Coffin et al. v. Atlantic Power Corporation et al.

[Indexed as: Coffin v. Atlantic Power Corp.]

Ontario Reports

Ontario Superior Court of Justice,

Belobaba J.

July 24, 2015

127 (3d) 199

2015 ONSC 3686

Case Summary

Civil procedure — Class proceedings — Certification — Plaintiffs denied leave under s. 138.8 of Securities Act to bring proposed securities class action — Plaintiffs seeking certification of common law claim for negligent misrepresentation — Certification denied as preferable procedure requirement in s. 5(1)(d) of Class Proceedings Act was not met — Class proceeding not preferable procedure for resolving reliance-based claims with individual issues of causation and damages — Approach of inferring reliance via evidence of efficient market not available in Ontario — Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5(1)(d) — Securities Act, R.S.O. 1990, c. S.5, s. 138.8.

Securities regulation — Statutory cause of action — Leave of court — Corporate defendant's CEO stating in early November 2012 that company was confident in its ability to sustain current dividend level — Company announcing in late February 2013 that it was cutting its dividend by 65 per cent — Share prices dropping by more than 40 per cent — Plaintiffs purchasing shares several weeks before dividend was cut — Plaintiffs denied leave under s. 138.8 of Securities Act to bring proposed securities class action — Unchallenged evidence establishing that defendants believed in early November 2012 that dividend levels could be maintained and that they only decided to cut dividend levels after detailed and careful review of significantly changed circumstances — No reasonable possibility existing that action would succeed — Securities Act, R.S.O. 1990, c. S.5, s. 138.8.

Near the end of an earnings call in early November 2012, the defendant ATP's CEO advised the analysts on the call that the company was confident in its ability to sustain the current dividend level. In late February 2013, ATP announced that it was cutting its dividend by 65 per cent. Share prices dropped by more than 40 per cent, and the price of the company's debentures fell by an average of 8 per cent. The plaintiffs purchased ATP common shares several weeks before the dividend was cut. Neither of them purchased or owned ATP debentures. The [page200] plaintiffs moved for leave under s. 138.8 of the Securities Act to bring a securities class action and moved for certification under s. 5(1) of the Class Proceedings Act.

Held, the motions should be dismissed.

The evidence was unchallenged that in early November 2012, the defendants believed that ATP would continue to pay a dividend of $1.15 per share, had the ability to do so for one or more years even without future acquisitions, and was committed to a growth strategy aimed at accretive acquisitions. It was only at the end of February 2013, after a detailed and careful review of the significantly changed circumstances and the various available options, that the board decided to cut the dividend to a level that could be maintained over the next five years. There were no misrepresentations by assertion or omission, and no material changes that were not disclosed. There was no reasonable possibility that the plaintiffs could show otherwise. Leave under s. 138.8 of the Securities Act was denied.

The plaintiffs still sought certification for the remaining claims. The shareholders and certain debenture-holders advanced a common law claim for negligent misrepresentation, and the Series D debenture-holders asserted a statutory claim under s. 130 of the Securities Act and common law claims for negligence and negligent misrepresentation. The shareholders component of the proposed class action failed to satisfy the preferable procedure requirement in s. 5(1)(d) of the Class Proceedings Act, and therefore could not be certified. A class proceeding is not the preferable procedure for resolving reliance-based claims with individual issues of causation and damages. The approach of inferring reliance via evidence of an efficient market is not available in Ontario. To allow common law claims where the corporate and shareholder protections set out in the leave provision of the Securities Act are not available would render the statutory remedy and the protective leave provision redundant.

The debenture-holders component of the proposed class action might qualify for certification if it was completely reconstituted solely as a statutory claim under s. 130 of the Securities Act, with a proper representative plaintiff, a redefined class, revised common issues and a new litigation plan.

Theratechnologies Inc. v. 121851 Canada Inc., [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, apld

Green v. Canadian Imperial Bank of Commerce (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, varg [2012] O.J. No. 3072, 2012 ONSC 3637, 29 C.P.C. (7th) 225, 219 A.C.W.S. (3d) 692 (S.C.J.); 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, consd

Other cases referred to

AIC Limited v. Fischer, [2013] 3 S.C.R. 949, [2013] S.C.J. No. 69, 2013 SCC 69, 452 N.R. 80, 312 O.A.C. 128, 2013EXP-3985, J.E. 2013-2175, EYB 2013-230429, 366 D.L.R. (4th) 1, 45 C.P.C. (7th) 227; Baroch v. Canada Cartage Diversified GP Inc., [2015] O.J. No. 843, 2015 ONSC 1147, 71 C.P.C. (7th) 151, 250 A.C.W.S. (3d) 42 (S.C.J.); Basic Inc. v. Levinson, 485 U.S. 224, 108 S. Ct. 978 (1988); Coventree Inc. (Re) (2011), 34 O.S.C.B. 10209; District of Massuchesetts, Civil Action No. 1:13-CV-10537-IT; Dobbie v. Arctic Glacier Income Fund (2012), 109 O.R. (3d) 607, [2012] O.J. No. 456, 2012 ONSC 773 (S.C.J.); Dugal 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.); [page201] Fantl v. Transamerica Life Canada (2015), 125 O.R. (3d) 230, [2015] O.J. No. 1083, 2015 ONSC 1367, 71 C.P.C. (7th) 56, 331 O.A.C. 358, 250 A.C.W.S. (3d) 389 (Div. Ct.); Goldsmith v. National Bank of Canada, [2015] O.J. No. 3848, 2015 ONSC 4581 (S.C.J.); Hollick v. Toronto (City), [2001] 3 S.C.R. 158, [2001] S.C.J. No. 67, 2001 SCC 68, 205 D.L.R. (4th) 19, 277 N.R. 51, J.E. 2001-1971, 153 O.A.C. 279, 42 C.E.L.R. (N.S.) 26, 13 C.P.C. (5th) 1, 24 M.P.L.R. (3d) 9, REJB 2001-26157, 108 A.C.W.S. (3d) 774; In Re: Atlantic Power Corp. Securities Litigation, 2015 U.S. Dist. LEXIS 31166; McClurg v. Canada, 1990 CanLII 28 (SCC), [1990] 3 S.C.R. 1020, [1990] S.C.J. No. 134, 76 D.L.R. (4th) 217, 119 N.R. 101, [1991] 2 W.W.R. 244, J.E. 91-67, 50 B.L.R. 161, [1991] 1 C.T.C. 169, 91 D.T.C. 5001, 24 A.C.W.S. (3d) 566; Menegon v. Philip Services Corp., 2001 CanLII 28396 (ON SC), [2001] O.J. No. 5547, [2001] O.T.C. 989, 23 B.L.R. (3d) 151, 111 A.C.W.S. (3d) 1090 (S.C.J.); Mondor v. Fisherman, 2001 CanLII 28388 (ON SC), [2001] O.J. No. 4620, 18 B.L.R. (3d) 260, 8 C.C.L.T. (3d) 240, 15 C.P.R. (4th) 289, 109 A.C.W.S. (3d) 860 (S.C.J.); NBD Bank, Canada v. Dofasco Inc. (1999), 1999 CanLII 3826 (ON CA), 46 O.R. (3d) 514, [1999] O.J. No. 4749, 181 D.L.R. (4th) 37, 127 O.A.C. 338, 1 B.L.R. (3d) 1, 15 C.B.R. (4th) 67, 47 C.C.L.T. (2d) 213 (C.A.); Rex Diamond Mining Corp. (Re), 2008 ONSEC 18, 2008 LNONOSC 631, 31 O.S.C.B. 8337

Statutes referred to

Class Proceedings Act, 1992, S.O. 1992, c. 6, ss. 5(1), (a), (b), (c), (d), 25

Securities Act, R.S.O. 1990, c. S.5, ss. 1(1) [as am.], 130 [as am.], Part XXIII.1 [as am.], ss. 138.1 [as am.], 138.3 [as am.], (1) [as am.], (2) [as am.], (4), 138.4 [as am.], (1) [as am.], 138.8 [as am.], 138.13 [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 21

MOTIONS for leave under s. 138.8 of the Securities Act to bring a proposed securities class action and for the certification of a class action.

Joseph Groia, Kirk Baert, Bonnie Roberts Jones, Jonathan Ptak, David Sischy and Garth Myers, for plaintiffs/moving parties.

Benjamin Zarnett, David Conklin, Michael Wilson and Charlie Pettypiece, for defendants/ responding parties.

BELOBABA J.: —

Introduction

[1] The plaintiffs in this proposed securities class action move for leave under s. 138.8 of the Securities Act[^1] ("OSA") and certification under s. 5(1) of the Class Proceedings Act, 1992[^2] ("CPA"). They say that the defendants, Atlantic Power Corporation, CEO Barry Welch and CFO Terrence Ronan, misrepresented the [page202] company's ability to maintain its dividend causing certain shareholders and debenture-holders to sustain losses when the dividend was cut and the share price dropped.

[2] In 2012, Atlantic Power was paying an annualized dividend of $1.15 per share. Near the end of an earnings call in early November 2012, the company's CEO advised the analysts on the call that the company was "confident in [its] ability to sustain the current dividend level". Four months later, on February 28, 2013, ATP announced that it was cutting its dividend by 65 per cent to $0.40 per share. Share prices dropped over the next five days by more than 40 per cent, from $10.26 at the close of trading on February 28 to $5.82 on March 5, 2013. The price of the company's debentures was also affected, falling by an average of 8 per cent.

[3] The plaintiffs seek to pursue a class action on behalf of anyone who purchased Atlantic Power common shares or debentures[^3] during the four-month period beginning on November 5, 2012 and ending on February 28, 2013 (the "class period").

[4] A similar class action, but only on behalf of shareholders who purchased ATP common stock on the NYSE, was commenced in the U.S. in 2013.[^4] The action was dismissed in March 2015, but the plaintiffs appealed and the appeal remains outstanding.[^5]

[5] The defendants ask that the OSA leave motion be dismissed because no misrepresentations were made and there is no reasonable possibility that the claim of secondary market misrepresentation will succeed at trial. The defendants also ask that the motion for certification be dismissed because the remaining claims all rest on the same alleged factual foundation.

[6] I will deal first with leave and then certification. [page203]

I. The Leave Motion

(1) Background

[7] Atlantic Power ("ATP") is a publicly traded power generation company that owns and operates power projects in Canada and the United States.[^6] Its shares are listed on the Toronto and New York Stock Exchanges. The power projects sell electricity to public utilities and large industrial customers under "power purchase agreements", or PPAs.

[8] ATP is known as a dividend-paying company. Indeed, as stated in its 2011 annual report, its corporate strategy is to "increase the value of the company through accretive acquisitions in North American markets while generating stable, contracted cash flows from its existing assets to focus on the dividend payout to shareholders".[^7] The main determinant of dividend level is the "cash available for distribution", which is primarily the cash flow from the power projects.

[9] The two plaintiffs, Jacqueline Coffin and Scott Fife, purchased ATP common shares several weeks before the dividend was cut.[^8] Ms. Coffin's and Mr. Fife's primary interest in acquiring the ATP shares was the income from the monthly dividends that were being paid out at an annualized rate of $1.15 per share. Neither of them purchased or ever owned ATP debentures. One of the original plaintiffs, Sandra Lowry, had purchased some debentures but decided to withdraw from the litigation and her name has since been removed on consent.

(2) The alleged misrepresentations

[10] The plaintiffs say, in essence, that the defendants are liable under s. 138.3(1) and (2) of the OSA for making misrepresentations about their ability to maintain the $1.15 dividend level. The OSA defines "misrepresentation" as "(a) an untrue statement of material fact, or (b) an omission to state a material fact that is required to be stated or that is necessary to make [page204] a statement not misleading in the light of the circumstances in which it was made".[^9]

[11] The plaintiffs allege both "misrepresentation by assertion" and "misrepresentation by omission". They say the former can be found in the company's November 5, 2012 press release that accompanied the third-quarter financials and in the earnings call with analysts that took place on November 6, 2012. The November 5 press release contained the following statement which the plaintiffs say is not true: "The Company expects, based on its growth assumptions, that there will be additional contributions from acquisitions and dispositions, which are expected to further support the Company's continued ability to pay its dividend." And, during the November 6 earnings call, after reviewing several financial items, CEO Welch added this: "For all these reasons taken together, we're confident in our ability to sustain the current dividend level." The plaintiffs say this statement was also untrue and misleading.

[12] "Misrepresentation by omission" is defined in the statement of claim[^10] as follows:

Misrepresentation by Omission means the failure to state that i) Atlantic's cash flow was unstable and that it did not have and would not receive sufficient Cash Available for Distribution to sustain its then level of dividends; and (ii) there was a material risk to the sustainability of Atlantic's then level of dividends and that the dividend level would have to be cut if Atlantic was unable to make $600M-$800M of accretive acquisitions.

[13] The plaintiffs say that "misrepresentations by omission" were made in the following six documents:

(i) the Q3 2012 interim financial statements released on November 5, 2012;

(ii) the Q3 2012 MD&A released on November 5, 2012;[^11]

(iii) the press release of November 5, 2012;

(iv) the Series D debenture prospectus dated December 3, 2012;

(v) the material change report (Form 8-K) filed on December 28, 2012 disclosing the impairment of the carrying amount for the Lake project; and [page205]

(vi) the material change report (Form 8-K) filed on February 1, 2013 disclosing the sale of the Lake and Auburndale projects.

[14] The plaintiffs also allege under s. 138.3(4) of the OSA that the defendants failed to disclose a "material change" in the company's business. The plaintiffs say the material change occurred on or just after January 11, 2013, when financial advisor Greenhill & Co. concluded that the company's cost of capital was becoming too high and that Greenhill would not be able to assist ATP in executing an accretive acquisition plan that would sustain the existing dividend.

[15] If leave to proceed is granted under s. 138.8, then any one of the alleged misrepresentations by assertion or omission, or the alleged failure to make timely disclosure of a material change, would allow a personal action for damages under s. 138.3(1), (2) or (4), and if certified, a class action without the need to prove reliance.

(3) The leave test

[16] An action for secondary market misrepresentation under Part XXIII.1 of the OSA requires leave of the court. Leave will be granted under s. 138.8 if the court is satisfied that the action is brought in good faith and "there is a reasonable possibility that the action will be resolved at trial in favour of the plaintiff ".[^12]

[17] Here, there is no suggestion that the action is not brought in good faith. Therefore, the only issue is whether there is a reasonable possibility that the action will be resolved at trial in favour of the plaintiff.

[18] In Theratechnologies,[^13] the Supreme Court provided a much-needed clarification of the "reasonable possibility" standard. The court made clear that the leave threshold was more than a "speed bump" and that judges should undertake "a reasoned consideration of the evidence to ensure that the action has some merit".[^14] The "reasonable possibility" threshold, said the court, requires that there be a "reasonable or realistic chance that the action will succeed".[^15] The court explained: [page206]

A case with a reasonable possibility of success requires the claimant to offer both a plausible analysis of the applicable legislative provisions, and some credible evidence in support of the claim. . . . A full analysis of the evidence is unnecessary . . . What is required is sufficient evidence to persuade the court that there is a reasonable possibility that the action will be resolved in the claimant's favour.[^16]

[Emphasis in original]

[19] The Supreme Court has reminded class action judges that the leave threshold is intended to provide "a robust deterrent screening mechanism" to ensure "that cases without merit are prevented from proceeding".[^17] I recognize, of course, that the Court of Appeal in Green v. Canadian Imperial Bank of Commerce[^18] concluded that the leave test under s. 138.8 of the OSA is akin to the "cause of action" analysis under s. 5(1)(a) of the CPA and that the purpose of the leave test is to "weed out hopeless claims and only allow those to go forward that have aesome chance of success'".[^19]

[20] There may be important differences in these two approaches, or they may turn out (with some tweaking) to be one and the same test.[^20] The Supreme Court will no doubt resolve this issue when it decides Green.[^21] In the meantime, I am obliged to follow Theratechnologies, which, in my view, actually applies the same test that was approved by the Court of Appeal in Green:

[W]hether, having considered all the evidence adduced by the parties and having regard to the limitations of the motions process, the plaintiffs' case is so weak or has been so successfully rebutted by the defendant, that it has no reasonable possibility of success.[^22] [page207]

[21] Given the decisions in Green and Theratechnologies, the question for me, as I see it, is this: 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 is has no reasonable possibility of success.

(4) The volume of evidence before the court

[22] Most leave motions under s. 138.8 of the OSA turn on the plain language of the alleged secondary market misrepresentations and the plaintiff's expert report. Both sides, of course, file fact affidavits from the parties and the defendant usually files its own expert report. But it is the alleged misrepresentations and the plaintiff's expert report that generally persuades the court that there is at least a reasonable possibility that the plaintiff will succeed at trial.

[23] This case is different in at least two ways: one, the plaintiffs' expert reports rely completely on publicly disclosed information (which is obviously rendered less persuasive if said information on its face contains no misrepresentations); and two, the volume of evidence filed by the defendants. The defendants made a conscientious decision to do battle from the outset. They have not only filed competing expert reports but also a massive amount of non-public (indeed court-sealed) internal and corporate narrative evidence to fully rebut the plaintiffs' allegations and show they have no reasonable possibility of succeeding at trial.

[24] The defendants have produced more than 14,000 electronic records from the time period October 1, 2012 to February 28, 2013. The evidence filed on the leave motion (mainly by the defendants) fills ten banker boxes[^23] that contain fact affidavits,[^24] expert reports,[^25] cross-examination transcripts, and numerous compendia with hundreds of corporate documents, e-mails and board meeting minutes. Add to this the ten separate facta and reply facta (on the leave motion alone) that in total run into the hundreds of pages and one can understand why I say that the volume of evidence before this court is substantial. [page208]

[25] As I have already noted, the question that needs to be answered is this: 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?

(5) Four points that are not in dispute

[26] Before turning to the evidence, I note the following four points that are not or should not be in dispute and that provide an important backdrop for the analysis that follows.

[27] The first point is that ATP repeatedly made clear in its public disclosures that "future dividends are not guaranteed" and that the payment or amount of any dividend was discretionary and could be reduced or eliminated at any time.[^26] ATP disclosed that its cash flows were subject to risks -- that revenues earned under existing PPAs would not necessarily be sustained after the PPAs expire, that the same revenues may not be available under new or extended PPAs, and that the company may not be able to make or integrate acquisitions on an accretive basis.^27

[28] Secondly, the connection between cash flow and the company's ability to pay dividends was also made clear. In its 2011 annual report, for example, ATP noted that "a significant portion of the cash received from project distributions is used to pay dividends" and that "PPAs are the primary determinants of the amount of cash that will be distributed from the projects to [ATP], and that will in turn be available for dividends paid to [ATP] shareholders". It was obvious from the investor perception studies that were conducted by the company as well as the analysts' reports, the latter discussed in more [page209] detail below, that the connection between cash flow and dividend levels was understood.[^28]

[29] The third point is that ATP had enough cash on hand during the time period in question to continue to pay the $1.15 annual dividend for another one to three years even without any further growth or accretive acquisitions. CFO Ronan on cross-examination explained that "there was no crisis" and "no liquidity issues" and that "the dividend could easily be paid through 2013 without growth and into 2014". The plaintiffs' own experts agreed that ATP had enough cash to pay the $1.15 dividend into mid-2014 (Mr. Sabine) or into 2014 or 2015 (Mr. Mak). ATP's financial advisor, Greenhill, went even further: Its "status quo" scenario in February 2013 showed that the company could pay the dividend into 2016. I also note that on December 7, 2012, the ATP board approved a budget that provided for the payment of the dividend at its existing level throughout 2013.

[30] The final background point (a more general point) is that dividend payments are not formulaic calculations but business judgment calls. As Professor Hubbard, dean of the Columbia Business School and one of ATP's experts, explained:

Dividends are tied to expectations of long-term future earnings and firms are unlikely to change their dividend level in response to changes they perceive as temporary. Dividend payments are not formulaic, but instead reflect management's judgment or risk-appetite concerning the level and stability of long-term earnings. Past financial performance, as of a given point in time, does not provide much insight as to whether a firm will change its dividends in the future.

[31] Each of these points -- that the dividends were not guaranteed; that they were very much connected to and dependent upon PPA-related cash flow; that the company had enough cash on hand to continue to pay the $1.15 dividend for another one to three years even without any further acquisitions; and that dividend payments in general are not formulaic calculations but business judgment calls -- will obviously be important as I consider the evidence and determine whether any of the alleged misrepresentations have a reasonable or realistic possibility of success at trial. [page210]

(6) The parties' positions

[32] The plaintiffs refer to their fact affidavits, expert reports, various corporate e-mails and other filed ATP material and documentation. The plaintiffs' argument, in essence, is that ATP's management knew or should have known even before November 5, 2012 (when the Q3 financials were released) that the $1.15 dividend was not sustainable and had to be reduced. Instead of disclosing that a dividend reduction was imminent, ATP made the misrepresentations by assertion and omission noted above.

[33] The plaintiffs also say that ATP failed to disclose a "material change" in its business when it was advised by Greenhill on or just after January 11, 2013 that its accretive acquisition growth plan could not be executed as planned and various scenarios, including a dividend cut, should be considered.

[34] The defendants rely on their own fact affidavits and expert reports, board meeting minutes and boxes of related ATP corporate material and documentation as described above. The defendants' argument, in essence, is that the February 28, 2013 dividend cut was the result of a reasoned board decision that considered the changed financial circumstances, discussed various available scenarios and concluded that it made business sense to effect an immediate dividend cut that could remain in place over the next five years, even though there was enough cash on hand to maintain the $1.15 dividend for one or more years. The defendants are adamant that what was said in the November 5, 2012 press release and the November 6 earnings call was true. No misrepresentations of any kind were made during the class period, whether by assertion or omission. Nor were any material changes not disclosed.

[35] To assist with the legal analysis that follows below, I think it important to set out a factual narrative of the events leading up to the February 28, 2013 dividend cut. I will then decide whether the defendants made any misrepresentations or failed to disclose material changes and whether the motion for leave should be granted.

(7) Corporate narrative

[36] I base this narrative on the detailed evidence presented by the defendants including the fact affidavits and cross-examinations of senior ATP management, the Greenhill financial advisor and an independent board member. This material provides an uncontroverted internal ATP perspective of the timeline and events in question. [page211]

[37] The narrative begins with the fact that the PPAs relating to two of ATP's more significant projects (Lake and Auburndale, both located in Florida) were expiring in July and December 2013, respectively. The expiration dates for the Lake and Auburndale PPAs had been duly disclosed in previous years.

January 2012

[38] At its annual strategy meeting on January 25 and 26, 2012, ATP's board of directors reviewed a number of cash flow scenarios with various growth assumptions. The board understood that the company had to continue to make accretive acquisitions and sell assets if it wanted to sustain the dividend past 2017. The board asked for presentations about how the company would handle the challenge presented by the expiry of the Lake and Auburndale PPAs and the reduction in cash flow when these PPAs expired. Because the company had managed a similar challenge in 2008 when the PPA for Onondaga (another significant project) had expired, the board believed the company would be able to manage these challenges in 2013 as well. The company remained committed to a growth strategy.

[39] In its 2011 10-K, released on February 27, 2012, ATP reported that Lake and Auburndale would continue to generate cash flow after their existing PPAs expired, "but at significantly lower levels".

June 2012

[40] On June 22, 2012, the board met and reviewed updated scenarios that showed that ATP would have positive ending cash balances in each year until either 2015 or 2016, even without accretive acquisitions. The board confirmed the importance of enhancing cash flow by making new accretive acquisitions and selling assets. The company's MD&A for Q2 2012 updated the risks relating to the expiry of PPAs generally and specifically noted the risks relating to the expiry of the Lake and Auburndale PPAs:

Our revenue and cash flows may be reduced upon the expiration of our power purchase agreements . . . Our current projects that have PPAs expiring in the near term are Kenilworth, Greeley, Gregory, Lake and Auburndale. When a PPA expires or is terminated, it is possible that the price received by the project for power under subsequent arrangements may be reduced and in some cases, significantly . . . We believe that the pricing for PPA extensions for some of our projects, such as the Auburndale and Lake projects whose PPAs expire in 2013, will be substantially lower than the current PPAs. [page212]

[41] The analysts covering ATP reported that the company might have to reduce its dividend if it could not generate sufficient replacement cash flows from new acquisitions to offset what would be lost from Lake and Auburndale. For example, CIBC reported on August 8, 2012 that "dividend sustainability will continue to challenge the company through 2014 as Atlantic contends with its PPA/contract expires for its Florida-based Auburndale and Lake project". RBC reported that because of "the uncertainty regarding the post-PPA economics of Lake and Auburndale, we believe investors should wait for improved visibility . . . before building a position". TD Bank stated on August 9, 2012 that it believed "that the market will continue to focus on the Auburndale and Lake re-contracting in relation to the security of the company's dividend".

[42] The connection between reduced cash flow and risk of reduced dividends was also understood by investors. According to the uncontroverted evidence of independent director Ladhani, ATP conducted perception studies and held conversations with investors about their views about the company. From the comments received, the company believed that investors understood that the expiry of the Lake and Auburndale PPAs created a risk to the company's cash flows and thus to its dividend.

September 2012

[43] On September 19, 2012, the board reviewed and discussed scenarios setting out the kinds and quantity of acquisitions that would be needed to offset the cash flow losses from the Lake and Auburndale projects. The meeting ended with the board again committed to continuing the company's efforts to execute on a growth strategy that would allow it to maintain the $1.15 dividend level.

[44] Following the September board meeting and well into the fall, ATP continued with its growth strategy. It submitted a bid to purchase two assets from General Electric; amended its senior credit facility to facilitate the acquisition of late stage development/construction projects and to accommodate the possible sale of the Florida projects; and continued its efforts to negotiate the acquisition of the Ridgeline facility which had started earlier in the year. Ridgeline was important because it had three projects in Idaho (with 20-year PPAs in place), a portfolio of 20 potential wind and solar projects and a skilled development team.

[45] Meanwhile, ATP was routinely receiving proposals from investment banks such as Greenhill & Co. Senior management met with Greenhill on October 17, 2012. Greenhill suggested [page213] a new approach -- that ATP should be making acquisitions outside the "independent power generation" space in the midstream or downstream sectors of the energy market. The uncontroverted evidence of senior management and Greenhill's managing director, Mr. Randolph, was that Greenhill believed it could assist ATP in successfully executing its growth strategy.

November 2012

[46] On November 5, 2012, ATP released its Q3 2012 financial disclosure. Part of that disclosure included the company's Q3 2012 financial statements. The financial statements contained historical information and, consistent with GAAP, made no forecasts or projections about future dividends.

[47] The Q3 2012 financial disclosure also included the Q3 MD&A. As was the case with previous management reports, the Q3 2012 MD&A made specific disclosures about the risks to revenues and cash flows due to the upcoming expiration of the Lake and Auburndale PPAs and incorporated by reference the risk disclosures set out in the 2011 10-K: that the payment of dividends was not guaranteed and that they could be reduced or eliminated. Also included in the MD&A was this statement: "We believe existing cash, cash equivalents and marketable securities and funds generated from operations should be sufficient to meet our working capital and capital expenditure requirements, and meet our obligations for the next 12 months."

[48] The Q3 2012 financial disclosure included the news release of November 5, 2012, which reported that even if ATP was able to obtain renewals for the Lake and Auburndale PPAs they would likely not contribute more than $4 million per year to the company's cash flows, confirming again that substantial reduction to cash flows could be expected.

[49] The news release also described a future scenario in which the reductions from Lake and Auburndale would be partially offset with increased cash flow from three other projects and stated, based on the growth assumptions the company was then making, that there would be additional contributions from acquisitions and dispositions to "further support the company's continued ability to pay its dividend". The news release duly identified these statements about the future as forward-looking statements that involved risks and uncertainties and "should not be read as guarantees of future performance or results".

[50] On November 6, 2012, ATP's senior management participated in an earnings call. The telephone conference began with CEO Welch stating that any forward looking-statements [page214] made on the call were subject to the qualifications in the company's written disclosure (which warned that such statements involved risks and uncertainties and were not guaranteed). Mr. Welch again pointed out the decreased cash flow the company would experience due to the expiry of the Lake and Auburndale PPAs. He reviewed the company's expectations about how the decreased cash flow might be offset, the possible sale of these projects and the possible sources of new cash flow that might result from the implementation of the growth strategy the company was following. After explaining ATP's cash flow projections and growth assumptions, which involved the company being able to make future accretive acquisitions at a particular rate, Mr. Welch said this: "For all these reasons taken together, we're confident in our ability to sustain the dividend level."

[51] Shortly after the earnings call, National Bank reported as follows:

While we do not expect a dividend cut through 2013, we expect investors will grow increasingly concerned surrounding ATP's dividend sustainability post 2013, until ATP secures additional accretive growth through acquisition, disposition or development. Of note, ATP has acquired $2.5 billion in projects / assets over the past few years and "expects, based on its growth assumptions, that there will be additional contributions from acquisitions and dispositions, which are expected to further support the company's continued ability to pay its dividend". However, we do not expect the market to be so rewarding for unconfirmed growth prospects.

[52] Other analysts also questioned the sustainability of the company's current dividend. TD Securities said this: "We question the sustainability of the current dividend, given our high payout ratio forecast and a lack of transparent growth prospects beyond current development projects." RBC Capital Markets issued a report using headlines that read "Significant Accretive Acquisitions Required to Sustain Dividends" and "We Remain Cautious Due to Dividend Uncertainty." The RBC report urged investors to "stay on the sideline until there is better dividend visibility" and concluded that "there could be further downside if Atlantic Power does not announce significant accretive acquisitions over the next year".

[53] On November 8, 2012, ATP's share price dropped 19 per cent, from $14.79 to $12.02. ATP senior management and board members believed that the share price drop would be temporary and that the company had to execute on making acquisitions to address the market's concerns.

[54] On November 9, 13 and 15, 2012, the board discussed the acquisition of Ridgeline and the contributions that it could make to ATP's cash flows and decided to proceed with the acquisition. [page215] Because of the drop in share price, the board agreed to fund the Ridgeline acquisition with a debt offering of convertible debentures for CDN$100 million. The transaction closed on December 31, 2012.

December 2012

[55] On December 3, 2012, ATP issued a prospectus for the offering of the Series D convertible debentures due 2019 (the "Series D debentures"). The prospectus stated that dividends were not guaranteed and referred to and incorporated the risk disclosure that had been included in the company's 2011 10-K and in the 10-Qs for 2012. The CDN$100 million raised from the offering of the Series D debentures was used mainly for the Ridgeline transaction. The prospectus stated in two places that "the primary risk that impacts our ability to continue paying dividends at the current rate is the operating performance of our projects and their ability to distribute cash to us after satisfying project-level obligations".

[56] On December 7, 2012, the board reviewed and approved a budget for 2013 that continued the payment of the $1.15 dividend for 2013. The board also directed senior management to prepare material for the upcoming strategy meeting that would facilitate a discussion about the company's objectives as a dividend paying company and its overall dividend policy.

[57] On December 14, 2012, ATP formally engaged Greenhill to help develop and provide advice on strategic and business alternatives. The engagement agreement provided that Greenhill was to be paid a fixed fee of $100,000 plus expenses but would be compensated beyond this amount if it successfully identified acquisition opportunities that were closed by ATP. According to Greenhill, it still believed at this point that accretive acquisitions could be made.

[58] By mid-December 2012, it became clear the Lake and Auburndale PPAs would not be renewed. As a result, on December 28, 2012, ATP announced it would be recognizing a US$50 million non-cash impairment charge to the value of the Lake project in the fourth quarter of 2012 and filed a material change report.

January 2013

[59] In early January 2013, in preparation for the board's annual strategy meeting, CFO Ronan asked ATP's treasurer to develop cash flow forecasts. Because the board wanted to consider a wide range of scenarios, the forecasts included scenarios that projected dividend cuts of 50 and 70 per cent, and [page216] also scenarios that assumed a recovering share price and no dividend cuts.

[60] By mid-January, ATP's share price had still not recovered even after the announcement confirming the company's acquisition of Ridgeline and the commencement of commercial operation at the Canadian Hills project. On or just after January 11, 2013, Greenhill advised ATP that its cost of capital was too high (and was not improving) and that Greenhill no longer believed that a sufficient number of accretive acquisitions could be made to meet ATP's growth targets and assumptions. The uncontroverted evidence of Greenhill's managing director (Mr. Randolph) is that, "between roughly January 11 and 24, 2013 it became apparent that after the company satisfied its debt obligations and paid its common shares dividend, it would not be generating enough cash flow to fund potential growth opportunities involving capital expenditures and acquisitions".

[61] On January 24 and 25, 2013, the board met and considered different projections based on growth and non-growth scenarios and the opportunities for continuing to pursue the growth strategy through new acquisitions and organic growth. The board also agreed to retain Greenhill to study the issues discussed at the January strategy meetings and develop a recommendation for the company's strategic direction and dividend policy.

[62] At the end of January 2013, ATP announced the sale of the Florida assets, including Lake and Auburndale, for US$136 million. The sale proceeds were in line with the company's expectations.

February 2013

[63] On February 1, 2013, ATP formally amended its engagement letter with Greenhill to include the provision of dividend advisory services. From February 1 to February 19, 2013, Greenhill, ATP management and two directors (Ms. Ladhani and Mr. Duncan) developed scenarios and sensitivity analyses to test different growth assumptions, leverage (i.e., debt) and dividend levels. The company also had to begin preparing for the release of the 2012 10-K at the end of February. ATP management drafted material describing a possible dividend reduction so that the company would be ready to finalize the 2012 10-K and related disclosures in the event that a decision was made to change the company's strategy and dividend policy. The different scenarios prepared with Greenhill included a "status quo" scenario that assumed no acquisitions [page217] but provided for asset sales. It showed that the $1.15 dividend level could be maintained into 2016.

[64] During the weekend of February 9 and 10, 2013, Greenhill's Randolph called CEO Welch and advised him, based on dividend scenarios of $1.15, $0.75 and $0.55 that ATP "still would be exceeding its distributable cash levels in 2014" and that ATP "should consider testing larger dividend reductions". According to Mr. Randolph's evidence (again uncontroverted), it was in "the following week" that Greenhill and ATP began modelling scenarios "that contemplated a reduction of the annual dividend to $0.45 and $0.40 per common share".

[65] On February 18, 2013, the board met by phone to preview the scenarios that would be discussed at the February 25 board meeting. On February 25, the board met in person to review the 2012 financial year-end that would be released on February 28, discuss the additional analysis prepared by management and Greenhill, and draft disclosure language that could be used if the board decided to reduce the dividend. The board made no decisions at this meeting. It wanted to review further sensitivity analyses that focused on the company's financial covenants.

[66] On February 27, 2013, the board met again to discuss the additional sensitivity analyses. The uncontroverted evidence of independent director Ladhani is that it was during this February 27 conference call that it became apparent "for the first time" that "the Board members were prepared to reduce the dividend to an annualized level of $0.40 per share". However, as Ms. Ladhani put it, "The Board decided . . . to take one evening to reflect on the analysis and discussions that were being made."

[67] On February 28, 2013, following the close of business, the board met again by conference call and decided to reduce the dividend to $0.40 per share. The decision was immediately announced to the market as part of the company's 2012 year-end financial disclosure that was released the same day.[^29] [page218]

[68] The gist of this corporate narrative is summarized by CFO Ronan and Greenhill's Randolph. Here is how they viewed the key events. First, CFO Ronan:

As of November 5 and 6, 2012, the company believed that it could maintain the dividend through a combination of sources that would offset the significant cash flow reductions it expected to experience. These sources included cash flows from Orlando in 2014, new cash flow from Canadian Hills and Piedmont in Q4 2012 as these projects commenced commercial operations, sales and new acquisitions. Unfortunately, through Q4 2012 and Q1 2013, it became apparent the company could not implement its planned growth strategy in terms of both scale and accretiveness. It was only then after a careful and deliberate review of the company's strategy, objectives and new forecasts based on new assumptions with the benefit of advice from its financial advisor, Greenhill, that management and the Board decided the dividend should be reduced. That decision was communicated to the market immediately after it was made on February 28, 2013.

[69] And Greenhill's Randolph:

At the time of our engagement in December, 2012, I believed it was worthwhile to work with the company to search for acquisition opportunities that would leverage the company's experience, allow it to enter different sectors of the energy industry and be accretive to its shareholders. Over time, as our analysis progressed, we became less optimistic about the likelihood of finding acquisitions that would achieve Atlantic Power's objectives. Eventually our work shifted in mid to late January, 2013 towards a more targeted analysis of the company's dividend policy which appeared to be unsustainable over the long term. This work culminated in management's recommendation to the Board that it approve a reduction of the annual dividend to $0.40 per common share. In his phase of Greenhill's engagement, we worked with management to develop options for a sustainable dividend policy that could be managed for at least five years. In my opinion, management's ultimate recommendation to the Board was consistent with and supported by the analyses that were performed and was the product of a deliberate and thorough process of review conducted by management.

[70] This completes the summary of the events and decisions leading up to the February 28, 2013 dividend cut. With this uncontroverted corporate narrative as backdrop, I can now consider the allegations of misrepresentation and failure to disclose a material change, and whether any of these allegations have a reasonable possibility of success at trial. In doing so, however, it is important to note that there is no evidence that ATP's management or board or their financial advisor, Greenhill, did not [page219] believe what they were saying. It is also important to understand that the issue on this leave motion is not whether ATP's management or board behaved reasonably or unreasonably, competently or incompetently. The issue is whether the plaintiffs have established a reasonable possibility of demonstrating at trial that misrepresentations (by assertion or omission) were made or that material changes were not disclosed, such that leave should be granted.

(8) Analysis

[71] I will consider each of alleged misrepresentations in turn and will do so by discussing the impugned document or event -- namely, the Q3 2012 financial disclosure; the Q3 2012 MD&A; the November 5, 2012 news release; the November 6, 2012 earnings call; the Series D debentures prospectus; the two material change reports; and the alleged non-disclosure of a material change arising out of Greenhill's advice on or just after January 11, 2013. I will complete the analysis by considering the key notes and e-mails relied on by the plaintiffs.

[72] My conclusion, as explained in detail below, is that no misrepresentations were made, whether by assertion or omission; nor were any material changes not disclosed.

[73] I have therefore no difficulty concluding that there is no reasonable possibility that any of the allegations levelled at the defendants would succeed at trial. The motion for leave will therefore be dismissed.

The Q3 2012 financial disclosure and MD&A

[74] The Q3 2012 financial statements are a core document.[^30] They contained historical statements and, consistent with GAAP, made no forecasts or projections about future dividends. I can find no misrepresentations whether by assertion or omission. Almost all of the plaintiffs' criticism is directed at the MD&A.

[75] The Q3 2012 MD&A, also a core document, disclosed that ATP expected to experience a significant reduction in cash flow beginning with the expiry of the PPAs at Lake and Auburndale. The MD&A also reiterated that dividends were not guaranteed and could be reduced or eliminated, and reaffirmed [page220] the connection between cash flow and dividend level. The MD&A contained no guarantee, assurance, opinion or other statement that the $1.15 dividend would continue in the future. I find that the Q3 2012 MD&A contained no misrepresentation by assertion.

[76] Nor do I find any misrepresentation by omission. Recall the definition: "An omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in the light of the circumstances in which it was made."[^31]

[77] As the narrative shows, there is no evidence that on or about November 5, 2012 either ATP management or board members believed (to track the language of the plaintiffs' alleged omission) that ATP "did not have and would not receive sufficient Cash Available for Distribution to sustain its then level of dividends". On the contrary, ATP was confident that its accretive acquisition plan would succeed and sustain the $1.15 dividend level. The connection between cash flows and dividend levels was understood, as was the risk that the reduced cash flows from the Lake and Auburndale PPAs could affect the dividend level.

[78] In my view, the failure to state that the accretive acquisition target was in the range of $600 to $800 million was not an omission of "a material fact that is required to be stated".^32 This was not an unusually large number -- ATP had made $3.3 billion in accretive acquisitions over the previous three and a half years. Also, the $600 to $800 million amount was explicitly discussed by CEO Welch in the earnings call the next day.

[79] If I am wrong on this point and ATP should have disclosed the $600 to $800 million amount in the November 5 MD& A rather than doing so in the November 6 earnings call, I would still conclude, given the explicit discussion on November 6, that all of the elements of misrepresentation by omission (in particular, damages) have not been established -- and thus there is no reasonable possibility that this alleged omission in the MD&A would succeed at trial.

[80] During the hearing of this motion, counsel for the plaintiffs focused on the following statement in the MD&A:

We believe existing cash, cash equivalents and marketable securities and funds generated from operations should be sufficient to meet our working capital and capital expenditure requirements, and meet our obligations for the next 12 months. [page221]

[81] This was not an untrue or misleading statement. ATP had sufficient cash to pay the dividend, even if no further acquisitions were made, "for the next twelve months" and beyond. Indeed, future dividends were not a corporate obligation and the ATP never described them as such, emphasizing instead that dividends were discretionary and not guaranteed. At law, the decision of a board to declare a dividend is discretionary, and only declared and unpaid dividends are an obligation.[^33]

[82] In short, I agree with the defendants and their experts that the Q3 2012 MD&A provided a review of the important trends and risks that had affected the financial statements or were reasonably likely to affect them. I also note that the plaintiffs' expert, Mr. Torchio, agreed that the analysts understood from the Q3 2012 financial disclosure that there was going to be a dividend cut if accretive acquisitions were not made, even if they did not know the size of the cut or its timing.

The news release and earnings call

[83] The 11-page November 5, 2012 news release, as already noted, contained project updates (including Lake and Auburndale), financial analyses, dividend payout ratios and forward-looking statements that were duly qualified by the required cautionary language. Under the heading "Outlook", ATP said this: "The Company expects, based on its growth assumptions, that there will be additional contributions from acquisitions and dispositions, which are expected to further support the Company's continued ability to pay its dividends."

[84] I can find no misrepresentations in the November 5 news release, either by assertion or omission. The point made earlier about the failure to mention the $600 to $800 million acquisition plan in the Q3 MD&A applies with equal force to the news release.

[85] There were also no misrepresentations in the November 6 earnings call. After providing a financial and projects update, CEO Welch discussed the company's cash flow projections and growth assumptions, which involved making some $600 to $800 million in future accretive acquisitions. He noted that, "We're very comfortable with how many deals we need to do in relation to the market for deals that are out there." He also said that ATP expected to target "a combination of operating projects as [page222] well as development construction stage projects". He then said this: "For all these reasons taken together, we're confident in our ability to sustain the current dividend level."

[86] This was not an untrue or misleading statement. In early November 2012, senior ATP management believed that the dividend level could be sustained in large part through accretive acquisitions, just as was done in previous years. There is no evidence to the contrary -- that is, there is no evidence that CEO Welch was not telling the truth on November 6 when he expressed confidence "for all of these reasons taken together" that the $1.15 dividend could be sustained.

[87] As was shown in the narrative set out above, senior management's level of confidence in the accretive acquisitions strategy changed as circumstances changed over the next several months. Executive VP Rapisarda summarized the changed circumstances as follows:

• the decline in the company's share price and the corresponding increase in its cost of capital. If the share price had not fallen, or had recovered as management and the board expected, the company's prospects for acquisitions after November 6, 2012 would have been different and better;
• the timing and terms of the sale of the Lake and Auburndale projects;
• the delay in Piedmont commencing commercial operations;
• the fact that the company had to finance the balance due on the Canadian Hill's construction loan on December 22, 2012;
• the company did not retain Greenhill until December 2012 because it was focused on amending its credit facility, closing the tax equity financing for Canadian Hills and releasing its Q3 2012 financial disclosure; and
• the completion of Greenhill's analysis in mid-January indicating that ATP would not be able to complete a certain significant acquisition (Niska Gas Storage) because it would not be sufficiently accretive to the company's cash flows.

[88] I will deal later in these reasons with the January and February time period. All that need be said now about the November 6 earnings call is that (again) there was full disclosure of the Lake and Auburndale situation, the reduced cash flows and the risk to dividend levels. It was obvious to all concerned that if $600 to $800 million in accretive acquisitions [page223] could not be made as anticipated, the current dividend was likely not sustainable.

[89] During the hearing, I asked plaintiffs' counsel what more should CEO Welch have said in the earnings call. Counsel responded that Mr. Welch should have said (1) that ATP had no (accretive acquisition) targets in the pipeline; and (2) that he was not confident that they could sustain the dividend level. But in my view, based on the evidence before me, neither of these statements would have been true. The evidence indicates (1) that in early November, ATP had numerous targets in their acquisition pipeline[^34] and (2) that CEO Welch and ATP senior management, supported by the board, believed that their accretive acquisition growth plan would indeed sustain the dividend level -- at least there is no evidence to the contrary. The plaintiffs' suggestion as to what CEO Welch "should have said" is therefore not supported by the evidence.

[90] In short, I have no difficulty concluding that there is no reasonable possibility that the allegations of misrepresentation in the November 6 earnings call, whether by assertion or omission, would succeed at trial.

The s. 138.4(1) issue

[91] There is a further reason why the allegations relating to the news release and earnings call cannot succeed. The OSA distinguishes, for secondary market liability purposes, between core documents on the one hand, and non-core documents and oral statements on the other, prescribing different liability standards for each.[^35] For non-core documents and oral statements, as s. 138.4(1) makes clear, the plaintiff must prove that the person sued knew the statement contained a misrepresentation, deliberately avoided such knowledge or was guilty of gross misconduct in making the misrepresentation.[^36] [page224]

[92] Since the statements were believed to be true, there can be no liability. There is no reasonable possibility that the plaintiffs can show at trial that ATP senior management knew that what was said in the news release or in the earnings call was not true; or that they deliberately avoided such knowledge; or that, in making the impugned statements, they were guilty of gross misconduct.

[93] The uncontroverted evidence before me is that as of November 5 and 6, 2012, the company was committed to its growth strategy as a way to sustain the dividend. Even if ATP was ultimately unable to achieve its growth objectives, this does not mean the statements made in either the news release or the earnings call were known to be false at the time they were made. The uncontroverted evidence also shows that the company's ability to achieve its projections deteriorated through the class period as its share price fell and the cost of capital increased with no apparent prospect for improvement.

[94] The question, as already noted, is not whether senior management acted reasonably or unreasonably, competently or incompetently, but whether any misrepresentations were made. In my view, no misrepresentations were made.

The debenture prospectus

[95] The plaintiffs argue that the December 6, 2012 Series D debenture prospectus was misleading because it stated (in two different places) that "the primary risk that impacts our ability to continue paying dividends at the current rate is the operating performance of our projects and their ability to distribute cash to us after satisfying project-level obligations". The plaintiffs say this was false and misleading because it was the risk of not completing acquisitions that put the dividend at risk.

[96] But there is nothing in the impugned statement that limits the focus to existing projects and precludes additional acquisitions. There is nothing untruthful or misleading in saying that the primary risk to dividends "is the operating performance of our projects and their ability to distribute cash". I can find no misrepresentation by assertion in the debentures prospectus.

[97] The plaintiffs then say that the prospectus contained a misrepresentation by omission. But the prospectus itself makes no statements about the payment of future dividends, except to emphasize that dividends are not guaranteed. It also incorporates the company's 2011 10-K and the Q1, Q2 and Q3 2012 10-Qs by reference. Hence, for the reasons set out above, I agree with the defendants that there is no reasonable possibility the [page225] plaintiffs will establish at trial that the debenture prospectus contained any misrepresentations by omission.

The two material change reports

[98] The plaintiffs impugn the "material change reports" that ATP filed on December 28, 2012 and February 1, 2013. The first report disclosed that a $50 million non-cash impairment charge relating to the company's interest in the Lake project (and the non-renewal of its PPA) would be written off in Q4 2012. The second report disclosed the sale of Lake and Auburndale.

[99] There were no misrepresentations in either of these documents, whether by assertion or omission. Neither of the reports discussed dividends or risks to dividends because neither was intended or required. The disclosures in these two reports are clear and to the point. If the plaintiffs are alleging that the February 1 report should have included a further material change, namely, the information received from Greenhill in mid-January that the accretive acquisition plan could not be implemented, then it is best to deal with this allegation separately.

Greenhill's mid-January conclusion

[100] On or just after January 11, 2013, Greenhill advised ATP that the company's cost of capital was too high and that Greenhill would not be able to assist the company in executing an accretive acquisition plan that would sustain the existing dividend. The plaintiffs say this was a "material change" that should have been disclosed forthwith.

[101] The OSA defines a "material change" as "a change in the business, operations or capital of the issuer that would reasonably be expected to have a significant effect on the market price or value of any of the securities of the issuer".[^37] The focus is not on material information that could reasonably be expected to affect share price -- if that were the case, then the Greenhill information should arguably have been reported. The triggering criterion is a material change "in the business, operations or capital of the issuer".

[102] The plaintiffs focus primarily on the word "business" not "operations or capital". I am mindful of the admonition of the Ontario Securities Commission in Coventree Inc. (Re)[^38] that "one should not take a supercritical or technical approach to the [page226] interpretation of what constitutes a change in the business or operations of an issuer for purposes of the definition of aematerial change' in the Act". And I do not do so.

[103] The receipt of Greenhill's (obviously negative) prognostication, that the planned accretive acquisitions strategy could not be achieved and that ATP should focus on reducing its leverage, did not amount to a material change in ATP's business. Nor did the possibility, even probability, that ATP would not be able to sustain the $1.15 dividend level amount to a material change. ATP's business was owning and operating power projects throughout North America. ATP was and remained a power generation company. It is true that a primary corporate objective, as already noted, was to "increase the value of the company . . . to focus on the dividend payout to shareholders". But it is also true, and it was made clear repeatedly over the years in the company's public disclosures, that dividends were discretionary. They were not guaranteed and could be reduced or eliminated at any time.

[104] In other words, by no stretch of the imagination can it be said that the "business" of ATP was paying a $1.15 dividend. The Greenhill prognosis, if accepted by management, could very well have led to a dividend cut, but it did not constitute a material change in ATP's business. The company continued to own and operate power generating facilities -- and, as it turned out, also continued to pay dividends.

[105] Consider the applicable case law. In Rex Diamond Mining Corp. (Re),[^39] the Ontario Securities Commission found that a material change occurred in the diamond company's business when it was legally unable to access its mining properties in order to extract diamonds.

[106] In Coventree Inc. (Re),[^40] the capital markets company was no longer able to issue commercial paper (through its conduits) which was a primary source of its revenue and a crucial aspect of its business. This inability was found to be a material change because the securitization company was no longer able "to carry on its principal business".[^41]

[107] ATP, however, was able to carry on it principal business as a power generation company and continued to do so. Greenhill's mid-January prognosis about the viability of the planned [page227] growth strategy was obviously considered by ATP. But note that even after receiving the Greenhill opinion, the board continued to review updates on potential acquisitions.[^42] It was only after Greenhill was retained to advise on dividend scenarios and the board fully reviewed the various possible options that a decision was made (a month and a half later on February 28) that the dividend should be cut by 65 per cent.

[108] The Greenhill advice did not constitute a change or decision to implement a change. The board was entitled to consider corporate strategy and the opinions of its advisors and management and then use its own judgment. The evidence is incontrovertible that it did so between the date of Greenhill's January advice and end of February decision. During this period, ATP continued to pay the $1.15 dividend and could have decided to do so through 2014 and perhaps even 2015; it entered into a further engagement with Greenhill to advise on various dividend scenarios, including maintaining the status quo; it considered further growth opportunities; and it only came to a decision on February 28, 2013. Greenhill's January advice did not pre-ordain any decision and it did not constitute a change in ATP's business.

[109] Nor is there any basis for the submission that ATP was obliged to provide a formal warning that the dividend may be reduced. It is true that some companies on occasion have provided such "pre-disclosure" but the actual data (provided by one of the plaintiffs' own experts) shows that 77 per cent of companies do not do so.

[110] In sum, the mid-January Greenhill opinion did not result in a material change to ATP's business as a power generation company. Thus, there was no need to file a material change report. And there is no possibility, and certainly no reasonable possibility, that the plaintiffs can show otherwise at trial.[^43] [page228]

The notes and e-mails

[111] The plaintiffs' case on this motion for leave is based largely on (1) the reports of their experts who reviewed publicly available information and concluded that ATP should have known as early as November 5, 2012, when the Q3 financial information was released, that the $1.15 dividend was not sustainable; and (2) various intra-corporate notes and e-mails that were presented to this court to support the same point. I have reviewed the evidence relating to the former and I have concluded, as set out above, that no misrepresentations were made and no material changes not disclosed. I will now deal briefly with the impugned notes and e-mails.

[112] My conclusion is that none of the e-mails and notes discussed below -- whether separately or in combination -- alter my overall finding that no misrepresentations were made and that there is no reasonable possibility of showing otherwise at trial. I will now consider each of the items in turn.

[113] I begin with the June 27, 2012 e-mail from director Ken Hartwick (sent at the urging of the board) to CEO Welch asking, inter alia, about the company's "dividend policy (increase, decrease) under various strategic scenarios" and the plan to stay competitive on acquisitions given its cost of capital. Mr. Welch forwarded the message to Mr. Rapisarda and CFO Donahue (Mr. Ronan's predecessor) with the following comment: "The note below is full of interesting questions and a fair amount of uncertainty/anxiety."

[114] The plaintiffs say this is evidence that the entire board was anxious about the company's dividend policy in June 2012, months before the Q3 2012 financial disclosure. Several points are clear from the evidence, again uncontroverted. First, it was CEO Welch who used the word "anxiety" not Mr. Hartwick. Second, as independent director Ladhani stated on her cross-examination, the board was not "anxious" in June 2012. Indeed, at the September meeting it reviewed a range of scenarios and remained committed to making acquisitions and maintaining the dividend; and in December, approved the company's 2013 budget that provided for the continued payment of the $1.15 dividend. Ms. Ladhani also suggested that Mr. Welch may have used the words "anxiety" and "uncertainty" because the board was accelerating the discussion about the upcoming strategic [page229] review, which would be covered again in the annual strategy meeting in January 2013.

[115] Third, the board met on September 19, 2012 to consider the very questions in Mr. Hartwick's e-mail and to review different scenarios for the company's future, including scenarios concerning possible dividend reductions effective January 1, 2014. The meeting concluded with the board and management both committed to maintaining the existing dividend level and pursuing the company's growth strategy. All of this evidence remains uncontroverted. This first e-mail adds nothing to the plaintiffs' allegations of misrepresentation or of failing to disclose a material change.

[116] The second e-mail dated November 6, 2012 is the exchange between ATP's corporate controller and its treasurer. The corporate controller writes, "Dividend cut in 2014 from all the analyst reports I have seen so far this morning" and the treasurer responds, "Everyone see's [sic] it but our management."

[117] The plaintiffs say this e-mail exchange between the two financial officers (neither of whom were members of senior management) shows that senior management and the board should have known in early November that the $1.15 dividend was not sustainable. However, if anything, this e-mail exchange reinforces the fact that senior management rightly or wrongly (but sincerely) believed on November 5 and 6, 2012 that a dividend reduction would not be necessary, even in 2014. The treasurer and corporate controller are certainly entitled to speculate about the need for or the timing of a dividend cut. But neither of them was privy to the discussions of senior management or the board of directors that, on uncontroverted evidence, demonstrate a decided commitment, from early November 2012 to well into January 2013, to continue the accretive acquisition strategy and maintain the $1.15 dividend. This particular e-mail exchange, in my view, does not assist the plaintiffs.

[118] Next is a handwritten note from a post-November 6 conference call with BMO and TD discussing the December (debenture) public offering. The note, written by CFO Ronan, consists of seven words: "no benefit to signaling cut in advance". No further information is available. Was this a comment made by Mr. Ronan or by someone else? Was it something someone said out loud or just thought? The note was not put to Mr. Ronan or any other witness on cross-examination. In any event, the evidence is uncontroverted that the business plan in November and December was growth via strategic acquisitions and not dividend reduction. (Hence the December debenture offering to [page230] finance the Ridgeline acquisition.) The evidence is also uncontroverted that no decision was made to cut the dividend until February 28, 2013. The isolated Ronan note, albeit interesting, does not, without more, provide a meaningful contribution to this court's review of the evidence.

[119] The plaintiffs refer to a February 4, 2013 e-mail from an ATP investor relations associate. The e-mail states that the associate and CFO Ronan were not confirming their attendance at a Morgan Stanley conference "until we have a better sense of timing on our announcement of a divi [sic] cut". The plaintiffs say this is evidence that the defendants knew the dividend was not sustainable. It is certainly evidence that in early February 2013, senior management (and no doubt those working with them) were alive to the possibility, and perhaps even probability, of a dividend reduction. Greenhill had just been retained to provide dividend advisory services and the board was preparing for the end-of-February financial disclosure.

[120] However, as already noted, the evidence is uncontroverted (recall again the evidence of independent director Ladhani) that the decision to cut the dividend from $1.15 to $0.40 was made by the board on February 28, 2013. The fact that in early February, some or all of senior management believed that the $1.15 dividend was probably not sustainable did not amount to a material change in the company's business, as I have already discussed. Nor does this e-mail add anything of value to the plaintiffs' allegations of misrepresentation.

[121] The final e-mail is a March 1, 2013 e-mail from Mr. Coleman, a member of ATP's commercial development team, who made the following comment about the dividend cut that was announced the day before. He said that he "knew it was coming for a long time". But Mr. Coleman was not a member of senior management. He did not participate in any of the discussions between the board and senior management in reviewing the company's strategy in 2013. Mr. Coleman was obviously entitled to his opinion and in a company dealing with cash flow issues, opinions will differ.

[122] My concern is whether there is a reasonable possibility that the plaintiffs can show at trial that ATP knew or should have known before February 28 that the dividend would be cut and then misrepresented this knowledge. The evidence is uncontroverted that the dividend decision was not made until February 28, 2013, and there is no evidence that the ATP board should have known any earlier that this would be their decision. Recall that the plaintiffs' experts suggesting otherwise base their assertions and opinions on publicly disclosed corporate [page231] information and nothing more. Mr. Coleman's e-mail tells me what a member of the company's commercial development team (not senior management) may have actually thought or thought in hindsight, but none of this adds anything to the "reasonable possibility" analysis.

(9) Conclusion

[123] I have now completed "a reasoned consideration of the evidence to ensure that the action has some merit" as required by the Supreme Court in Theratechnologies.[^44] And my conclusion is this. I am not persuaded that the allegations of misrepresentation or non-disclosure of a material change have a reasonable possibility of success at trial.

[124] ATP disclosed and the market understood that cash flows would be reduced due to the expiration of the Lake and Auburndale PPAs and this could affect the dividend level unless the company made accretive acquisitions to replace the lost cash flow. Senior management expressed confidence that the growth plan would be successful and the current dividend level would be maintained. The board agreed and approved a budget for 2013 that continued the $1.15 payment.

[125] The evidence is unchallenged that as of November 6, 2012, the defendants believed that ATP would continue to pay the $1.15 dividend, had the ability to do so for one or more years even without future acquisitions, and was committed to a growth strategy aimed at accretive acquisitions.

[126] It was only at the end of February 2013, after a detailed and careful review of the significantly changed circumstances and the various available options that the board decided to cut the dividend to a level that could be maintained over the next five years.

[127] There were no misrepresentations by assertion or omission, and no material changes that were not disclosed. There is no reasonable possibility that the plaintiffs can show otherwise at trial.

[128] The motion for leave under s. 138.8 of the OSA is dismissed.

II. The Certification Motion

(1) Scope and content

[129] Even though the motion for leave to pursue the statutory claim for secondary market misrepresentation has been [page232] dismissed, the plaintiffs can still seek certification of the remaining claims.[^45] The remaining claims fall into two categories: the shareholder claims and the debenture-holder claims. The former category consists of shareholders who purchased ATP securities in the secondary market during the class period. The latter category consists of debenture-holders who purchased any of the company's debentures in the secondary market or the Series D debentures in the primary market via the December 2012 prospectus.

[130] The secondary market claimants (the shareholders and certain debenture-holders) advance a common law claim for negligent misrepresentation. The primary market claimants (the Series D debenture-holders) assert a statutory claim under s. 130 of the OSA and common law claims for negligence and negligent misrepresentation.

(2) The shareholder claims

[131] The apparent reason for this proposed class action was the loss allegedly sustained by the shareholders who purchased on the secondary market during the proposed class period. Hence, my decision denying leave to pursue the statutory action for misrepresentation in the secondary market (which does not require proof of reliance) will be a major setback for the plaintiffs. Indeed, I know of no securities class action that has proceeded after leave under the OSA had been denied. As Strathy J., as he then was, noted in Green, the statutory action under s. 138.3 is "tailor-made for a class action".[^46]

[132] Having lost the leave motion, the plaintiffs are now limited to the much more cumbersome common law action for negligent misrepresentation which requires proof of individual reliance -- that is, the plaintiffs will have to show that every shareholder (and debenture-holder) that purchased ATP securities on the secondary market relied on one or more of the alleged misrepresentations. This means that evidence will be needed to establish which shareholder relied on what particular misrepresentation, which misrepresentation caused what [page233] loss to whom and when did this occur? Given the highly individualized nature of the inquiry, it is not surprising that the Court of Appeal has noted that, "generally, common law negligent misrepresentation claims in securities cases are not suitable for certification".[^47]

[133] The reason for this is not because there is no reasonable cause of action under s. 5(1)(a) of the CPA or no identifiable class under s. 5(1)(b) of the CPA. Nor is it the case that negligent misrepresentation claims have never been certified in securities actions -- they have.[^48]

[134] The reason why common law negligent misrepresentation claims in securities cases are generally not suitable for certification is that the plaintiff will probably have difficulty satisfying the preferable procedure requirement under s. 5(1)(d). As Strathy J. explained in Green,[^49] a class proceeding is not the preferable procedure for resolving reliance-based claims with individual issues of causation and damages because that is a task that would be "unmanageable".[^50]

[135] Class counsel have tried to sidestep the "proof of individual reliance" problem (and, in doing so, the manageability problem) by building on the accepted proposition that individual reliance can be "inferred" from the surrounding facts or circumstances.[^51] Thus, in securities class actions, class counsel have presented expert evidence that the securities in question were trading in an "efficient market"[^52] and then used this evidence [page234] to certify a common issue that asked whether individual reliance could be inferred from these (efficient market) circumstances. In the past, some class action judges, myself included,[^53] accepted this approach and certified the question about the efficient market and inferred reliance as a common issue. Class counsel were thus able to avoid both the s. 5(1)(c) pitfall (individual assessments) and the s. 5(1)(d) pitfall (manageability).

[136] However, as I was soon to discover, this approach (inferring reliance via evidence of an efficient market) is not available in Ontario. Justice Strathy explained why in Green v. CIBC:[^54]

[T]he statutory remedy for a secondary market misrepresentation under s. 138.3 of the Securities Act was enacted, in part, due to the difficulty in proving reliance-based common law claims and the rejection in Ontario of the "fraud on the market" theory. The statutory provisions contain checks, such as the leave procedure, to ensure that the remedy is not abused and balances, such as the liability cap, to protect the corporation and its continuing shareholders from crippling exposures.

In my view, there is no authority to support the proposition that "fraud on the market" or the "efficient market" theory can supplant the need to prove individual reliance.[^55] [page235]

[137] The Court of Appeal agreed.[^56] To allow common law claims where the corporate and shareholder protections set out in the OSA leave provision are not available "would render the [statutory] remedy and the protective leave provision redundant".[^57]

[138] A few months later in Kinross,[^58] the Court of Appeal revisited the leave provision and reaffirmed that "[r]eliance is a claimant-specific issue requiring individualized evaluation and fact-finding".[^59] The Court of Appeal also noted that "the statutory action under s. 138.3 . . . was enacted in part due to the difficulty in proving reliance-based common law claims" and, quoting Justice Strathy, agreed that it was "tailor-made for a class action".[^60] In short, the Court of Appeal has closed the door (in my view correctly) to any further use of the American-based efficient market/fraud on the market theory to establish inferred reliance in a common law negligent misrepresentation claim.

[139] Thus, the plaintiffs' attempt herein -- presenting expert evidence that the ATP shares were trading in an efficient market during the proposed class period and asking that an "inferred reliance" common issue be certified -- must be rejected. If, having lost the leave motion, the plaintiffs intend to proceed with the negligent misrepresentation claim they may do so, but they will be required to prove individual reliance.

[140] I can now return to s. 5(1)(d) of the CPA and the preferable procedure analysis. My concern here is not manageability -- I agree with the observation of the Court of Appeal in Green that manageability problems can often be addressed under s. 25 of the CPA: "The trial judge may order individual trials to determine the issues of reliance and damages."[^61] My concern is the correlation between the denial of leave and the preferability analysis. As I read the decision in Kinross, the Court of Appeal made an important pronouncement: that the [page236] denial of leave for the statutory claim is a relevant factor in the preferability analysis.[^62]

[141] Recall that the question of preferability has two concepts at its core: whether the class proceeding would be a fair, efficient and manageable method of advancing the claim; and whether the class action would be preferable to other reasonably available means of resolving the claims of the class members.[^63] Recall as well that in Fischer,[^64] the Supreme Court reaffirmed that the preferability inquiry has to be conducted "through the lens of the three principal goals of class actions, namely judicial economy, behaviour modification and access to justice".[^65]

[142] In Kinross, a case where leave to pursue the statutory action was denied by the motion judge, the Court of Appeal concluded not only that the remaining common law claims of negligent misrepresentation that required individualized proof of reliance, causation and damages were inherently "unsuitable for certification"[^66] because of manageability problems, but also that a class proceeding would not be the preferable procedure for advancing the remaining common law claims.[^67] The court said it was "inappropriate to simply ignore the denial of leave for the statutory claims"[^68] and that:

The motion judge's leave decision is a relevant consideration in determining whether the class representative has demonstrated some basis in fact that a class proceeding is the preferable procedure to resolve the class members' claims. It, too, favours the conclusion that a class action is not the preferred method of advancing the common law claims in this case.[^69]

[143] The Court of Appeal made clear that where leave under s. 138.8 of the OSA has been denied because the statutory misrepresentation claims had no reasonable possibility of success and where the common law misrepresentation claims are based on the same evidentiary foundation as the statutory claims, and [page237] are thus "destined to fail",[^70] a class action is not the preferable procedure. "To permit a class action to proceed in [these] circumstances would render access to justice more illusory than real and would significantly undercut the goal of judicial economy."[^71]

[144] It is important to set out the court's reasoning in full:

[I]t has already been determined in this case that the appellants' statutory misrepresentation claims have no reasonable prospect of success at trial. This assessment of the merits was made on the basis of the comprehensive record on the leave motion. In my opinion, in the unique circumstances where 1) statutory misrepresentation claims and common law misrepresentation claims, based on the same evidentiary foundation, are combined, and 2) the former claims have been found to have no reasonable possibility of success under a statutory mechanism that is directed at access to justice, it is appropriate to consider the outcome of the leave motion for the statutory claims in the preferability inquiry regarding the common law claims. This conclusion is reinforced, in my view, by the fact that the courts have recognized that reliance-based claims are particularly unsuitable for resolution in a class proceeding.

In the case at bar, as I have stressed, numerous individual trials will be required to establish reliance, causation and damages. If a class action were to be certified, those trials would proceed against the backdrop of an existing judicial determination that the appellants' core claims of misrepresentation . . . hold no reasonable prospect for success at trial. Yet the same claim is said to warrant a class action for common law negligent misrepresentation claims grounded on the same alleged facts. In these circumstances, encumbering the parties and the courts with a complex class action that is destined to fail hardly promotes the goals of judicial economy and access to justice.

That said, I recognize that there may well be economic barriers to the pursuit of the common law claims on an individual basis. I also acknowledge that the option of individual actions to pursue securities misrepresentation claims is unappealing, costly and cumbersome. But that is precisely the access to justice impediment sought to be remedied by s. 138.3 of the Securities Act. To permit a class action to proceed in the circumstances of this case, in my view, would render access to justice more illusory than real and would significantly undercut the goal of judicial economy. The goal of behaviour modification does not alter this conclusion.[^72]

[145] The reasoning in Kinross applies here as well. I dismissed the leave motion for the statutory claims because I concluded, after reviewing the evidence, that they had no reasonable possibility of success. The common law claims rest on the same evidentiary foundation as the statutory claims. As the Supreme Court noted in Fischer, the preferable procedure [page238] analysis under s. 5(1)(d) of the CPA requires a "cost-benefit approach" that considers "the impact of a class proceeding on class members, the defendants, and the court".[^73] Encumbering the parties and the courts with a complex class action that is destined to fail promotes neither judicial economy nor access to justice. Therefore, a class action is not a preferable procedure.

[146] In sum, the shareholder claims do not satisfy the s. 5(1)(d) preferable procedure requirement and cannot be certified as a class proceeding.

(3) The debenture-holder claims

[147] Given that the shareholder claims cannot be certified as a class action, I must now consider whether the remaining debenture-holder claims can be certified as a possible sub-class or a completely separate class. The problem, however, is two-fold:

(i) Neither of the two current plaintiffs (who are shareholders only) are proper representative plaintiffs for the debenture-holders.[^74] The law is clear that a secondary market purchaser does not have a statutory cause of action for prospectus misrepresentation under s. 130 of the OSA[^75] and can advance such a claim as a representative plaintiff only if he himself has a cause of action.[^76] In other words, the proposed representative plaintiff for the debenture-holder claims should be a debenture-holder.

(ii) The action as currently constituted needs to be fundamentally reconfigured. The statement of claim has to be substantially amended or reissued and the class definition and proposed common issues completely revised to focus only on the debenture-holders. There must be a rational relationship between the class and the common issues.[^77] And, obviously, a new litigation plan must be submitted. [page239]

[148] Therefore, if class counsel (or other counsel retained by the debenture-holders) wish to reconstitute this action as a proposed class action on behalf of the debenture-holders (in the face of the evidentiary findings made herein) they have leave to do so. But two observations should be made, one positive and one negative.

[149] The positive aspect of pursuing an action under s. 130 of the OSA on behalf of the prospectus-based purchasers of the Series D debentures is that neither leave of the court nor proof of reliance is required. The negative aspect is that the court may decide that the two added common law claims of negligence and negligent misrepresentation should be collapsed, for reasons of duplication, into a single claim of negligent misrepresentation.[^78] Should this happen, there may be little to no value in certifying common law negligent misrepresentation issues, given that individual trials will still be necessary to determine the actual reliance of the debenture-holders who purchased in the secondary market.

[150] Put simply, if debenture-holders' counsel believes that there is a worthwhile and viable action here despite the evidence herein that suggests otherwise, he or she may wish to proceed with a reconstituted "debenture-holders only" class action that is limited to the statutory claim under s. 130 of the OSA.

[151] But I leave this decision to the debenture-holders and their lawyers. All I need to say at this point is that any potential class action limited to the debenture-holders must be completely reconstituted before it can be considered for certification.

(4) Conclusion on certification motion

[152] The shareholders component of this proposed class action fails to satisfy the preferable procedure requirement in s. 5(1)(d) of the CPA and thus cannot be certified. The debenture-holders component may be considered for certification if it is completely reconstituted with a proper representative plaintiff, a redefined class, revised common issues and a new litigation plan. [page240]

III. Disposition

[153] For the reasons set out above in Part I, the motion for leave under s. 138.8 of the OSA is dismissed.

[154] For the reasons set out above in Part II, the motion for certification of the proposed class action as currently constituted is dismissed.

[155] Class counsel have leave to file a reconstituted action limited to the debenture-holder claims provided that the defendants are reimbursed on a partial indemnity basis for their success on this motion.

[156] The defendants should forward brief cost submissions within 14 days and the plaintiffs within 14 days thereafter.

[157] Counsel should be aware of the costs protocol for certification motions that was set out in my 2013 costs decisions.[^79] Counsel should also note that this costs protocol does not apply to leave motions, with one qualification: if the plaintiffs intend to argue that the defendants' quantum is excessive or unreasonable (other than obvious excesses or non-compliance with the rules committee's hourly rate grid),[^80] they should consider submitting a certified copy of their own costs outline.[^81]

[158] Finally, my thanks to counsel on both sides for their assistance and for the quality of their oral and written advocacy.

Motions dismissed.

[^1]: Securities Act, R.S.O. 1990, c. S.5.

[^2]: Class Proceedings Act, 1992, S.O. 1992, c. 6.

[^3]: At the start of the class period, in addition to common shares, Atlantic Power had four classes of convertible subordinated debentures that traded on the secondary market carrying interest rates of 5.6 per cent, 5.75 per cent, 6.25 per cent and 6.50 per cent. Also, on December 3, 2012, the company raised CDN$100 million in a public offering of 6.00 per cent Series D extendible convertible unsecured subordinated debentures pursuant to a prospectus (discussed in more detail later in these reasons).

[^4]: District of Massachusetts, Civil Action No. 1:13-CV-10537-IT.

[^5]: In Re: Atlantic Power Corp. Securities Litigation, 2015 U.S. Dist. LEXIS 31166.

[^6]: I will refer to Atlantic Power Corporation by its Toronto Stock Exchange trading symbol, ATP.

[^7]: An acquisition is considered "accretive" if it adds to earnings per share.

[^8]: Jacqueline Coffin purchased 260 ATP common shares for $11.74 per share and 186 ATP common shares at $10.79 per share. Scott Fife purchased 5,500 ATP common shares at $12.75 per share. Both of the proposed representative plaintiffs held all of their shares at the close of trading on February 28, 2013.

[^9]: OSA, supra, note 1, s. 1(1).

[^10]: That is, in the amended fresh as amended statement of claim.

[^11]: The MD&A is management's discussion and analysis.

[^12]: OSA, supra, note 1, s. 138.8.

[^13]: Theratechnologies Inc. v. 121851 Canada Inc., [2015] S.C.J. No. 18, 2015 SCC 18.

[^14]: Ibid., at para. 38.

[^15]: Ibid., at para. 38.

[^16]: Ibid., at para. 39.

[^17]: Ibid., at para. 38.

[^18]: Green v. Canadian Imperial Bank of Commerce (2014), 118 O.R. (3d) 641, [2014] O.J. No. 419, 2014 ONCA 90.

[^19]: Ibid., at para. 88.

[^20]: One way is to simply equate the "reasonable possibility" test under s. 138.8 with the "reasonable prospect" test under Rule 21 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] and s. 5(1)(a) [of the CPA]. The important difference, of course, is that the former involves a preliminary merits test and requires some weighing of the evidence and the latter simply assumes the facts as pleaded.

[^21]: The appeal has been argued and the Supreme Court's decision is pending.

[^22]: Green, supra, note 18, at para. 93 (affirming Strathy J.'s test in the court below).

[^23]: Plus three more boxes of material for the certification component.

[^24]: The plaintiffs and defendants both filed six fact affidavits.

[^25]: The plaintiffs retained four experts who filed a total of 11 reports; the defendants retained three experts who filed a total of six reports.

[^26]: See, for example, the following provision in the 2011 annual report (Form 10-K): "Future dividends are not guaranteed. Dividends to shareholders are paid at the discretion of our board of directors. Future dividends, if any, will depend on, among other things, the results of operations, working capital requirements, financial condition, restrictive covenants, business opportunities, provisions of applicable law and other factors that our board of directors may deem relevant. Our board of directors may decrease the level of or entirely discontinue payment of dividends" (emphasis in original).

[^28]: Also, one of the plaintiffs' experts, Mr. Sabine, acknowledged that when he reviewed ATP's public disclosure, he understood that cash flows from projects were volatile; the company had not guaranteed its dividend; the expiry of the PPAs at Lake and Auburndale posed a significant risk to cash flows; and absent new sources of cash, there would be a significant reduction in cash available for distribution and for payment of the dividend.

[^29]: It is interesting to note that analysts following ATP were expecting a significant dividend cut when the company released its 2012 10-K on February 28, 2013. For example, on January 31, Macquarie was predicting a 27 per cent cut and on February 19, RBC was predicting a 30 per cent cut. The company was able to announce the change as soon as it was made because it had begun preparing draft disclosure materials a few weeks earlier. The evidence shows that it was a common practice for management to prepare draft disclosure ahead of time, knowing that it may or may not be used, depending on decisions that were made, but also knowing that meaningful disclosure could not be prepared on short notice. For example, in preparing the Q3 2012 financial disclosure ATP had two forms of releases ready: one announcing the Ridgeline acquisition and one not announcing that acquisition. Since an agreement had not been signed by November 5, 2012, the company used the second version of the release.

[^30]: The OSA, supra, note 1, distinguishes, for the purposes of secondary market liability, between core documents (such as financial statements, MD&A's and prospectuses) and non-core documents (such as news releases or earning call transcripts): see ss. 138.3(1), 138.3(2) and 138.4(1).

[^31]: OSA, supra, note 1, s. 1(1).

[^33]: McClurg v. Canada, 1990 CanLII 28 (SCC), [1990] 3 S.C.R. 1020, [1990] S.C.J. No. 134, at para. 21.

[^34]: For example, Alterra Power, Ameresco, EmberClear, Finavera, First Wind and Mesa-Stephen's Ranch. ATP was also in discussions with Borealis with respect to a potential joint-venture opportunity in association with Midland Cogeneration Venture. There is evidence that throughout the proposed class period, the company was actively pursuing Sunrun, Maxim Power, Kingfisher, Cameron, Good Spring, Greenleaf, Hereford and Sunlight Partners.

[^35]: OSA, supra, note 1, ss. 138.1, 138.3 and 138.4.

[^36]: Supra, note 30.

[^37]: OSA, supra, note 1, s. 1(1).

[^38]: Coventree Inc. (Re) (2011), 34 O.S.C.B. 10209.

[^39]: Rex Diamond Mining Corp. (Re), 2008 ONSEC 18, 2008 LNONOSC 631, 31 O.S.C.B. 8337.

[^40]: Coventree (Re), supra, note 38.

[^41]: Ibid., at para. 583.

[^42]: The defendants refer the court to the February 25, 2013 board materials which list Sunrun, Maxim Power, Kingfisher, Cameron, Goodspring, Greenleaf, Hereford and Sunlight Partners as active acquisitions at that time.

[^43]: The plaintiffs also argue that Greenhill's advice meant that ATP knew that the dividend would be cut by the board. There is no evidence to substantiate this position. In fact, as outlined in the narrative above, the evidence of management and the board is directly to the contrary. It is true that after hearing what Greenhill had to say in mid-January, CFO Ronan believed that ATP would be required to reduce the dividend. But he did not and could not know either the amount or the timing. He understood that these issues had to be considered by management and the board, and that the board would make these decisions. More importantly, as already noted, Mr. Ronan did not believe there was any crisis because the company had enough cash on hand to pay the dividend through 2013 as planned.

[^44]: Supra, note 13, at para. 38.

[^45]: See Musicians' Pension Fund of Canada (Trustees of) v. Kinross Gold Corp., [2014] O.J. No. 6070, 2014 ONCA 901, at para. 97: "It does not automatically follow from the denial of leave for the statutory claims that there will be no basis in fact for all of the class definition, common issues and preferable procedure certification criteria."

[^46]: Green v. Canadian Imperial Bank of Commerce, [2012] O.J. No. 3072, 2012 ONSC 3637 (S.C.J.), at para. 611.

[^47]: Kinross, supra, note 45, at para. 136.

[^48]: See, for example, Green, supra, note 18, at para. 103; and Fantl v. Transamerica Life Canada (2015), 125 O.R. (3d) 230, [2015] O.J. No. 1083, 2015 ONSC 1367 (Div. Ct.) and the case law discussed therein, at paras. 42-44. Also note that s. 138.13 of the OSA preserves common law claims, such as the claim for negligent misrepresentation, even where leave to proceed with the statutory action under s. 138.3 has been granted.

[^49]: Green, supra, note 46, at para. 595.

[^50]: Ibid., at para. 610.

[^51]: NBD Bank, Canada v. Dofasco Inc. (1999), 1999 CanLII 3826 (ON CA), 46 O.R. (3d) 514, [1999] O.J. No. 4749 (C.A.), at para. 81; Mondor v. Fisherman, 2001 CanLII 28388 (ON SC), [2001] O.J. No. 4620, 18 B.L.R. (3d) 260 (S.C.J.), at para. 65.

[^52]: The "efficient market" concept is an important component of the "fraud on the market" principle, an American construct affirmed by the U.S. Supreme Court in Basic Inc. v. Levinson, 485 U.S. 224, 108 S. Ct. 978 (1988). The U.S. Supreme Court developed the "fraud on the market" principle to get around the problem of having to prove individual reliance in securities actions alleging negligent misrepresentation. If counsel can show that the impugned securities were trading in an efficient market (by filing an expert's report), then one can assume that all relevant information, including any (alleged) misrepresentations about the security, was reflected in its price. Investors who relied on this price when they purchased the securities are deemed to have relied on these misrepresentations. Hence, there is no need for any further individualized proof. The efficient market/fraud on the market theory is obviously essential to the viability of many American securities class actions. In Ontario, however, there is arguably no need for this "deemed reliance" construct because the statutory action under Part XXIII.1 of the OSA, in particular s. 138.3, explicitly dispenses with the need to prove individual reliance.

[^53]: Dugal v. Manulife Financial Corp., [2013] O.J. No. 3455, 2013 ONSC 4083 (S.C.J.), at para. 93: "Proposed Common Issue 8 is certified . . . The question asks whether aeeach Class Member's reliance' can be inferred from the fact that each Class Member acquired the MFC securities in an efficient market. Both the Court of Appeal and this court have held that individual reliance can indeed be inferred from the surrounding facts or circumstances. Given that this Proposed Common Issue only asks whether buying securities in an efficient market can provide the surrounding circumstances for inferring individual reliance and does not require individual assessments, it is a legitimate query and one that, in my view, will help advance the litigation."

[^54]: Green, supra, note 46.

[^55]: Ibid., at paras. 595 and 600.

[^56]: Green, supra, note 18, at para. 103: "[We] see no error in the motion judge's analysis and no basis to interfere with his conclusion that the reliance issues should not be certified."

[^57]: Ibid., at para. 102.

[^58]: Kinross, supra, note 45.

[^59]: Ibid., at para. 117.

[^60]: Ibid., at para. 136.

[^61]: Green, supra, note 18, at para. 104.

[^62]: Kinross, supra, note 45, at para. 99.

[^63]: Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158, [2001] S.C.J. No. 67, at para. 28.

[^64]: AIC Limited v. Fischer, [2013] 3 S.C.R. 949, [2013] S.C.J. No. 69, 2013 SCC 69.

[^65]: Ibid., at para. 22.

[^66]: Kinross, supra, note 45, at paras. 117 and 129.

[^67]: Ibid., at paras. 127-28.

[^68]: Ibid., at para. 132.

[^69]: Ibid., at para. 132.

[^70]: Ibid., at para. 138.

[^71]: Ibid., at para. 139.

[^72]: Ibid., at paras. 130, 138 and 139.

[^73]: Fischer, supra, note 64, at para. 21.

[^74]: The two proposed representative plaintiffs, Ms. Coffin and Mr. Fife, only purchased ATP shares, not debentures. Recall the discussion above in para. 9.

[^75]: Menegon v. Philip Services Corp., 2001 CanLII 28396 (ON SC), [2001] O.J. No. 5547, [2001] O.T.C. 989 (S.C.J.), at para. 38.

[^76]: Dobbie v. Arctic Glacier Income Fund (2012), 109 O.R. (3d) 607, [2012] O.J. No. 456, 2012 ONSC 773 (S.C.J.), at paras. 15-18.

[^77]: Hollick v. Toronto (City), supra, at para. 20.

[^78]: The defendants argue that the claim for negligence made on behalf of the Series D debenture-holders who purchased under the prospectus does not plead a duty of care that is different from the duty to provide accurate information; that the negligence claim is in fact simply a claim for negligent misrepresentation without the element of reliance; that it is duplicative of the negligent misrepresentation claim and thus should not be allowed to proceed.

[^79]: See, for example, Dugal, supra, note 53, at para. 5.

[^80]: Counsel are directed to the discussion about hourly rates in Baroch v. Canada Cartage Diversified GP Inc., [2015] O.J. No. 843, 2015 ONSC 1147 (S.C.J.), at paras. 7-8; and Goldsmith v. National Bank of Canada, [2015] O.J. No. 3848, 2015 ONSC 4581 (S.C.J.), at paras. 7-11.

[^81]: See my comments in Goldsmith, supra, note 80, at para. 13.