Court File and Parties

COURT FILE NO.: CV-16-548624 DATE: 20180726 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Craig Johnson and Wolgang Vaeth Plaintiffs – and – North American Palladium Ltd., Phil Du Toit, David Langille and KPMG LLP Defendant

Counsel: Eli Karp and Jennie M. Brodski for the Plaintiffs Alan W. D’Silva, and Patrick Corney for the Defendants North American Palladium Ltd., Phil Du Toit, and David Langille Dana M. Peebles and Mira Novek for the Defendant KPMG LLP

Proceeding under the Class Proceedings Act, 1992

HEARD: June 26, 2018

PERELL, J.

REASONS FOR DECISION

A. Introduction

[1] In March 2016, pursuant to the Class Proceedings Act, 1992, Craig Johnson and Wolfgang Vaeth brought a securities misrepresentation class action, against North American Palladium Ltd., its former officers and directors, Phil Du Toit, and David Langille, (collectively, the “Palladium Defendants”) and KPMG LLP, which was Palladium’s auditor.

[2] The class action is about alleged misrepresentations made in Palladium’s corporate public disclosure documents between July 30, 2014 and April 14, 2015 inclusive. There is a common law misrepresentation claim and also a statutory cause of action, for which leave is required, under Part XXIII.1 of the Ontario Securities Act.

[3] The Plaintiffs have brought their motion for leave under Part XXIII.1 of the Ontario Securities Act, and the leave motion is scheduled for October 18-19, 2018. The parties have exchanged affidavits for the leave motion.

[4] The Defendants now bring a motion for an order striking, in part, the reply expert report delivered by Andrew M. Mintzer in his affidavit dated May 1, 2018, or, in the alternative, the Defendants seek an order permitting them to file additional evidence from David Oldham, Mr. Langille, David Yule, and Armand Capisciolto, all of whom have delivered affidavits for the pending leave motion.

[5] For the reasons that follow, I strike Mr. Mintzer’s affidavit dated May 1, 2018 in its entirety with leave to deliver a new affidavit confined solely to the issue of causation.

B. The Procedure for a Leave Motion under the Ontario Securities Act

[6] The motion now before the court raises the issue of what is the proper procedure for the delivery of evidence for a leave motion under Part XXIII.1 of the Ontario Securities Act in a proposed class action under the Class Proceedings Act, 1992. Before setting out the factual background, it is necessary to understand the law of procedure and of evidence associated with a motion for leave under the Ontario Securities Act.

[7] Under s. 138.8 (1) of the Ontario Securities Act, leave of the court is required to proceed with a statutory misrepresentation cause of action under s. 138.3 of the Act. Section 138.8 (1), the leave requirement, states:

138.8(1) No action may be commenced under s. 138.3 without leave of the court granted upon motion with notice to each defendant. The court shall grant leave only where it is satisfied that,

(a) the action is being brought in good faith; and (b) there is a reasonable possibility that the action will be resolved at trial in favour of the plaintiff.

[8] The leave requirement was designed to have a gatekeeper function. Theratechnologies inc. v. 121851 Canada inc., 2015 SCC 18 at para. 36 The leave test is meant to create a robust deterrent screening mechanism with a reasoned consideration of the evidence to protect defendants so that cases without merit are prevented from proceeding. Theratechnologies inc. v. 121851 Canada inc., 2015 SCC 18 at para. 38 Using the record of affidavit evidence and cross-examinations, the court is entitled to weigh the evidence, but the court must take into account that the leave motion involves merely a paper record and that the leave test sets a low evidentiary threshold. Musicians' Pension Fund of Canada (Trustees of) v. Kinross Gold Corp., 2014 ONCA 901 The motions judge should be cognizant that full production has not been made and that the defendant may have relevant documentation and evidence that is not before the court. Rahimi v. SouthGobi Resources Ltd., 2017 ONCA 719 at paras. 45-49 A full analysis of the evidence is unnecessary, and the plaintiff need only provide a plausible analysis of the applicable legislative provisions and some credible evidence in support of the claim sufficient to persuade the court that there is a reasonable possibility that the action will be resolved in the plaintiff’s favour. Theratechnologies inc. v. 121851 Canada inc., 2015 SCC 18 at paras. 38-39

[9] The procedure for a leave motion under Part XXIII.1 of the Ontario Securities Act is governed by (a) the Rules of Civil Procedure; (b) the provisions of the Ontario Securities Act; and the principles of procedural fairness.

[10] For present purposes, the relevant Rules of Civil Procedure are rules 1.04, 39.02, and 39.03, which state:

INTERPRETATION

General Principle

1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

Proportionality

(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

Matters Not Provided For

(2) Where matters are not provided for in these rules, the practice shall be determined by analogy to them

EVIDENCE BY AFFIDAVIT

Generally

39.01 (1) Evidence on a motion or application may be given by affidavit unless a statute or these rules provide otherwise.

Service and Filing

(2) Where a motion or application is made on notice, the affidavits on which the motion or application is founded shall be served with the notice of motion or notice of application and shall be filed with proof of service in the court office where the motion or application is to be heard at least seven days before the hearing.

Expert Witness Evidence

(7) Opinion evidence provided by an expert witness for the purposes of a motion or application shall include the information listed under subrule 53.03 (2.1).

EVIDENCE BY CROSS-EXAMINATION ON AFFIDAVIT

On a Motion or Application

39.02 (1) A party to a motion or application who has served every affidavit on which the party intends to rely and has completed all examinations under rule 39.03 may cross-examine the deponent of any affidavit served by a party who is adverse in interest on the motion or application.

(2) A party who has cross-examined on an affidavit delivered by an adverse party shall not subsequently deliver an affidavit for use at the hearing or conduct an examination under rule 39.03 without leave or consent, and the court shall grant leave, on such terms as are just, where it is satisfied that the party ought to be permitted to respond to any matter raised on the cross-examination with evidence in the form of an affidavit or a transcript of an examination conducted under rule 39.03.

To be Exercised with Reasonable Diligence

(3) The right to cross-examine shall be exercised with reasonable diligence, and the court may refuse an adjournment of a motion or application for the purpose of cross-examination where the party seeking the adjournment has failed to act with reasonable diligence.

EVIDENCE BY EXAMINATION OF A WITNESS

Before the Hearing

39.03 (1) Subject to subrule 39.02 (2), a person may be examined as a witness before the hearing of a pending motion or application for the purpose of having a transcript of his or her evidence available for use at the hearing.

(2) A witness examined under subrule (1) may be cross-examined by the examining party and any other party and may then be re-examined by the examining party on matters raised by other parties, and the re-examination may take the form of cross-examination.

To be Exercised with Reasonable Diligence

(3) The right to examine shall be exercised with reasonable diligence, and the court may refuse an adjournment of a motion or application for the purpose of an examination where the party seeking the adjournment has failed to act with reasonable diligence.

At the Hearing

(4) With leave of the presiding judge or officer, a person may be examined at the hearing of a motion or application in the same manner as at a trial.

Summons to Witness

(5) The attendance of a person to be examined under subrule (4) may be compelled in the same manner as provided in Rule 53 for a witness at a trial.

[11] Although there is no specific rule of civil procedure that orders or organizes the presentation of the evidence for a motion or application, typically on a motion or application, the moving party or the applicant delivers his or her notice of motion or notice of application along with supporting affidavit material, and then the responding party or the respondent delivers his or her responding affidavit to oppose the motion or application. Sometimes, there is reply evidence from the moving party or applicant. When the exchange of affidavits is completed, then the motion or application may proceed to cross-examinations. The modern practice is for the court to set a timetable or schedule or the parties to agree to a timetable for the motion or application covering the exchange of affidavits, the cross-examinations, and the exchange of factums.

[12] Although there is no specific rule of civil procedure that applies, with some modifications, the law against case-splitting regulates the delivery of the reply affidavit and the rule against case-splitting also regulates the argument at the hearing of the motion or the application. Schick v. Boehringer Ingelheim (Canada) Ltd., 2011 ONSC 63 Where the parties or the court set a timetable for the exchange of affidavits for a motion or application, the reply evidence should generally be limited to proper reply; i.e., with evidence that complies with the rule against case splitting. Lockridge v. Ontario (Ministry of the Environment, Director), 2013 ONSC 6935 (Div. Ct.)

[13] The rule against case-splitting that applies at hearings and trials restricts reply evidence and reply submissions to matters raised by the defendant or responding party and does not permit the plaintiff or applicant to deliver new evidence. The rationale is that the defendant or respondent is entitled to know and to respond to the case being made against him or her, and, therefore, the plaintiff or applicant should not split his or her case and take the opponent by surprise and without an opportunity to respond. It is intrinsically unfair for a plaintiff, applicant, or moving party to add new evidence or new argument after the defendant, respondent, or responding party has completed his or her evidence and argument. Moss v. Crane, 2013 MBQB 13 Reply evidence is admissible only when defendant, respondent, or responding party has raised a new matter that could not be reasonably anticipated by the plaintiff, applicant, or moving party or where the reply evidence is in response to an issue enlarged by the opponent in a manner that could not have been reasonably foreseen. Moss v. Crane, 2013 MBQB 13

[14] The standard for permissible reply evidence, however, is less strict for motion and application procedure than the standard applied at trial. When the reply evidence for a motion or application is introduced before the cross-examination and the hearing on the merits, a less rigorous standard applies. Lockridge v. Ontario (Ministry of the Environment, Director), 2013 ONSC 6935 at paras. 16-30 (Div. Ct.) Once cross-examinations begin, the admission of reply evidence is governed by rule 39.02 (2) of the Rules of Civil Procedure, discussed below, and the standard for admitting reply evidence is higher, but still not as strict as the standard at trial. Lockridge v. Ontario (Ministry of the Environment, Director), 2013 ONSC 6935 at para. 23 (Div. Ct.)

[15] On motions and applications, in appropriate circumstances, the court has a discretion to admit the improper reply evidence and to allow the opponent to respond with a sur-reply affidavit. Friends of Lansdowne v. Ottawa (City), 2011 ONSC 1015 (Master) Ultimately, it is a balancing exercise, with the goal of ensuring that each party has a fair opportunity to present its case and to respond to the case put forward by the other party. Lockridge v. Ontario (Ministry of the Environment, Director), 2013 ONSC 6935 (Div. Ct.)

[16] In Canadian Triton International, Ltd. (Assignees of) v. National Iranian Oil Co., [2005] O.J. No. 949 (Div. Ct.), Justice Lane refused to grant leave to appeal to the Divisional Court a decision of Justice Hoy, as she then was. Justice Hoy had declined to apply the rule against case-splitting as an aspect of motion and application procedure. However, upon closer analysis, the problem in the case was not a matter of case-splitting but was more a matter of allowing a party to file a supplementary or confirmatory affidavit before any of the parties were cross-examined. In the Canadian Triton International, Ltd., the moving party was the defendant who challenged the court’s jurisdiction as forum non conveniens. Before there were any cross-examinations, the defendant’s expert delivered an affidavit, the plaintiff’s expert delivered a responding affidavit, the defendant’s expert delivered a reply affidavit, and the plaintiff’s expert delivered a sur-reply affidavit that was confirmatory of his earlier affidavit. Thus, the unfairness that the rule against case-splitting was designed to prevent was not present in the Canadian Triton International, Ltd. case and the court allowed the sur-reply affidavit.

[17] As set out above, the rules of procedure require that all the affidavits be delivered before the commencement of cross-examinations and the examination of witnesses in aid of the motion or application. In determining whether to grant leave for an additional affidavit or another examination and upon what terms, if any, the court will consider whether the matter raised on the cross-examination was relevant to the litigation, whether the affidavit sought to be filed is responsive to the matter, and whether allowing the delivery of the affidavit would operate unfairly against the adverse party. Skrobacky (Attorneys for) v. Frymer, 2011 ONSC 3295 The rule about the delivery of subsequent affidavits should not be used as a mechanism for correcting deficiencies in the motion materials. Hartmann v. 2504886 Ontario Inc., 2017 ONSC 2483 (Master) A party cannot see how it makes out on cross-examination and then determine whether it needs to bolster its case by reply evidence. Shell Canada Products v. Northmore [1997] O.J. No. 523 (Gen. Div.) The moving party has a high threshold to meet and leave should only be granted sparingly. Shah v. LG Chem Ltd., 2015 ONSC 776

[18] On a motion for leave to file a further affidavit, a party should explain why the evidence could not have been included as part of its pre-cross-examination evidence, Brock Home Improvement Products Inc. v. Corcoran (2002), 58 O.R. (3d) 722 (S.C.J.) but in Nolan v. Canada (Attorney General) (1997), 38 O.R. (3d) 722 (Gen. Div.), Justice Quinn rejected the proposition that leave could only be granted to introduce evidence to respond to a matter that had been raised for the first time during the cross-examination. In First Capital Realty Inc. v. Centrecorp Management Services Ltd., [2009] O.J. No. 4492 at para. 4 (Div. Ct.), the Divisional Court adopted this point, and the Court also stated that a flexible, contextual approach is to be taken in assessing the criteria relevant to rule 39.02(2), having regard to the overriding principle outlined in Rule 1.04 of the Rules of Civil Procedure that the rules are to be interpreted liberally to ensure a just, timely resolution of the dispute.

[19] The court should avoid a rigid interpretation of rule 39.02, and a flexible, contextual approach is to be preferred. Mars Canada Inc. v. Bemco Cash & Carry Inc., 2015 ONSC 8078 (Master) The criteria for determining whether a party should be granted leave to file a further affidavit after there have been cross-examinations are: (a) Is the evidence relevant? (b) Does the evidence respond to a matter raised on the cross-examination? (c) Would the opposing party suffer prejudice not compensable by an adjournment, costs, or terms? and (d) Did the moving party provide an adequate and reasonable explanation why the evidence was not included at the outset? 2386240 Ontario Inc. (c.o.b. Al-Omda Lounge) v. Mississauga (City), 2018 ONSC 3992

[20] For present purposes, the relevant provisions of the Ontario Securities Act, are s. 138.8, which states:

PROCEDURAL MATTERS

Leave to proceed

138.8 (1) No action may be commenced under section 138.3 without leave of the court granted upon motion with notice to each defendant. The court shall grant leave only where it is satisfied that,

(a) the action is being brought in good faith; and

(b) there is a reasonable possibility that the action will be resolved at trial in favour of the plaintiff.

Same

(2) Upon an application under this section, the plaintiff and each defendant shall serve and file one or more affidavits setting forth the material facts upon which each intends to rely.

Same

(3) The maker of such an affidavit may be examined on it in accordance with the rules of court. .

[21] On a motion for leave, the defendant is not obliged to file any evidence, Ainslie v. CV Technologies Inc. (2008), 93 O.R. (3d) 200 (S.C.J.) and the rights to discovery and production of documents may be limited from what would normally be available in an action that does not have a threshold of a leave motion. Mask v. Silvercorp Metals Inc., 2014 ONSC 4161 That it is optional for the defendant to adduce evidence reflects the policy that the leave requirement serves a gatekeeper function designed to protect defendants from speculative and unmeritorious statutory misrepresentation claims.

C. Facts

[22] Starting in June 30, 2014, Palladium deleted the “going concern warning” in its quarterly interim financial statements. In February 2015, KPMG issued a clean audit opinion in respect of the Company’s AIF (Annual Information Form).

[23] The Plaintiffs allege that when Palladium deleted the going concern warning, it knew or ought to have known that it was in danger of breaching its debt covenants in the upcoming 12-month period and that KPMG should have insisted on a going concern warning being inserted as a result of the risk that the company would violate its debt covenants in the upcoming 12-month period.

[24] In March 2016, the Plaintiffs brought a securities misrepresentation class action. There is a common law misrepresentation claim and also a statutory cause of action, for which leave is required, under Part XXIII.1 of the Ontario Securities Act.

[25] In April 2017, the Plaintiffs delivered a four-volume motion record in support of their motion for leave under the Ontario Securities Act. The record included Palladium’s public disclosure documents during the proposed Class Period. The record also included an expert report from Soheil Talebi, a chartered accountant. Mr. Talebi’s report was based on Palladium’s publicly disclosed core documents and KPMG’s audit report. Mr. Talebi opined on Palladium’s liability for misrepresentation.

[26] On consent of the parties, the motion for leave was originally scheduled to be heard in February 2018, but there was a case conference on September 2017, and the Defendants advised that they required additional time to respond. They requested an adjournment of the leave motion. I rescheduled the leave motion for October 18-19, 2018, and I issued a direction that the Defendants serve their responding material by December 22, 2017. I left the balance of the timetable to be agreed upon by the parties.

[27] On December 22, 2017, the Defendants delivered their respective responding records. The Palladium Defendants delivered affidavits from their fact witness, Mr. Langille, and from their expert witness, Mr. Capisciolto, of the accounting firm BDO. KPMG delivered affidavits from its fact witness, David Oldham, and its expert witness, David Yule.The Defendants filed six volumes of responding materials.

[28] Mr. Oldham’s and Mr. Langille’s affidavits included documentary information that had not been disclosed to the public. The experts, Messrs. Yule and Capisciolto, referred to this evidence in their opinions.

[29] On February 2, 2018, the Palladium Defendants served an expert report from Bradley Heys of NERA Consulting Services. Mr. Heys’ report addressed the matter of causation of damages. It was Mr. Heys’ opinion that the Plaintiffs’ losses were not attributable to the alleged misrepresentations as identified by Mr. Talebi.

[30] After the delivery of Mr. Heys report, the parties agreed to revise the timetable for the leave motion. The Plaintiffs indicated that they would deliver a reply affidavit from Mr. Talebi and a report from Andrew Mintzer, an expert retained to respond to Mr. Heys’ report on causation. The parties agreed that after the delivery of Mr. Talebi’s reply report, Messrs. Talebi, Yule, and Capisciolto would be cross-examined in April 2018. Further, the parties agreed that after the delivery of the Mr. Mintzer’s report about causation, Messrs. Oldham, Langille, Heys, and Mintzer would be cross-examined.

[31] On March 29, 2018, the Plaintiffs requested documents referred to in the Defendants’ affidavits, and on March 31, 2018, they received an electronic copy of Palladium’s Life of Mine spreadsheet that was referenced in the affidavit of Mr. Langille.

[32] On April 5, 2018, the Plaintiffs served Mr. Talebi’s reply expert report.

[33] On April 11, 2018, the Plaintiffs indicated that in addition to addressing the matter of causation, Mr. Mintzer would also address the Defendants’ liability evidence. As a result of this development, the April cross-examinations did not proceed.

[34] On May 1, 2018, the Plaintiffs delivered Mr. Mintzer’s report. The report indicates that Mr. Mintzer was retained to opine on all aspects of the Plaintiffs’ case and, in particular, whether the alleged misrepresenations were misrepresentations of material facts. Mr. Mintzer’s opinion is based on a granular review of financial documents and of KPMG’s internal memoranda disclosed by Mr. Langille and Mr. Oldham. In his 74-page, single-spaced report, Mr. Mintzer summarizes and analyzes all the evidence that had been proffered by all the witnesses. He affirms Mr. Talebi’s opinions, and he also opines on new particulars of alleged negligence not addressed by Mr. Talebi.

[35] A miniscule part of Mr. Mintzer’s report deals with the matter of causation.

[36] On May 17, 2018, the Defendant served a joint Notice of Motion to strike the Mintzer Report from evidence, or alternatively to have an opportunity to respond to the Mintzer Report.

[37] The Plaintiffs advised the Defendants that they were welcome to respond to the Mintzer Report. This offer was declined, and the Defendants went ahead with their motion to strike the portions of the Mintzer Report that do not address causation.

D. Position of the Parties

[38] The Defendants submit that the liability portions of Mr. Mintzer’s ought to be struck out for two reasons; namely: (a) the Mintzer Report contravenes the case management timetable; and (b) the Mintzer Report contravenes the rule against case-splitting. Relying on Justice Strathy’s decision in Cannon v. Funds for Canada Foundation, 2011 ONSC 2960, the Defendants submit that a party should not be permitted to depart from a timetable in a class proceeding and that it is neither proper nor fair to allow a party to introduce new and unanticipated evidence at a late stage of the proceedings unless there is a cogent and credible reason for the departure from the timetable and for the unauthorized introduction of evidence.

[39] The Defendants submit that the Plaintiffs have split their case, and although a motion is not a trial, the Defendants argue that the rationale of not permitting a party to split his or her case is an aspect of motion and application practice under rule 39.02, which organizes the conduct of cross-examinations and that limits successive rounds of evidence and cross-examinations. The Defendants submit that case-splitting and successive rounds of evidence is unfair and permitting case-splitting and successive rounds of evidence is dilatory, costly, and inefficient. They submit that successive rounds of evidence is particularly offensive in the context of a leave motion under Part XXIII.1 of the Ontario Securities Act, which is designed to protect corporate defendants from unmeritorious misrepresentation claims.

[40] Further, the Defendants submit that they made their decisions about whether to file evidence for a leave motion under Part XXIII.1 of the Ontario Securities Act based on the Plaintiffs’ initial proffer of evidence, and, therefore, the Defendants submit that it is unfair for them to be sandbagged by the Plaintiffs’ delivering a report from Mr. Talebi and then a “come to the rescue” reply report from Mr. Mintzer that raises new allegations of what counts for a material misrepresentation. The Defendants submit that permitting such an approach is unfair and contrary to the leave regime under the Ontario Securities Act.

[41] The Plaintiffs’ position is that the prohibition against case-splitting is not applicable to motions and applications. Further, even if the case-splitting prohibition applied to a leave motion under the Ontario Securities Act, the Plaintiffs submit that the prohibition does not apply in the immediate case because Mr. Mintzer utilizes information that was only received after Mr. Talebi’s first report was served, and this information could not have been obtained using rule 39.03 examinations or other evidence taking methods and was only available because the Defendants decided to file evidence.

[42] The Plaintiffs submit that applying a rule against case-splitting in the context of an action that requires leave to proceed is especially unfair because the plaintiff is disadvantaged given that it may not take measures to gather evidence from the responding party or from others before leave to proceed has been granted.

[43] Moreover, the Plaintiffs assert that the Class Proceedings Act, 1992 authorizes adjournments of a certification motion to allow a plaintiff to file additional evidence, which demonstrates the policy that reasonable adjournments to allow defendants to serve further responding material is the approach that ought to be applied in the immediate case, especially since the Defendants have requested and been granted adjournments in the immediate case.

[44] Relying on my decision in Zwaniga v. Johnvince Foods Distribution L.P., 2012 ONSC 3848, the Plaintiffs submit that the appropriate test to apply to determine whether to strike Mr. Mintzer’s report is whether there is any prejudice that cannot be addressed by admitting the report and permitting the Defendants to file a responding report. Further, the Plaintiffs submit that the admission of Mr. Mintzer’s report satisfies the test for the delivery of new evidence by reply when the reply evidence is proffered before any cross-examinations have occurred.

E. Discussion

[45] There is merit in both parties’ arguments, but, as noted above, ultimately it is a matter of balancing exercise about what is the fair procedure to apply in the circumstances of the immediate case.

[46] I do not believe that the Plaintiffs’ did it intentionally, but their decision to expand Mr. Mintzer’s mandate to repeat and to expand upon the work performed by Mr. Talebi set a litigation trap for the Defendants and this increased mandate offended the rule against case-splitting even as it applies in a case where the cross-examinations have not occurred.

[47] The parties had agreed to a timetable and are taken to have agreed to the rules that govern reply evidence. Even if Mr. Mintzer’s reply evidence had have been delivered by Mr. Talebi, it would have not have been proper reply, and it was all the more improper reply to have been delivered by a different expert witness hired to replicate and improve upon Mr. Talebi’s work.

[48] The Defendants were under no obligation to file any evidence for the leave motion, and they were protected from discovery and production. Based on Mr. Talebi’s opinion of what was a material misrepresentation, the Defendants, however, did not take cover; rather, they joined issue and they filed evidence. It is both technically and substantively unfair to allow the Plaintiffs to split their case in these circumstances.

[49] The Plaintiffs submit that they should be permitted to use Mr. Mintzer’s evidence because applying a rule against case-splitting in the context of an action that requires leave to proceed is unfair as the plaintiff is disadvantaged, given that it may not take measures to gather evidence from the responding party or from others before leave to proceed has been granted.

[50] There is, however, no unfairness because the design of Part XXIII.1 of the Ontario Securities Act requires a plaintiff to demonstrate some merit to its case without any assistance from the defendant. The secondary market misrepresentation remedies provided by the Act is a finely-tuned regime that balances the substantive and procedural rights of the parties. I see no unfairness of applying the rule against case-splitting in the circumstances of the immediate case. In contrast, I see unfairness in not applying the rule. The Defendants responded to the case they thought they had to meet, and it is spring a trap to now make them respond to a different case.

[51] The Plaintiffs’ reliance on my decision in Zwaniga v. Johnvince Foods Distribution L.P., 2012 ONSC 3848, where I permitted reply evidence that contravened the rule against case-splitting is of no assistance to them. In that case, I allowed the reply evidence because the defendant’s objection was purely technical and the defendant was not substantively prejudiced by the admission of the evidence and its position was that substantively the evidence was more helpful than harmful. The case at bar, however, presents itself as genuine case of case-splitting, and it also appears to be a case where Mr. Mintzer’s evidence is being used to correct deficiencies in the Plaintiffs’ case in-chief.

[52] From a policy perspective, a defendant to an action under Part XXIII.1 of the Ontario Securities Act should not be exposed to unexpected adverse procedural and evidentiary consequences if he or she does join issue with plaintiff by filing affidavit evidence and producing documents upon which the plaintiff can build its case; thus, the rule against case-splitting is appropriate to be applied on a leave motion, especially in a case where the parties can be taken to have expected the rule against case-splitting to apply because they had agreed to a formal timetable.

[53] Each case of determining whether to permit a reply affidavit that may amount to case-splitting must be decided in accordance with its own circumstances and exigencies, and, in some cases, it will be appropriate to admit the reply evidence and to allow a sur-reply or to impose terms. In my opinion, the case at bar is not such a case, and it is appropriate to grant the defendants’ motion and to strike Mr. Mintzer’s affidavit.

F. Conclusion

[54] For the above reasons, I grant the Defendants’ motion, and I strike Mr. Mintzer affidavit dated May 1, 2018 in its entirety with leave for the Plaintiffs to deliver a new affidavit from Mr. Mintzer confined solely to the issue of causation, which was the original expectation of the Defendants. No further affidavits shall be filed by either party without further order of this court.

[55] In my opinion, this is an appropriate case to order costs in the cause.

Perell, J.

Released: July 26, 2018