, for David J. Horsley.
Laura Fric and Geoffrey Grove, for William E. Ardell, James P. Bowland, James M.E. Hyde and Garry J. West.
John Fabello and Andrew Gray, for Credit Suisse Securities (Canada) Inc., TD Securities Inc., Dundee Securities Corporation, RBC Dominion Securities Inc., Scotia Capital Inc., CIBC World Markets Inc., Merrill Lynch Canada Inc., Canaccord Financial Ltd., Maison Placements Canada Inc., Credit Suisse Securities (USA) LLC and Banc of America Securities LLC.
Peter H. Griffin and Shara Roy, for Ernst & Young LLP.
Kenneth Dekker and Michelle Booth, for BDO Limited.
John Pirie and David Gadsden, for Pöyry (Beijing) Consulting Company Limited.

PERELL J.: -- A. Introduction

[ 1 ] A motion for an order requiring a defendant to deliver a statement of defence or for an order setting a timetable for a motion should not be a momentous matter. But scheduling is a very big deal in this very big case under the Class Proceedings Act, 1992, S.O. 1992, c. 6 .

[ 2 ] The defendants strenuously resist delivering a statement of defence before the certification motion, and they submit that it would [be] both contrary to law and a denial of due process to require them to plead in the normal course of an action.

[ 3 ] The defendants submit that having to plead their statement of defence is contrary to law because the plaintiffs' statement of claim can be commenced only with leave pursuant to s. 138.8 of the Securities Act, R.S.O. 1990, c. S.5 and in Sharma v. Timminco Ltd., [2012] O.J. No. 719, 2012 ONCA 107 the Court of Appeal ruled that the statement of claim does not exist until leave is granted. The defendants submit that having to plead their statement of defence is a denial of due process because the plaintiffs' statement of claim includes causes of action that might not survive a challenge under Rule 21 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 . One of the defendants, BDO Limited, also argues that claims against it are statute-barred, and, therefore, it should not be required to deliver a statement of defence but should be permitted to bring a Rule 21 motion before the certification hearing. [page176]

[ 4 ] The position of the defendants is set out in para. 2 of the defendant Sino-Forest Corporation's factum as follows:

2. The Responding Parties oppose the relief relating to the delivery of a statement of defence because, as a result of the Ontario Court of Appeal's decision in Sharma v. Timminco, the secondary market action has yet to be commenced and will not have been commenced unless and until leave has been granted by this Honourable Court. Accordingly, the Defendants cannot be required to deliver a statement of defence to a proceeding that has yet to be commenced. Moreover, the secondary market claims are intertwined with the balance of the allegations in the statement of claim, such that it would not be realistic to provide a partial or bifurcated defence. In addition, the Responding Parties expect to be bringing a motion to strike the Statement of claim, at least in respect of the portion of the claim that purports to be brought on behalf of Noteholders, who are prohibited from commencing such a claim by virtue of the no suits by holder clause.

[ 5 ] In response, the plaintiffs submit that just as defendants are entitled to know the case they must meet, plaintiffs are entitled to know the defence they confront. The plaintiffs submit that the law and the dictates of due process do not preclude ordering the delivery of a statement of defence in accordance with the Rules of Civil Procedure , and the plaintiffs' rely on the court's power under s. 12 of the Class Proceedings Act, 1992 and on what I said in Pennyfeather v. Timminco Ltd. (2011), 107 O.R. (3d) 201, [2011] O.J. No. 3286, 2011 ONSC 4257 about the desirability of the pleadings being closed before the certification motion.

[ 6 ] In the immediate case, the defendants also strenuously resist the plaintiffs' request that the leave motion under s. 138.8 the Securities Act and the certification motion under the Class Proceedings Act, 1992 be heard together. Instead of a combined leave and certification motion, the defendants submit that a series of motions be scheduled, beginning with the leave motion, followed by Rule 21 motions, followed by the certification motion. Some defendants would begin with the Rule 21 motions before the leave motion, but all wish a sequence of separate motions.

[ 7 ] The defendants submit that a combined leave and certification motion would be both inappropriate and also unfair, and particularly so if they are also required to plead their defences. The defendants submit that fairness dictates that leave be determined in advance of certification and that their right to attack all or part of whatever pleading emerges from the leave motion be preserved. They submit that it would be inefficient to deliver a statement of defence when the statement of claim is likely to be amended in a substantial manner depending on the outcome of the plaintiffs' leave motion and the Rule 21 motions. [page177]

[ 8 ] The plaintiffs regard the defendants' proposal of a sequence of motions as something akin to having their action being sentenced to a life of imprisonment on Devil's Island.

[ 9 ] For the reasons that follow, I adjourn the motion as it concerns BDO Limited, and I order that there shall be a combined leave and certification motion on November 21-30, 2012 (ten days).

[ 10 ] I order that the "Proposed Fresh as Amended Statement of Claim" be the statement of claim for the purposes of the leave and certification motion and that this pleading shall not be amended without leave of the court. Further, I order that with the exception of the plaintiffs' funding motion, there shall be no other motions before the leave and certification motion without leave of the court first being obtained.

[ 11 ] I do not agree that it would be contrary to law or a denial of due process to order the pre-certification delivery of a statement of defence; nevertheless, I shall not order all the defendants to deliver their statements of defence before the combined leave and certification.

[ 12 ] Rather, I shall order that a statement of defence be delivered by any defendant that delivers an affidavit pursuant to s. 138.8(2) of the Securities Act . I order that any other defendant may, if so advised, deliver a statement of defence. Further, I order that if a defendant delivers a statement of defence, then the delivery of the statement of defence is not a fresh step and the defendant is not precluded from bringing a Rule 21 motion at the leave and certification motion or from contesting that the plaintiffs have shown a cause of action under s. 5(1) (a) of the Class Proceedings Act, 1992 .

[ 13 ] In my reasons, I will explain why it may be advantageous to a defendant to deliver a statement of defence although it may not be obliged to do so.

[ 14 ] Finally, in my reasons, I will establish a timetable for the funding motion and for the leave and certification motion, which timetable may be adjusted, if necessary, by directions made at a case conference.

Motion granted in part.