Abdula v. Canadian Solar Inc. et al.

[Indexed as: Abdula v. Canadian Solar Inc.]

Ontario Reports

Ontario Superior Court of Justice,

G.E. Taylor J.

January 5, 2015

124 O.R. (3d) 459 | 2015 ONSC 53

Case Summary

Civil procedure — Class proceedings — Certification — Proposed class action asserting claim of misrepresentation under Part XXIII.1 of Securities Act, common law negligent misrepresentation and oppression — Leave to commence action under Securities Act granted — Motion to certify action as class proceeding granted in part — Certification denied for claims of negligent misrepresentation other than misrepresentation claims for which leave was granted under Securities Act — All three claims certified for global class — Securities Act, R.S.O. 1990, c. S.5, Part XXIII.1.

The plaintiff brought a proposed class action asserting a misrepresentation claim under Part XXIII.1 of the Securities Act, a common law misrepresentation claim and an oppression claim under the Canada Business Corporations Act, R.S.C. 1985, c. C-44. Leave to commence an action under XXIII.1 of the Securities Act was granted with respect to some of the alleged misrepresentations. The plaintiff brought a motion to certify the action as a class proceeding.

Held, the motion should be granted in part.

The defendants conceded that the statement of claim disclosed causes of action in relation to the claims of statutory misrepresentation, negligent misrepresentation and oppression, and that the plaintiff would fairly and adequately represent the interest of the class.

It was not appropriate to certify as common issues for a claim of negligent misrepresentation questions of inferred reliance. Certification was denied for the claims of negligent misrepresentation other than the claims which were identical to those asserted in the statutory claim. The defendants accepted as appropriate all of the proposed common issues with respect to the statutory claim and the oppression claim. All three claims were certified for a global class. There were no parallel U.S. proceedings. The only avenues for recovery for non-Ontario resident shareholders of the defendant Solar were this action and individual lawsuits.

Bayens v. Kinross Gold Corp., [2014] O.J. No. 6070, 2014 ONCA 901, 61 C.P.C. (7th) 1, affg [2013] O.J. No. 5071, 2013 ONSC 6864, 45 C.P.C. (7th) 371 (S.C.J.); Green v. CIBC (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.), apld [page460]

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.); Silver v. Imax Corp., 2009 72334 (ON SC), [2009] O.J. No. 5585, 86 C.P.C. (6th) 273 (S.C.J.), consd

Other cases referred to

Abdula v. Canadian Solar Inc., [2014] O.J. No. 4163, 2014 ONSC 5167 (S.C.J.); 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; Cannon v. Funds for Canada Foundation, [2012] O.J. No. 168, 2012 ONSC 399, 13 C.P.C. (7th) 250, [2012] 3 C.T.C. 132 (S.C.J.); Cloud v. Canada (Attorney General) (2004), 2004 45444 (ON CA), 73 O.R. (3d) 401, [2004] O.J. No. 4924, 247 D.L.R. (4th) 667, 192 O.A.C. 239, 27 C.C.L.T. (3d) 50, [2005] 1 C.N.L.R. 8, 2 C.P.C. (6th) 199, 135 A.C.W.S. (3d) 567 (C.A.); Dobbie v. Arctic Glacier Income Fund, [2011] O.J. No. 932, 2011 ONSC 25, 3 C.P.C. (7th) 261 (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; Meeking v. Cash Store Inc., [2013] M.J. No. 294, 2013 MBCA 81, 48 C.P.C. (7th) 41, 367 D.L.R. (4th) 684, 299 Man. R. (2d) 109, [2014] 3 W.W.R. 118, 230 A.C.W.S. (3d) 971; Millwright Regional Council of Ontario Pension Trust Fund (Trustees of) v. Celestica Inc., [2014] O.J. No. 744, 2014 ONSC 1057, 49 C.P.C. (7th) 12, 238 A.C.W.S. (3d) 28 (S.C.J.); Rumley v. British Columbia, [2001] 3 S.C.R. 184, [2001] S.C.J. No. 39, 2001 SCC 69, 205 D.L.R. (4th) 39, 275 N.R. 342, [2001] 11 W.W.R. 207, J.E. 2001-1970, 157 B.C.A.C. 1, 95 B.C.L.R. (3d) 1, 10 C.C.L.T. (3d) 1, 9 C.P.C. (5th) 1, REJB 2001-26160, 108 A.C.W.S. (3d) 775

Statutes referred to

Canada Business Corporations Act, R.S.C. 1985, c. C-44, s. 241, (3)(j)

Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5(1), (d), (e)

Securities Act, R.S.O. 1990, c. S.5, Part XXIII.1 [as am.]

MOTION to certify an action as a class proceeding.

A. Dimitri Lascaris, Douglas Worndl and Anthony O'Brien, for plaintiff.

Michael Statham and Anastasija Sumakova, for defendants.

G.E. TAYLOR J.: —

Introduction

[1] This is a motion for certification as a class proceeding of a number of claims arising out of alleged misrepresentations made by Canadian Solar Inc. contained in filings required by the Securities and Exchange Commission of the United States and in press releases that accompanied the filings. In a previous ruling, I granted leave to the plaintiff to commence an action pursuant to Part XXIII.1 of the Ontario Securities Act, R.S.O. 1990, c. S.5 in relation to some of the alleged misrepresentations. The plaintiff now seeks certification as a class proceeding of the claims contained in the statutory cause of action. In the fresh as [page461] amended statement of claim, the plaintiff has also pleaded that the misrepresentations, which include the alleged misrepresentations for which leave was granted, were made negligently and that the conduct of Canadian Solar and its officers and directors has been oppressive, and accordingly s. 241 of the Canada Business Corporations Act, R.S.C. 1985, c. C-44 is engaged. The plaintiff also seeks certification of the claims of for negligent misrepresentation and oppression.

Evidentiary Background

[2] At paras. 4 through 30 under the heading Evidentiary Background of my ruling dated September 9, 2014 (Abdula v. Canadian Solar Inc., [2014] O.J. No. 4163, 2014 ONSC 5167 (S.C.J.)), I set out the factual background giving rise to the present action. I adopt those paragraphs for the purpose of this ruling.

[3] August 26, 2010 was the record date for Canadian Solar's 2010 annual meeting. As of that date, 1,236 Ontario residents held a total of 1,058,705 shares of Canadian Solar. Also, as of August 26, 2010, there were 22 Ontario residents who held a total of 6,954 shares of Canadian Solar through U.S. brokers. There were 42,995,097 issued and outstanding shares of Canadian Solar at August 26, 2010. This means that approximately 2.8 per cent of the total issued and outstanding shares of Canadian Solar were held beneficially by Ontario residents. When the number of shares held by excluded persons as that term is defined in the fresh as amended statement of claim is subtracted from the total of the issued and outstanding shares, there remains 29,728,097 shares of Canadian Solar that are beneficially owned by non-excluded persons. Ontario resident shareholders therefore make up approximately 3.6 per cent of this group.

[4] Canadian Solar has determined that as of August 26, 2010, there were shareholders from 82 countries who held their shares through U.S. investment dealers. There were an additional 34 shareholders from the remaining provinces and territories who held the shares in Canadian Solar through U.S. brokers.

[5] In the prospectus supplement dated October 15, 2009, under the heading Enforceability of Civil Liabilities, the following is stated:

We were incorporated as an Ontario corporation in October 2001 and we were continued as a Canadian corporation under the Canadian federal corporate statute, the Canadian Business Corporations Act (the "CBCA"), in June 2006.

Furthermore, it may not be possible for you to enforce against us or them, in the United States, judgments obtained in U.S. courts, because all or a substantial portion of our assets and the assets of those persons are located outside the United States. We have been advised by WeirFoulds LLP, our [page462] Canadian counsel, that a monetary judgment of a U.S. court predicated solely upon the civil liability provisions of the U.S. federal securities laws would likely be enforceable in Canada if the U.S. court in which the judgment was obtained had a basis for jurisdiction in the matter that was recognized by a Canadian court for such purposes. We cannot assure you that this will be the case. It is unlikely that an action could be brought in Canada in the first instance for civil liability under U.S. federal securities laws. Therefore, it may not be possible to enforce those actions against us, our directors and officers or the experts named in this prospectus.

[6] Also contained in the prospectus supplement is a description of the availability of the oppression remedy pursuant to the CBCA.

[7] In Canadian Solar's 2009 annual report, Robert McDermott is identified as "lead independent director of our company" and is said to be a partner in McMillan LLP, a law firm based in Canada. In the same annual report, Lars-Eric Johansson is identified as an independent director with significant connections to Canada.

[8] On December 20, 2013, a parallel action in the United States was dismissed by the United States Court of Appeal for the Second Circuit with no further right of appeal.

The [Class Proceedings Act, 1992](https://www.canlii.org/en/on/laws/stat/so-1992-c-6/latest/so-1992-c-6.html)

[9] Section 5(1) of the Class Proceedings Act, 1992 sets out the criteria to be established for certification of an action as a class proceeding as follows:

(a) the pleading discloses a cause of action;

(b) there is an identifiable class;

(c) the claims of the class members raise common issues;

(d) a class proceeding is the preferable procedure for the resolution of the common issues; and

(e) there is a representative plaintiff who would fairly and adequately represent the interests of the class, who has produced a suitable litigation plan and who does not have a conflict with the interests of the other class members.

[10] The defendants concede that the fresh as amended statement of claim discloses causes of action in relation to the claims of statutory misrepresentation, negligent misrepresentation and oppression.

[11] The defendants concede that there is an identifiable class but do not agree with the plaintiff as to the description of the class with respect to the statutory cause of action and the claim for negligent misrepresentation. The defendants concede that it [page463] is appropriate to certify a global class for the oppression claim except that when there is an overlap between the factual foundation for the statutory cause of action and the claim for oppression, the statutory claim is the preferable procedure, with the result that the oppression claim will be certified only for alleged conduct which is not embraced by the statutory claim.

[12] The defendants concede that 13 of the 17 proposed common issues are appropriate for certification. The defendants accept as appropriate all of the proposed common issues with respect to the statutory claim and the oppression claim. The defendants take issue with three of the six proposed common issues in relation to the claim of negligent misrepresentation.

[13] With respect to the claims of negligent misrepresentation, it is the position of the defendants that none of those claims should be certified. The defendants say that certification would be appropriate for the misrepresentations for which leave to commence the statutory cause of action has been granted except for the fact that leave was granted. The defendants submit that for the alleged misrepresentations for which leave was granted, the statutory regime is the preferable procedure and accordingly certification should be denied for the overlapping claims of negligent misrepresentation.

[14] The defendants concede that the plaintiff would fairly and adequately represent the interests of the class and does not have a conflict of interest with any member of the class. In their factum, the defendants took issue with two aspects of the proposed litigation plan. The defendants took issue with the proposed notice provisions to non-resident class members although no oral submissions were made on this point. The defendants also submitted that the proposed litigation plan failed to identify a mechanism for determining the governing law with respect to each individual class members' claims. During the course of the hearing of the present motion, the plaintiff produced a revised litigation plan which resolved this concern. I therefore take it that the defendants no longer raise objections to the proposed litigation plan.

[15] I propose to deal with the criteria for certification pursuant to s. 5(1) of the Class Proceeding Act in a slightly different order than they are set out in the section.

The Disputed Common Issues

Was the misrepresentation a misrepresentation at common law?

[16] In the reply factum, at para. 157, in relation to this proposed common issue the plaintiff says: [page464]

It was only intended to encompass the question of whether the "Misrepresentation" was "untrue, inaccurate or misleading", which is one element of the negligent misrepresentation claim.

The defendants submit that this common issue ought to be amended to clarify the stated intention of the plaintiff. I agree.

[17] Therefore, common issue number 2 will be amended to read as follows: "Was the Misrepresentation untrue, inaccurate or misleading?"

In the circumstances of this case, can each class member's reliance on the misrepresentation be inferred?

[18] Paragraphs 72 and 73 of the fresh as amended statement of claim allege:

The Plaintiff and the Class Members relied upon the Misrepresentation.

Alternatively, the Plaintiff and the other Class Members relied upon the Misrepresentation by the act of purchasing Canadian Solar securities in an efficient market that promptly incorporated into the price of those securities all publicly available material information regarding the securities of Canadian Solar. As a result, the repeated publication of the Misrepresentation in the documents described in paragraph 62 caused the price of Canadian Solar's shares to trade at inflated the prices during the Class Period, thus directly resulting in damage to the Plaintiff and the other Class Members.

[19] In Cannon v. Funds for Canada Foundation, [2012] O.J. No. 168, 2012 ONSC 399 (S.C.J.), Strathy J. (as he then was) concluded that in a negligent misrepresentation case, it is possible to infer individual reliance from the surrounding circumstances. Cannon involved claims arising out of scheme to reduce the income tax paid by persons who made charitable donations to certain Canadian charities. Canada Revenue Agency ultimately disallowed the claims for deduction. One of the issues was whether an opinion letter written by an experienced tax lawyer contained a material misrepresentation. There were one or two representations which were distilled down to [at para. 350]:

This is a legitimate tax avoidance program that has been designed to satisfy the requirements of Revenue Canada. You will receive a tax credit that exceeds the amount of your actual donation.

Strathy J. concluded that this was a case where reliance could be inferred and accordingly he certified as a common issue the claim of negligent misrepresentation against the promoters of the scheme and the lawyer who provided the opinion letter.

[20] Previous cases have approved similarly worded common issues to that proposed in the present case.

[21] In Silver v. Imax Corp., 2009 72334 (ON SC), [2009] O.J. No. 5585, 86 C.P.C. (6th) 273 (S.C.J.), two of the proposed common issues were as follows [at para. 171]: [page465]

Did the traded price of IMAX shares during the Class Period incorporate and reflect the Representation?

If the answer to [the previous question] is yes, did the acquisition of IMAX shares by the class members, on the TSX and NASDAQ, during the Class Period, constitute reliance upon the Representation?

[22] In addressing these two proposed common issues, van Rensburg J. (as she then was) stated, at para. 190:

In the present case the plaintiffs have pleaded that the individual class members relied on the Representation through their conduct in purchasing shares. It should be open to the plaintiffs to attempt to establish in the common issues trial that, as a factual matter, reliance has been established for all members of the class through proof of the common action of purchasing shares. It may be that the defendants will persuade the court that at best any inference of reliance is rebuttable through evidence that is individual to each class member. It may be that any inference of reliance is rebuttable through evidence applicable to the class at large. The question I need to determine is not whether the issues will be determined in the plaintiffs' favour, but whether they are "common" and not "individual" issues. I find that the issues as framed are common issues, and will be certified as such for the common issues trial.

[23] In Dugal v. Manulife Financial Corp., [2013] O.J. No. 3455, 2013 ONSC 4083 (S.C.J.), it was proposed that one of the common issues be [in Appendix A]:

If the answer to [proposed common the issue (6)] is yes, can each Class Member's reliance be inferred from the fact of the Class Member having acquired MFC's securities in an efficient market?

Belobaba J. amended the proposed common issue only slightly by deleting the opening words so that the certified common issue became [in Appendix B]:

Can each Class Member's reliance be inferred from the fact of the Class Member having acquired MFC's securities in an efficient market?

In approving the common issue, Belobaba J. stated, at para. 93:

The question asks whether "each 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.

[24] In Green v. CIBC (2014), 2014 ONCA 90, 118 O.R. (3d) 641, [2014] O.J. No. 419 (C.A.), the Court of Appeal approved of the finding in Cannon that, in the circumstances of that case, inferred group reliance could be certified as a common issue (para. 100). [page466]

[25] In Green v. CIBC, [2012] O.J. No. 3072, 2012 ONSC 3637 (S.C.J.), Strathy J. declined to certify the proposed common issues relevant to the claim of negligent misrepresentation. There were seven proposed common issues of which the last two were [at para. 594]:

Were the public markets on which CIBC securities traded during and immediately following the Class Period efficient markets? If so, did the trade prices of CIBC shares during the Class Period incorporate and reflect the misrepresentations?

If the answer to [the previous question] is yes, did the purchase of CIBC shares by Class Members during the Class Period constitute reliance or inferred reliance upon the misrepresentations?

The Court of Appeal agreed with Strathy J. that the common issues set out above were not appropriate for certification although the court did conclude that the first five of the proposed common issues dealing with negligent misrepresentation should have been certified. Presumably, in coming to this conclusion, the Court of Appeal was not satisfied that reliance could be inferred based on the circumstances present in Green.

[26] In the recently released decision of Bayens v. Kinross Gold Corp., [2014] O.J. No. 6070, 2014 ONCA 901, the Court of Appeal clearly articulated that for claims of common law misrepresentation reliance must be proven for each individual person and cannot be calculated on an aggregate basis. At para. 117, the court stated:

The first exception concerns the issue of reliance. Reliance is a claimant-specific issue, requiring individualized evaluation and fact-finding. See Green, at paras. 100-103. In most cases of negligent misrepresentation, therefore, issues of individual reliance have been regarded by the courts as inherently unsuitable for certification. In this case, in my view, the question of reliance is not a common issue.

[27] Notwithstanding the decisions of Silver v. Imax and Dugal, I have come to the conclusion that I am bound by the clear direction from the Court of Appeal in Green and Bayens that it is not appropriate to certify as common issues for a claim of negligent misrepresentation questions of inferred reliance. I therefore find that proposed common issue number 6 is not an appropriate common issue in this case.

Did the misrepresentation in the documents cause the price of Canadian Solar's securities to become or remain inflated during the class period? If so, what was the extent of that inflation?

[28] This proposed common issue deals with assessing damages for negligent misrepresentation on an aggregate basis. This [page467] issue was also dealt with in the Court of Appeal decision in Bayens. At paras. 119 and 120, the Court of Appeal stated:

Here, the motion judge disagreed with the notion that damages for negligent misrepresentation could be calculated on an aggregate basis in this case (at para. 242).

I agree. As I have already said, the issue of reliance is not a common issue in this case. And, as I discuss later in these reasons, individual trials of some complexity will be required to determine the question of reliance and, hence, liability. In these circumstances, the associated issue of consequential damages, should liability be found, must be determined in those individual trials rather than on a global basis.

[29] For essentially the same reasons as I concluded that proposed common issue number 6 is not appropriate for certification, I conclude that proposed common issue number 5 is not an appropriate common issue in this case.

Should the defendants pay the costs of administering and distributing the recovery? If so, which defendants should pay, and how much?

[30] In support of its position that this ought to be a common issue, the plaintiff relies on Silver v. Imax, where van Rensburg J. stated, at para. 209:

Issues 15 and 16 deal with the procedure for determining individual issues. Such issues have been certified recently in other cases as common issues, and in my view are proper common issues to be certified in this case.

Issue 15 in Silver v. Imax was the equivalent to proposed common issue number 17 in the present case. The plaintiff also relies on Dobbie v. Arctic Glacier Income Fund, [2011] O.J. No. 932, 2011 ONSC 25 (S.C.J.), where a common issue virtually identical to the proposed common issue in this case was conceded by the defendants as appropriate. The plaintiff submits that there is no harm by giving the common issues trial judge specific authority to address the issue of costs of administering and distributing the recovery.

[31] In opposing common issue number 17, the defendants rely on the decision of Belobaba J. in Dugal, where he stated, at para. 95, in reference to a proposed common issue identical to that being proposed in this case:

Whether the defendants should be required to pay for the costs of administering and distributing the recovery and if so how much should be paid, are not common issues that will advance this litigation. They are self-evident "ex post" questions that will be ably determined by the trial judge as and when needed. At this point, the questions are premature. [page468]

[32] I prefer the view expressed by Belobaba J. Therefore, proposed common issue number 17 will not be certified as a common issue in this case.

Preferable Procedure

[33] In Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158, [2001] S.C.J. No. 67, the court stated, at para. 31:

I think it clear, too, that the court cannot ignore the availability of avenues of redress apart from individual actions. As noted above, the preferability requirement was intended to capture the question of whether a class proceeding would be preferable "in the sense of preferable to other procedures such as joinder, test cases, consolidation and so on": see Report of the Attorney General's Advisory Committee on Class Action Reform, supra, at p. 32; see also Cochrane, supra, at p. 27; M. A. Eizenga, M. J. Peerless and C. M. Wright, Class Actions Law and Practice (loose-leaf), at para. 3.62 ("[a]s part of the determination with respect to preferability, it is appropriate for the court to review alternative means of adjudicating the dispute which is before it"). In my view, the preferability analysis requires the court to look to all reasonably available means of resolving the class members' claims, and not just at the possibility of individual actions.

[34] In Cloud v. Canada (Attorney General) (2004), 2004 45444 (ON CA), 73 O.R. (3d) 401, [2004] O.J. No. 4924 (C.A.), the Ontario Court of Appeal after referring to Hollick stated, at para. 73:

. . . the preferability requirement has two concepts at its core. The first is whether or not the class action would be a fair, efficient and manageable method of advancing the claim. The second is whether the class action would be preferable to other reasonably available means of resolving the claims of class members. The analysis must keep in mind the three principal advantages of class actions, namely judicial economy, access to justice, and behaviour modification and must consider the degree to which each would be achieved by certification.

[35] Recently, the Supreme Court of Canada returned to the preferable procedure issue in AIC Limited v. Fischer, 2013 SCC 69, [2013] 3 S.C.R. 949, [2013] S.C.J. No. 69. At paras. 24 and 25, the court stated:

There is no doubt that access to justice is an important goal of class proceedings. But what is access to justice in this context? It has two dimensions, which are interconnected. One focuses on process and is concerned with whether the claimants have access to a fair process to resolve their claims. The other focuses on substance -- the results to be obtained -- and is concerned with whether the claimants will receive a just and effective remedy for their claims if established. They are interconnected because in many cases defects of process will raise doubts as to the substantive outcome and defects of substance may point to concerns with the process.

. . . The correct approach, however, must include both substantive and procedural aspects in assessing whether a class action is the preferable procedure. The focus cannot be exclusively on process: a process may be fair but nonetheless not offer a real opportunity to recover compensation for all of [page469] the losses suffered. In other words, in some cases even if the process is fair, there will remain significant obstacles to recovery. In addition, an absence of a fair process may also heighten concerns about whether substantive justice has or will be done. Of course, as we shall see, consideration of these aspects must respect the limited scope of the certification process.

[36] It is the position of the defendants that in the circumstances of this case, where similar if not identical claims are advanced under the headings of negligent misrepresentation, oppression and Part XXIII.1 of the Ontario Securities Act, the preferable procedure is that pursuant to Part XXIII.1. In support of this position, the defendants rely on Millwright Regional Council of Ontario Pension Fund (Trustees of) v. Celestica Inc., [2014] O.J. No. 744, 2014 ONSC 1057 (S.C.J.). In this decision, Perell J. wrote, at paras. 183 to 185:

The Defendants argue, and I agree, that where there is a statutory misrepresentation claim and also a common law misrepresentation claim for the same misrepresentation, the statutory claim is the preferable way to resolve the Class Members' claims; indeed, the statutory claim was introduced precisely to overcome the difficulties of a class action for negligent misrepresentation with respect to the distribution of debt and equity instruments in the primary and secondary market for securities.

Part XXIII.1 of the Ontario Securities Act was designed to be the preferable procedure for misrepresentation claims in the marketplace for shares.

A common law misrepresentation class action with respect to the sale of securities, unless it settles, may lead to economically unfeasible or non-viable individual issues trials where the Class Members are confronted with the enormous difficulty of proving reliance, (the surrogate of causation) and damages.

[37] However, in Bayens v. Kinross Gold Corp., [2013] O.J. No. 5071, 2013 ONSC 6864 (S.C.J.), Perell J. stated, at para. 210:

To oversimplify if leave is granted under Part XXIII.1 of the Ontario Securities Act, it follows that the court should certify a class action for both the statutory and common law negligent misrepresentation claim.

[38] In Green v. CIBC, at paras. 102 and 103, Court of Appeal approved of parallel claims of common law misrepresentation and the statutory cause of action being certified. At para. 103, the court stated:

However, if the motion judge intended to say that no issues in the entire common law misrepresentation claim can be certified alongside the statutory claim, that suggestion conflicts with s. 138.13 of the Securities Act, which provides:

The right of action for damages and the defences to an action under s. 138.3 are in addition to, and without derogation from, any other rights or defences the plaintiff or defendant may have in an action brought otherwise than under this Part. [page470]

[39] In Bayens, the Court of Appeal noted that the conclusion of Perell J. that certification of the negligent misrepresentation claim would follow automatically certification of the statutory claim was not one of the issues on appeal. However, it is apparent that the Court of Appeal agreed with Perell J. on that particular point.

[40] The Court of Appeal in Bayens concluded that a denial of leave to proceed with a statutory claim does not necessarily mean a claim for negligent misrepresentation should not be certified. However, the Court of Appeal did conclude that denial of leave with respect to the statutory claim is a relevant factor in the preferability analysis with respect to the claim of negligent misrepresentation. In the final analysis, the Court of Appeal concluded that because the negligent misrepresentation claim would require a vast number of individual trials on issues of reliance, causation and damages two of the main objectives of a class proceeding; namely, judicial economy and access to justice would not be achieved because the process would be unmanageable, inefficient and unfair to the parties and the court. Accordingly, certification was refused for the negligent misrepresentation claim.

[41] I am of the view that the procedure contemplated in s. 5(1)(d) of the Class Proceedings Act is an alternate method of obtaining recourse for the class members. To my mind, this follows from the description in Hollick at para. [243] of "other procedures such as joinder, test cases, consolidation and so on". The preferable procedure inquiry should not become an analysis, in cases such as the present where there are parallel claims, as to which one of two or more causes of action has the greatest chance of success for the plaintiff and certifying that cause of action to the exclusion of all others.

[42] In Cloud, there was an alternative dispute resolution tribunal, created to deal with claims of aboriginal Canadians who had attended residential schools. In AIC, there were proceedings conducted by the Ontario Securities Commission which had resulted in settlements being reached with the defendants, and payments made it to at least some of the proposed class members, arising out of the same basis as it was proposed to certify the class proceeding. In both cases, a class proceeding was held to be the preferable procedure.

[43] In AIC and Rumley v. British Columbia, 2001 SCC 69, [2001] 3 S.C.R. 184, [2001] S.C.J. No. 39, one of the considerations with respect to the issue of the preferable procedure was the fact that there were caps on the recovery amounts available through the alternative compensation procedures. That concern is a factor if the statutory cause of action is an alternative procedure to the claim [page471] for common law misrepresentation because of the liability limits imposed for damages pursuant to Part XXIII.1.

[44] In my view, it is not necessary to choose as between claims for negligent misrepresentation, oppression or arising out of the statutory cause of action. The preferable procedure is a class proceeding in which all three causes of action can be asserted. I am guided, however, by the Court of Appeal decision in Bayens, where in a claim for negligent misrepresentation was found not to meet the preferable procedure requirement when leave to commence an action pursuant to Part XXIII.1 of the Ontario Securities Act was denied. I therefore conclude that I must limit the claim for negligent misrepresentation to the same factual claims as will be asserted in the statutory claim.

An Identifiable Class

[45] The plaintiff proposes in the fresh as amended statement of claim that the class be defined for each of the claims of negligent misrepresentation, oppression and the statutory cause of action as:

All persons, wherever they may reside or be domiciled, who acquired securities of Canadian Solar in the secondary market during the Class Period [the opening of trading on May 26, 2009 to the close of trading on June 1, 2010], other than Excluded Persons.

[46] The defendants do not object to a global class being certified for the oppression remedy claim. In fact, the defendants propose that the class definition for the oppression claim include all persons who owned securities of Canadian Solar during the class period. The defendants also assert that the class for each of the claims be worded so as to exclude early sellers. I agree. Therefore, for the oppression remedy claim, the class will be defined as:

All persons, wherever they may reside or be domiciled, who were registered or beneficial security holders of Canadian Solar at any time during the Class Period [May 26, 2009 to the close of trading on June 1, 2010] and who continued to hold securities of Canadian Solar at the close of trading on the NASDAQ on June 1, 2010, other than Excluded Persons.

[47] The defendants submit that the class for the claims of negligent misrepresentation and the statutory cause of action ought to be restricted to Ontario residents.

[48] It has been conclusively decided by the Court of Appeal in this case that Canadian Solar has a real and substantial connection to Ontario. At para. 9, the Court of Appeal stated:

The motion judge found that Canadian Solar has a "real and substantial connection to Ontario" and that finding, with which we agree, is not in [page472] issue. In addition to having its registered office and principal executive office in Ontario, Canadian Solar has held its annual meeting in Ontario. The alleged misrepresentations were contained in documents that were released or presented in Ontario. While Canadian Solar's principal place of business is in the People's Republic of China, directly and through its subsidiaries, it has undertaken or engaged in numerous solar projects in Ontario. Canadian Solar has also raised capital from Ontario investors through private placements and has made filings with the Ontario Securities Commission confirming this activity as required by Ontario securities laws. Mr. Abdula placed orders for shares of Canadian Solar through his online discount brokerage, Bank of Montreal InvestorOnline, using the computer at his home in Markham, Ontario. As of August 26, 2010, Canadian Solar had 1253 shareholders in Ontario, who held in the aggregate over one million shares.

[49] In addition to the factors referred to in the above passage from the judgment of the Court of Appeal, there are a number of additional factors which connect Canadian Solar to Ontario.

[50] Although the prospectus supplement dated October 15, 2009 advises that there might be difficulty encountered in recovering any judgment obtained in a U.S. court, there is no mention in the document of the possibility of an action being brought in Canada for breach of Canadian securities laws. The prospectus supplement, at least implicitly, provides that a claim for an oppression remedy would be by way of an action in Canada. As was set out in the ruling granting leave to commence the statutory action, the press releases that accompanied the financial statements which are alleged to contain the misrepresentation were released in Ontario. The press release dated June 1, 2010 advising that a revision of 2009 net revenues might be necessary was released in Ontario. Robert McDermott and Lars-Eric Johansson are identified in the 2009 annual report as Canadian directors.

[51] In Silver v. Imax, van Rensburg J. stated, at para. 129:

There is accordingly no doubt that this court has the authority to certify an international class if there is a "real and substantial connection" between the claims asserted on behalf of the foreign class members and this jurisdiction.

As I have just indicated, the Court of Appeal has held that there is a real and substantial connection between Canadian Solar and Ontario. In my view, there is also a real and substantial connection between Ontario and the claims asserted on behalf of the foreign class members. This point is conceded as it relates to the oppression remedy. I see no difference in substance between the oppression remedy which is a creature of statute and the statutory cause of action pursuant to Part XXIII.1 of the Securities Act.

[52] With respect to the claim for negligent misrepresentation, the defendants submit that a global class would be unworkable [page473] because of the need to apply foreign law from numerous jurisdictions to that issue. As noted in Silver v. Imax, foreign law must be pleaded and proved. At the present time, with no statement of defence having been delivered, it is uncertain if the defendants intend to plead foreign law.

[53] There have been a number of cases in which a global class including class members residing elsewhere in Canada and in other countries has been certified in the context of securities litigation. However, in each of those cases, the securities of the corporate defendant traded on a Canadian exchange. (See Silver v. Imax, Dobbie v. Arctic Glacier, Green v. CIBC and Celestica.) This is the first case in which it is sought to certify a global class action which includes all shareholders of a corporation regardless of their residency who purchased their shares on a foreign exchange.

[54] I find the development of the Silver v. Imax case to be instructive. On certification, a global class was certified. The class was defined as [at para. 98]:

. . . all persons, other than Excluded Persons, who acquired securities of Imax during the Class Period on the TSX and on NASDAQ and held some or all of those securities of the close of trading on August 9, 2006.

At the time of certification, there was a parallel proceeding in the United States. In that proceeding, certification was sought for a class including purchasers on both the NASDAQ and TSX. At the time of the Ontario certification hearing, certification of the U.S. class action had been denied without prejudice to a further motion for certification to be brought. It was therefore not known at the time of certification of the Ontario class proceeding if the parallel action in the United States would be certified.

[55] The U.S. action was eventually certified. In early 2012, the parties to the U.S. proceeding reached a settlement. The settlement was approved subject to an order being obtained in the Canadian action to amend the class definition to exclude all persons to be bound by the settlement of the U.S. action. Those persons would be all who acquired their shares on the NASDAQ which would include Canadian residents. Van Rensburg J. granted the requested amendment to the class description in order to permit the U.S. settlement to go forward.

[56] It seems to me that the original decision to certify a global class arose out of a concern to protect persons who acquired Imax shares during the class period regardless of their place of residency. At the time of certification of the Canadian class proceeding, that was a concern because the U.S. action had not been certified and indeed certification had been rejected on at least one occasion. However, once the U.S. class action was certified and the settlement was achieved, this concern evaporated. [page474] Accordingly, it was appropriate to amend the global class in the Canadian proceeding which, although somewhat of an oversimplification, resulted in the Canadian class being only those persons who acquired that their shares on the TSX. One of the considerations in approving the amendment to the Canadian class was the ability of Canadians who had purchased their shares on the NASDAQ to opt out of the U.S. settlement.

[57] It seems to me that similar concerns are present in this case. There is no parallel proceeding in the United States. That action has been finally dismissed. In my view, this is an important factor in determining the appropriate description of the class for the claims of negligent misrepresentation and the statutory cause of action. At the present time, the only avenues for recovery for non-Ontario resident shareholders of Canadian Solar are the current proceeding or individual lawsuits. Therefore, if the defendants' submission is correct, the only shareholders who will be entitled to compensation in the event that a misrepresentation, negligent or statutory, is proved will be the Ontario shareholders.

[58] In Meeking v. Cash Store Inc., [2013] M.J. No. 294, 2013 MBCA 81, the Manitoba Court of Appeal dealt with the issue of the appropriateness of an Ontario court certifying a class action and approving a corresponding settlement purporting to be binding on Manitoba residents for transactions that occurred wholly within the Province of Manitoba. The court found there to be a real and substantial connection between the Ontario action and the Manitoba resident. In coming to that conclusion, the court stated, at para. 93:

The Canadian jurisprudence to which I have referred that would allow for common issues to be considered as a presumptive connecting factor in the real and substantial connection test is persuasive. Fairness to non-resident plaintiffs is achieved through the notification process and opt-out provisions, while, at the same time, the policy considerations favouring class actions described by McLachlin C.J.C. in Western Canadian Shopping are fulfilled. Further, the constitutional principle of federalism is respected.

And further, at para. 97:

Therefore, I would conclude that, in circumstances where the court has territorial jurisdiction over both the defendant and the representative plaintiff in a class action proceeding, common issues between the claim of the representative plaintiff and that of non-resident plaintiffs is a presumptive connecting factor, sufficient to give the court jurisdiction over non-resident plaintiffs.

[59] In the present case, this court has territorial jurisdiction over both the plaintiff and Canadian Solar. Therefore, a presumptive connecting factor to Ontario for the purpose of [page475] determining the jurisdiction of this court to the non-resident class members is the existence of common issues as between the representative plaintiff and the non-resident class members. Based on my review of the approved common issues, it appears to me that all of them are equally applicable to residents and non-resident class members. This therefore strengthens the real and substantial connection of this litigation to Ontario.

[60] Canadian Solar chose to incorporate, originally as an Ontario corporation, and subsequently as a Canadian corporation. Canadian Solar chose to carry on business in Ontario, have an executive office in Ontario, and disseminate information from Ontario to all of its shareholders and prospective shareholders. This is not a case of a defendant being forced to defend a lawsuit in a jurisdiction to which it has no connection. On the other side of the coin, the certification of a global class provides an opportunity to Canadian Solar's shareholders to obtain compensation for damages, if they wish to participate in the action, when no other avenue of recourse is available, other than individual lawsuits. The certification of a global class, in my view, achieves the objectives of the Class Proceedings Act by providing access to justice to those class members who would otherwise have no practical way to obtain compensation for losses suffered, by promoting judicial economy and avoiding multiple individual lawsuits and by encouraging behaviour modification by requiring Canadian Solar to face a proceeding involving all of its shareholders.

[61] I therefore conclude that a global class is appropriate for the statutory claim and the claim for negligent misrepresentation. But because in my earlier ruling I determined that the earliest date from which it could be concluded that the statutory cause of action arose was the date of issuance of the prospectus supplement on October 15, 2009, I find that the class period for the statutory claim and the claim of negligent misrepresentation commences on October 15, 2009.

[62] The Court of Appeal in Bayens made it clear that, generally speaking, a claim for negligent misrepresentation is ill-suited to resolution in a class action because of the need to prove individual reliance and individual damages. On the other hand, the Court of Appeal approved parallel proceedings based on negligent misrepresentation and the statutory claim pursuant to the Securities Act. Therefore, I feel I must reach the conclusion that the claims for negligent misrepresentation which are unrelated to the statutory claim must fail for the same reasons as they did in Bayens. [page476]

[63] Therefore, for the claims of negligent misrepresentation and the statutory cause of action, the class will be defined as:

All persons wherever they may reside or be domiciled, who acquired securities of Canadian Solar in the secondary market during the Class Period [the opening of trading on October 15, 2009 to the close of trading on June 1, 2010], and who continued to hold some or all of those securities at the close of trading on the NASDAQ, on June 1, 2010, other than Excluded Persons.

Litigation Plan

[64] The defendants in their factum take issue with the notice provisions of the litigation plan. Oral submissions were not made on this issue. I am satisfied that the notice provisions to notify all class members of the certification of this class action and the opt-out procedure are adequate.

[65] The defendants also criticized the litigation plan for its failure to include a provision with respect to conflict of laws. That issue was addressed during the course of the certification hearing by the addition of what is now para. 20 of the litigation plan. I am therefore satisfied that the plaintiff has produced a satisfactory litigation plan as contemplated by s. 5(1)(e) of the Class Proceedings Act.

Conclusion

[66] For the foregoing reasons, there will be an order certifying as a class proceeding, the claims for statutory misrepresentation pursuant to Part XXIII.1 of the Securities Act and for negligent misrepresentation for a global class and for a class period defined as follows:

All persons wherever they may reside or be domiciled, who acquired securities of Canadian Solar in the secondary market during the Class Period [the opening of trading on October 15, 2009 to the close of trading on June 1, 2010], and who continued to hold some or all of those securities at the close of trading on the NASDAQ, on June 1, 2010, other than Excluded Persons.

[67] There will be an order certifying as a class proceeding the oppression claim pursuant to the Canadian Business Corporations Act for a global class and for a class period defined as follows:

All persons, wherever they may reside or be domiciled, who were registered or beneficial security holders of Canadian Solar at any time during the Class Period [May 26, 2009 to the close of trading on June 1, 2010] and who continued to hold securities of Canadian Solar at the close of trading on the NASDAQ, on June 1, 2010, other than Excluded Persons.

[68] I have concluded, on the authority of Bayens, that the common law misrepresentation claim should be limited to the alleged misrepresentations for which leave was granted pursuant to [page477] Part XXIII.1 of the Securities Act. The class period for the claims of misrepresentation is from October 15, 2009 to June 1, 2010. This period covers alleged misrepresentations in the prospectus supplement and the financial statements for Q4 2009, which were released on March 3, 2010. Therefore, to be consistent, I have deleted from the certified common issues those which were proposed as numbers 1 (a), (b), (c) and (e). These are the common issues with respect to the claims of negligent misrepresentation which are also the misrepresentations for which leave to proceed with the statutory claim was not granted.

[69] The common issues which I have certified are attached as Appendix A to this ruling.

Amendment to the Statement of Claim

[70] Because of the changes I have made with respect to the class definitions and the differing class periods for the oppression claim and that the misrepresentation claims, the plaintiff may wish to amend the fresh as amended statement of claim. Should the plaintiff wish to do so, an amended fresh as amended statement of claim is to be delivered within 30 days of the release of this ruling.

Costs

[71] If counsel are unable to agree on the appropriate disposition as to costs for the leave motion and the certification motion, they may make written submissions. The written submissions on behalf of the plaintiff are to be delivered to my office within 14 days of the release of this ruling, not to exceed three pages in length exclusive of a bill of costs and costs outline. Responding submissions are to be delivered to my office within 28 days of the release of this ruling, not to exceed three pages in length.

Motion granted in part.

APPENDIX A

Common Issues

Negligent Misrepresentation

(1) Did any or all of the following documents issued by Canadian Solar during the class period contain the misrepresentation? [page478]

(a) Canadian Solar's prospectus supplement dated October 15, 2009;

(b) Canadian Solar's financial statements for Q4 2010, which were released on March 3, 2010.

(2) Was the misrepresentation untrue, inaccurate or misleading?

(3) If the answer to each of (1) and (2) is yes, did the defendants, or any of them, owe the class members a duty of care to ensure that the documents did not contain a misrepresentation? If so, which defendants owed that duty?

(4) If the answer to (3) is yes, did any or all of the defendants breach their duty of care? If so, which defendants breached their duty and how?

Oppression

(5) During the class period, did any act or omission of Canadian Solar effect a result, or were the business or affairs of Canadian Solar carried on or conducted in a manner, or were the powers of the directors of Canadian Solar exercised in a manner that was oppressively or unfairly prejudicial to order that unfairly disregarded the interests of the class members, within the meaning of s. 241 of the CBCA?

(6) If the answer to (5) is yes, should the court make an order that the defendants, or any of them, compensate the class members pursuant to s. 241(3)(j) of the CBCA?

(7) If the answer to (6) is yes, on what basis should the amount of compensation payable to the class members be determined?

(8) If the answer to (5) is yes, are there other remedies that should be ordered by the court to rectify the harm caused by the defendants, or any of them, to the class members as a result of the conduct of the defendants, or any of them, which was oppressive or unfairly prejudicial to or that unfairly disregarded the interests of the class members?

Statutory secondary market liability

(9) Did documents issued by Canadian Solar during the class period or public oral statements made on behalf of Canadian Solar during the class period, in respect of which leave has been granted under s. 138.8(1) of the OSA, contain a misrepresentation within the meaning of the OSA? [page479]

(10) If the answer to (9) is yes, then when and by what means were the misrepresentations contained in each such document and/or public oral statement corrected?

(11) If the answer to (9) is yes with respect to a document, and such document is not a "core document" within the meaning of the OSA, then in respect of each such "non-core document":

(a) did the defendants, or any of them, know that the document contain the misrepresentation at the time the document was released;

(b) at or before the time the document was released, did the defendants, or any of them, deliberately avoid acquiring knowledge that the document contain the misrepresentation; or

(c) were the defendants, or any of them, through action or failure to act, guilty of gross misconduct in connection with the release of the document that contained the misrepresentation?

(12) If the answer to (9) is yes with respect to a public oral statement, then in respect of each such public oral statement:

(a) did Qu or Chien, or either of them, make the public oral statement or authorize, permit or acquiesce in the making of the public oral statement; and

(b) did or were the defendants, or any of them:

(i) know that the public oral statement contained a misrepresentation at the time such public oral statement was made;

(ii) at or before the time the public oral statement was made, deliberately avoid acquiring knowledge that the public oral statement contained a misrepresentation; or

(iii) through action or failure to act, guilty of gross misconduct in connection with the making of the public oral statement that contained a misrepresentation?

(13) What is the specific formula by which the damages payable by each of the defendants to the class members is determined? [page480]

Vicarious liability

(14) Is Canadian Solar vicariously liable or otherwise responsible for the acts of either or both of the individual defendants?

End of Document