SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: CV-08-362807-00 CP

DATE: 20140218

RE: Michael Cannon / Plaintiff

AND:

Funds for Canada Foundation et al, including ParkLane Financial Group Limited, Trafalgar Associates Limited, Trafalgar Trading Limited, Appleby Services (Bermuda) Ltd. as trustee for the Bermuda Longtail Trust / Defendants

AND:

Numerous Third Party Defendants

Proceeding under the Class Proceedings Act, 1992

BEFORE: Justice Edward Belobaba

COUNSEL:
Margaret Waddell and Samuel Marr for the Plaintiff

John Brown and Junior Sirivar for Defendants ParkLane Financial, Trafalgar Associates and Trafalgar Trading (“the ParkLane Defendants”)

Andrea Laing and Daniel Stern for Defendant Appleby Services

Robert Brush and Bruce O’Toole / Peter Jervis and Remissa Hirji / Daniel Murdoch / Christopher Goldson for certain Third Party Defendants

HEARD: October 17, 2013; January 30 and February 14, 2014; and written submissions

direction regarding plaintiff’s motion to

amend common issues and stay third party claim

[1] I have been persuaded by counsel for all parties that the common issues that were certified by Justice Strathy[^1] must be amended and narrowed in order to stay the ParkLane Defendants’ third party claim against the distributors.[^2] I note that Justice Strathy himself envisaged this very possibility in his certification decision.[^3]

[2] I initially encouraged counsel to see if the required revisions could be the subject of a consent agreement and, to their credit, they spent many hours trying to achieve consensus. In the end, after weeks of effort, two different versions were presented: one by the Plaintiff, with strong support from two large groups of third-party distributors, and one by the ParkLane Defendants (hereafter “Defendant”). Appleby Services took the opportunity to inject their concern about an unpleaded, new claim and provided yet a third version for the common issues under the negligence, conspiracy and fraud headings.

[3] After reviewing the certification decision, the numerous written submissions from counsel and the competing versions that are now before me, I can advise the parties as follows.

[4] I would be prepared to grant the Plaintiff’s motion to amend the common issues and stay the third-party claim until after the common issues have been finally resolved if the concern raised by Appleby is satisfactorily accommodated. Assuming the latter, I would approve the Plaintiff`s proposed revisions and draft order

[5] The purpose of this Direction is to explain why I would be prepared to approve the Plaintiff’s proposed revisions and draft order rather than the revisions and draft order proposed by the Defendant, why these revisions must accommodate Appleby’s concern about an unpleaded, new claim, and how this can be done.

[6] For ease of reference, I will refer to the Plaintiff’s proposed common issue revisions as PCI and his draft order as PDO, and the Defendant’s as DCI and DDO.

Why I prefer PCI over DCI

[7] Three reasons. One, the PCI achieves the overall objective – a common issues trial that does not involve or bind the distributors – much more directly and does not stray unduly from the common issues that were certified by Justice Strathy. The DCI, on the other hand, adds unnecessary complexity by adding concepts, words and phrases that were never considered at certification and are not needed now. Two, the PCI version is strongly supported by two large groups of third-party distributors and is unopposed by the other distributors, while the support for the DCI is lukewarm at best. Three, I am satisfied that if the PCI version is approved, there will be no resulting unfairness or injustice to the Defendant that is of any significance.

Why I prefer the PDO over the DDO

[8] I prefer the PDO over the DDO for the following reasons:

➢ Section 3 of the DDO provides that any findings made in the common issues trial against donor/distributors shall be binding on these distributors in the individual issues trial and in the third-party claim. I agree with counsel for the third parties that this provision totally undermines the very objective that is being sought by all parties, namely a carefully focused common issues trial that would not necessarily involve or legally bind the distributors; it is judicially unworkable because it creates two classes of distributors one bound, the other not bound; and it is unfair because it exposes the donor/distributor class to “sitting duck” summary judgment motions that could be brought by the Defendant. Whatever prejudice there is to the Defendant in having to re-litigate similar and perhaps identical issues (which, by the way, is often the consequence of staying any third-party action) is more than trumped by the prejudice that would be suffered by the distributors. Section 3 of the DDO is completely unacceptable.

➢ Section 5(a) of the DDO, which attempts to particularize the content of the bar order that I granted in the Settlement Approval Order of October 18, 2013 by adding about 160 additional words (out of an abundance of caution says the Defendant) is unnecessary. The additional verbiage may also create its own interpretive difficulties as evidenced by the Plaintiff’s submission that they differ with the Defendant about its meaning. Better to let the bar order speak for itself without any further “particularization.” Section 5 of the PDO is all that is needed to ensure the continuing operation of the bar order.

➢ Section 6(c) of the DDO, dealing with exhibits and evidentiary read-ins at the trial of the third-party claim is best left to the trial judge who will hear the third-party claim.

➢ The PDO is strongly supported by two large groups of third-party distributors. There is no support for the DDO other than from the Defendant. I am also satisfied that it would be neither unfair nor unjust to the Defendant if the PDO is approved rather than the DDO.

Appleby’s concern about the unpleaded, new claim

[9] I agree with the Plaintiff that the core allegation of the wrongdoing herein is not limited to the improper, unlawful or defective design of the Gift Program but also extends to and includes the implementation and operation of the (defectively designed) Gift Program. However, Appleby correctly points out that the language in the PCI is broad enough to find Appleby, and possibly other defendants, liable for the negligent implementation or operation of a perfectly valid Gift Program. Appleby is also correct to note that the latter (liability for the negligent implementation or operation of a legitimate Gift Program) was not pleaded by the Plaintiff[^4] and was not the focus of Justice Strathy’s certification analysis.[^5] Indeed, it wasn’t even mentioned.

[10] Appleby therefore has a valid concern about an unpleaded, new claim. If the Plaintiff is content to limit the PCI to the design, implementation and operation of an improper or defective Gift Program, this should be made clear in the PCI, perhaps via a simple footnote or asterisk that can easily be added to the appropriate headings. However, if the Plaintiff intends to extend the reach of the PCI and expose one or more of the defendants to possible liability for the negligent (or fraudulent) implementation or operation of an otherwise valid or legitimate Gift Program, then the Plaintiff should bring the necessary motion to amend its statement of claim and certify this extended dimension as a new and additional common issue. This motion can be brought in writing.

[11] If Appleby is inclined to do a victory dance at this point, it may be wise to reconsider. Amendments to the statement of claim are often granted at this stage of the proceedings and the Plaintiff’s obligation to satisfy the s. 5(1)(c) common issue requirement[^6] for the “new claim” has been made much easier by the Supreme Court’s recent decision in Pro-Sys Consultants.[^7] The Court took time to remind everyone that the common issue requirement asks not “whether there is some basis in fact for the claim itself” but “whether these questions are common to all the class members.”[^8] In other words, the Court made clear that evidence that the acts alleged actually occurred is not required. All that is needed is “some assurance … that the questions are capable of resolution on a common basis.”[^9]

[12] A long way of saying that if the Plaintiff intends his PCI to reach into unpleaded, new claim territory and if this can be accomplished on the part of the Plaintiff by an arguably straight-forward motion, then there may be room for a consent agreement on the part of Appleby.[^10]

Conclusion

[13] If the PCI is reworked to accommodate the Appleby concern, whether via a footnote or via a successful motion as described above, then the PDO (with an attached Schedule A containing the amended common issues) will indeed achieve the objective of making the common issues trial more manageable by fairly and properly staying the ParkLane defendants’ third party claim against the distributors.

Costs

[14] Deciding the costs of this motion may well prove to be a complicated and counter-productive exercise. The most sensible thing may be to award costs in the cause. Nonetheless, if any party is determined to seek costs on this motion, it should forward its initial submission (maximum five pages) within one month from the date that the Order herein is finally signed, with responding submissions (same page limit) to follow within one month thereafter.

[15] I trust this Direction will be of some assistance.

Justice Edward Belobaba

Date: February 18, 2014 Belobaba J.

[^1]: Cannon v Funds for Canada Foundation, 2012 ONSC 399 (S.C.J.)

[^2]: Court File No. CV-08-362807-CPA3

[^3]: Supra, note 1, at paras. 393-95.

[^4]: The Plaintiff points to para. 133(A)(iv) of the statement of claim, but this paragraph is obviously concerned about an improper or unlawful Gift Program rather than a valid or lawful one

[^5]: See the certification decision, supra, note 1, at paras. 141 and 303. I agree with Appleby that the language in para. 155 (that the Gift Program “was negligently designed and that it did not work”) is best understood as meaning that the Gift Program did not work because it was negligently designed. I see nothing in the certification reasons that considers or discusses the ‘negligent implementation of a properly designed Gift Program.’

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

[^7]: Pro-Sys Consultants Ltd. v Microsoft Corporation, 2013 SCC 57, 364 D.L.R. (4th) 573.

[^8]: Ibid., at paras. 100 and 110.

[^9]: Ibid., at para. 114.

[^10]: I am not prejudging the matter. It may turn out that the Plaintiff’s motion is not that “straight-forward” and Appleby may well prevail. I am simply urging some sober second thought on the part of both parties.