COURT FILE NO.: CV-17-569023CP

DATE: 2018/09/13

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Ashleka Persaud and Ten Eight Vacations Ltd.

Plaintiff

– and –

Talon International Inc.

Defendant

Mitchell Wine for the Plaintiff

Michael Tamblyn, Symon Zucker and Nancy Tourgis for the Defendant

Pursuant to the Class Proceedings Act, 1992

HEARD: August 16, 2018

PERELL, J.

REASONS FOR DECISION

A. Introduction

[1] This a proposed class action under the Class Proceedings Act, 1992.[^1] The Plaintiff Ashleka Persaud signed an agreement to purchase a hotel condominium unit from the Defendant Talon International Inc in the Trump International Hotel and Tower Toronto. She seeks to have the agreement rescinded and the deposit refunded with interest. Ms. Persuad brings her action on behalf of purchasers of hotel condominium units who paid a deposit and who seek rescission of their agreements with Talon.

[2] Ms. Persaud now moves to have the action certified as a class proceeding. She also requests that the class action be consolidated with action CV-14-498306, which is an action in which Talon is the plaintiff and Ms. Persaud is the defendant. In that action, Talon seeks to forfeit the deposit and to claim damages for breach of contract.

[3] Talon resists certification and submits that none of the certification criteria are satisfied.

[4] For the reasons that follow: (a) I conditionally approve the certification of Ms. Persaud’s action as a class action; and (b) in any event, I consolidate the action in which Ms. Persaud is a defendant with the class action in which she is plaintiff.

[5] I conclude that all of the certification criteria with the exception of the representative plaintiff criterion are satisfied.

[6] I conclude that the representative plaintiff criterion can be satisfied provided that Ms. Persaud’s delivers a notice of change of lawyer from current proposed Class Counsel Levine, Sherkin, Boussidan within sixty days. Her choice of Class Counsel must be approved by the Court. If Ms. Persaud fails to appoint a new Class Counsel, her motion for certification shall be dismissed and only the consolidation order shall be granted.

B. Facts

1. The Marketing of the Hotel Units

[7] Talon is the parent corporation of Talon International Development Inc. Both corporations were incorporated under the laws of the Province of Ontario with registered head offices in Markham, Ontario.

[8] In 2004, Talon owned a property municipally known as 311-325 Bay Street, in the City of Toronto on which it was constructing a mixed-use condominium project known as the Trump Tower, named after Donald John Trump, Sr., the current president of the United States, who was then a real estate developer.

[9] Trump Tower was comprised of a hotel, hotel condominium units, and condominium residential units. Talon was licenced to use the Trump name pursuant to a licence agreement. There were two condominium declarations. There were 261 hotel condominium units and 118 residential condominium units. The residential units are not the subject of the proposed class action.

[10] The hotel, which bore the name Trump International Hotel in Toronto, was to be managed by Trump Toronto Hotel Management Corp., a Delaware corporation owned by Mr. Trump. Also involved was Trump Marks Toronto LP (“Trump Marks”), a Delaware limited partnership. Trump Marks is the licensor of the Trump name and trademarks in Canada, and it had entered into licence agreements for the use of the Trump name and trademarks for the Trump Tower.

[11] Talon’s development and sale of the hotel condominium appeared to be the sale of “security,” which is a very broadly defined term under the Securities Act,[^2] and so by letter dated April 28^th, 2004, pursuant to s. 74 of the Securities Act, Talon’s lawyers applied on Talon’s behalf for an exemption from the requirement to file a prospectus when selling a security.

[12] Talon's lawyers sought this exemption because, under s. 1(1) of the Securities Act, the definition of "security" includes "any investment contract". Without conceding the point, Talon's lawyers explained in Talon’s application for the exemption that there was a risk that a Hotel Unit could be considered an investment contract for purposes of the Act. If so, without an exemption, the Hotel Units could not be sold or resold by real estate brokers, and any sale or resale would have to comply with the dealer registration and prospectus requirements of the Act. In other words, Talon wanted the Hotel Units to be treated as real estate, not as securities.

[13] The law firm’s letter set out the reasons for seeking the exemption, and the law firm made certain representations on behalf of Talon as to how it planned to market the Hotel Units, which required purchasers to enter into a Reservation Agreement governing the renting of Hotel Units. The letter stated:

[A] Hotel Unit will generally appeal only to persons who wish to defray related ownership expenses through participation in the Reservation Program […];

(a) Hotel Units will be marketed primarily as first-class luxury condominium units to be used for short-term transient hotel occupancy or for longer-term occupancy. The Reservation Program is merely a secondary feature which offers participating purchasers a means to defray related ownership expenses as opposed to an investment vehicle for making a gain or profit of the type contemplated by Howey and Hawaii;

(b) In keeping with this marketing approach of emphasizing the predominance of the luxury transient hotel occupancy features of Hotel Units, prospective purchasers of Hotel Units will not be provided with rental or cash flow forecasts or guarantees or any other form of financial projection or commitment on the part of [Talon];

(c) An initial purchaser of a Hotel Unit before an Agreement of Purchase and Sale is entered into would receive an offering memorandum called a Disclosure Document. This would be in the form of the disclosure statement required under the Condominium Act, 1998, S.O. 1998, c. 19 (the “Condominium Act”) but would also “include additional information in the body of the disclosure statement relating to the real estate securities aspects of the offering prepared substantially in accordance with the form and content requirements of 45-906F of the Securities Act (British Columbia), S.B.C. 1985, c. 83 (“Form 45-906F”);

(d) As stated in paragraph 9.04, no purchaser of a Hotel Unit who elects to participate in the Reservation Program will be provided with rental or cash flow guarantees or any other form of financial projection or commitment on the part of [Talon], except for the budget that must be delivered to an initial purchaser of a Hotel Unit pursuant to the Condominium Act;

(e) A Disclosure Document Summary of the Disclosure Document shall be prepared that includes certain items in Form 45-906F; and

(f) [I]f Hotel Units are marketed and structured in the manner described above, it is our submission that trades therein they [sic] should be entitled to an exemption from the registration and prospectus requirements of the Act. It is our submission that Hotel Units will not be marketed or structured as investments for profit or gain within the meaning of Howey and Hawaii. Hotel Units will instead be marketed as luxury hotel condominium units entailing exclusive occupancy rights, coupled with an opportunity to defray related ownership expenses in connection with periods of non-occupancy through voluntary participation in the Reservation Program.

[14] On May 25, 2004, the Ontario Securities Commission (“OSC”) issued a ruling exempting Talon from the requirements of sections 25 and 53 of the Securities Act. The OSC ruled that it was not necessary for Talon to obtain approval of a prospectus to sell the Hotel Units, and it authorized a different means for the Hotel Units to be sold. The OSC allowed the Hotel Units to be sold as real estate.

[15] The OSC’s ruling set out many of the representations made by Talon’s lawyers in the application for an exemption, including representations numbered 23, 24, 28 and 29 which dealt with financial information. These representations stated:

23. Hotel Units will be marketed primarily as first-class luxury hotel condominium units to be used for short-term transient hotel occupancy or for longer term occupancy. The Reservation Program is merely a secondary feature which offers participating purchasers a means to defray related ownership expenses, as opposed to an investment vehicle for making a gain or profit.

24. Prospective purchasers of Hotel Units will not be provided with rental or cash flow forecasts or guarantees or any other form of financial projection or commitment on the part of the Applicant.

25. No purchaser of a Hotel Unit who elects to participate in the Reservation Program will be provided with rental or cash flow guarantees or any other form of financial projection or commitment on the part of the Applicant, except for the budget that must be delivered to an initial purchaser of a Hotel Unit pursuant to the Condominium Act.

26. The economic value of a luxury hotel condominium of this type will be attributable primarily to its real estate component because Hotel Units will be marketed as luxury transient occupancy hotel condominium properties and will not be offered or sold with an emphasis on the expected economic benefits of the Reservation Program and the Reservation Program Agreement.

[16] The OSC Ruling required that before entering into an agreement of purchase and sale with a prospective purchaser, Talon should deliver an offering memorandum in the form of a disclosure statement required under the Condominium Act, 1998.[^3]

[17] This Disclosure Document would include information about "the risk factors that make the offering of Hotel Units a risk or speculation." The Disclosure Document would explain that prospective purchasers have a statutory right of action for misrepresentation under s. 130.1 of the Securities Act. Prospective purchasers would also be informed of their right under the Condominium Act, 1998 to rescind an agreement of purchase and sale within ten days of receiving the Disclosure Document or a material amendment to the Disclosure Document.

[18] In 2004, Talon began marking the hotel and the residential units to the public. Talon opened a sales centre at the construction site. Almost all of the Hotel Units offered for sale were studio, one-bedroom, or two-bedroom units.

[19] Talon prepared marking documents including a document entitled Frequently Asked Questions about Hotel Condominiums and these documents were used by Adina Zak, Talon’s sales representative, to market the units. A PowerPoint presentation was posted on the Trump Tower website. Advertisements were placed in newspapers, magazines, and other media. All purchasers received a promotional DVD and were shown a 41-slide PowerPoint presentation, which described various aspects of purchasing a Hotel Unit in the Trump Tower. The presentation depicted four different studio units in the hotel.

[20] The presentation included a document for the four studio units being sold entitled: “Estimated Return on Investment” (the “Estimate”).

[21] More precisely, there was four versions of Estimates for four different suite types. Visitors to the sales centre were provided with customized versions of the Estimates for the type of Hotel Unit that they were interested in possibly purchasing.

[22] The Estimates provided the following information: (a) purchase price of the Hotel Unit (ranging from $784,000 to $843,000); (b) monthly common expense fees (ranging from $1,827 to $2,081); (c) estimated daily room rental rate (ranging from $550 to $600); (d) daily occupancy fee (housekeeping) of $60; (e) percentage amount of purchase price to be financed [mortgaged]; (f) mortgage interest (estimated at a 6% interest rate); (g) property taxes (estimated at 2% of purchase price); (h) average occupancy (ranging from 55% to 75%); (i) yearly return earned by an investor in the Hotel Unit (ranging from $18,144.41 to $63,627.70); and (j) annual return on cash invested in the Hotel Unit (ranging from 6.46% to 21.57%).

[23] As required by the OSC’s ruling and by the Condominium Act, 1998, Talon prepared a Disclosure Statement to be given to purchasers of a Hotel Unit. The initial Disclosure Document or Statement was dated June 17, 2004 and in the following years, it was amended from time to time.

[24] To participate in the Reservation Program with the Hotel Operator, Purchasers of Hotel Units were required to sign the “Reservation Program Agreement”.

2. Ms. Persaud’s Purchase of a Unit

[25] In 2007, Ms. Persaud and her husband Jason Boccinfuso, who is a police office, learned about the Trump Tower project from a computer search. Ms. Persaud had no direct contact with any Talon representative. Mr. Boccinfuso contacted Ms. Zak. Ms. Zak told him that an investment in a Hotel Unit would be very profitable. She gave him written Profit Estimates that she said would be met or exceeded. Mr. Boccinfuso saw the PowerPoint presentation and reviewed the Estimates with Ms. Zak.

[26] In November 2007, Ms. Persuad signed an agreement of purchase and sale, but she and Mr. Boccinfuso decided not to proceed with the transaction without partners. The agreement was cancelled during the ten-day cooling off period.

[27] About three months passed, and on March 7, 2008, Ms. Persuad signed an agreement of purchase and sale to acquire a Hotel Unit. By this time, five of Mr. Boccinfuso’s police officer colleagues had agreed to participate in the purchase.

[28] Ms. Persuad’s agreement was for Unit 1615 at a purchase price of $910,000. There was a $227,500 deposit to be paid in installments. The agreement provided that the deposit would be forfeit if the purchaser defaulted in closing the transaction.

[29] Ms. Persaud and Mr. Boccinfuso deposed that in making the purchase, they relied on the Estimate and the other information that had been provided to them by Talon.

[30] Ms. Persaud and Mr. Boccinfuso incorporated Ten Eight Vacations Ltd., (Ms. Persaud’s co-Plaintiff) to take title to Unit 1615. The $227,500 deposit for the purchase of Unit 1615 was paid.

[31] In November, 2008, Talon wrote to the purchasers of the Hotel Units to advise them that the closing for their purchases had been extended pursuant to paragraph 2(a) of the Agreement of Purchase and Sale from March 20, 2009 to November 1, 2010.

[32] Almost two years went by. The purchasers waited, until by letter dated August 11, 2010, Talon wrote to ask them to agree to a further amendment of the Agreement of Purchase and Sale to allow the Closing Date for the Hotel Units to be extended from November 1, 2010 to as late as December 1, 2011.

[33] On October 14, 2010, Talon wrote the purchasers and advised that the closing date had been delayed to September 20, 2011.

[34] On May 30, 2011, Talon wrote to purchasers to advise that the closing date would be delayed a further two months until December 20, 2011.

[35] By letter dated September 22, 2011, Talon wrote to purchasers asking them to agree to an amendment extending their closing date from December 1, 2011 to as late as March 31, 2012.

[36] In December of 2011, the interim occupancy closing date was set for January 31, 2012, but it was later extended to February 14^th, 2012, and then to February 24^th, 2012.

[37] On January 23, 2012, purchasers were advised the Trump Hotel would be open for business on January 31^st, 2012. And, it did open on that day.

[38] On February 20, 2012, four days before interim occupancy closing, Talon emailed the purchasers the following documents: (a) Reservation Program Agreement; (b) Reservation Program Highlights; (c) Reservation Program Frequently Asked Questions; (d) Hotel Unit Maintenance Program Highlights; and (e) Hotel Unit Maintenance Program Frequently Asked Questions.

[39] Question five on the Reservation Program Frequently Asked Questions discussed what fees could be anticipated under the Reservation Program. The answer was that a fee of $48.00 is charged to Hotel Units in the Reservation Program “for each night of occupancy”. This was the first time this fee had been disclosed to purchasers, and it does not appear in the Estimates.

[40] On February 24, 2012, Ms. Persaud through Ten Eight Vacations Ltd. took interim occupancy of Unit 1615, and Ms. Persuad, Mr. Boccinfuso, and his five police officer colleagues began making interim occupancy payments, which covered; (a) estimated common area expenses; (b) estimated realty taxes; (c) interest on deferred purchase monies; and (d) HST. The Reservation Program Agreement was executed for participation in the reservation program to earn revenue from the Hotel Unit.

[41] Other purchasers took interim occupancy also on February 24, 2012. They also signed Reservation Program Agreements and began paying occupancy fees.

[42] The occupancy of the units by hotel patrons was poor, and in the fall of 2012, in response to media reports about losses being suffered by purchasers of Hotel Units, Talon advised the purchasers that the Hotel Units might not be immediately profitable. Talon advised patience.

[43] On November 24, 2014, Levine, Sherkin, Boussidan, the lawyers who are now acting for Ms. Persaud in this proposed class action, wrote the OSC and requested the Commission to investigate alleged breaches of the Securities Act by Talon, including, the distribution of the document entitled “Estimated Return on Investment” as contrary to the OSC’s ruling by providing forecasts, projections, guarantees, cash flow statements, etc.

[44] As a result of the complaint, Talon received an inquiry letter from the OSC dated November 21, 2012. Talon responded to the OSC’s letter by letters dated November 23, and November 28, 2012.

[45] On December 4, 2012, the OSC issued a public statement. The statement indicated that after a thorough review, the OSC would not be pursuing regulatory action.

[46] The interim occupancy period lasted until December 12, 2012, which was the date scheduled for final closing. By this time, because of poor occupancy rates, the purchasers of the Hotel Units were losing between $4,000 to $5,000 per month. The Estimates were wrong, overstating revenue, understating expenses, and failing to disclose expenses.

[47] On December 12, 2012, Ms. Persuad did not complete the purchase of Unit 1615. Only 50 transactions closed.

3. Litigation Following the Abortive Closings

[48] Following the abortive closings, some of the purchasers retained Levine, Sherkin, Boussidan to commence individual actions for misrepresentation. There were 22 plaintiffs in twenty actions with respect to 27 Hotel Units. Of the 20 actions, 17 involved transactions that did not close and 3 actions involve purchases that did close. Of the 22 plaintiffs, only 7 reside in Ontario.

[49] In 2013, Justice Janet Wilson was assigned to case manage the twenty individual actions. There are currently sixteen actions involving eighteen plaintiffs (or groups of plaintiffs) who are suing Talon for rescission and the return of their deposits. Unlike the putative Class Members in the proposed class action, the plaintiffs in the sixteen actions are seeking damages in excess of the deposits they paid and seeking recovery from s Donald Trump, Alex Shnaider and Val Levitan in addition to damages from Talon. If the plaintiffs in these sixteen action do not opt out of the class action, they will waive their right to seek the damages and their claims against the additional Defendants.

[50] On February 11, 2014, in action CV-14-498306, Talon sued Ms. Persuad for breaching the contract to purchase Unit 1615. Talon sought forfeiture of the deposit and damages of $750,000. Ms. Persuad defended the action, but, she made no counterclaim. In the motion now before the court, Ms. Persaud seeks the consolidation of CV-14-498306 with her proposed class action.

[51] In late 2014, Justice Wilson directed summary judgment motions in two of the individual actions as test cases. One motion concerned the situation where a purchaser closed the Hotel Unit transaction (CV-15-522065-Lee), and the other test case concerned the situation where a purchaser did not close (CV-12-469042- Sarbjit Singh) and sought rescission and a return of his deposit. Singh v. Trump as the test case for rescission.

[52] I was assigned the task of deciding the summary judgment motions.

4. Singh v. Trump

[53] In 2015, I decided the summary judgment motions in the two test cases.[^4] I dismissed Sarbjit Singh’s action. There was an appeal, and in late 2015, my decision was reversed by the Court of Appeal.[^5]

[54] The theory of Mr. Singh’s case was complicated. There were four branches, of which all but the fourth branch is repeated for the purposes of the proposed class action now before the court. The Plaintiffs submit that three branches of their case are supported by the Court of Appeal’s decision.

[55] For the purposes of the certification motion now before the court, the Plaintiffs repeat the arguments that were made for Mr. Singh in Singh v. Trump both before me and also repeated on the appeal to the Court of Appeal. Implicitly, but not expressly, the Plaintiffs rely on the Court of Appeal’s decision as estopping Talon from disputing the factual and legal findings of the Court of Appeal.

[56] The Plaintiffs place a great deal of reliance on what the Court of Appeal decided as establishing that the certification criteria are satisfied. This issue estoppel reliance is challenged by Talon. It is, therefore, necessary, to explicate my decision and the Court of Appeal’s decision with some care.

[57] However, that exegesis is not a simple matter of simply relying on the circumstance that the appeal was granted, because only some aspects of my decision were reversed and other aspects of my decision were adopted by the Court of Appeal. Further, some aspects of my decision were not addressed by the Court of Appeal.

[58] The theory behind the first branch of Mr. Singh’s case was that because Talon breached the OSC ruling, its sales without a prospectus were illegal and as such Mr. Singh was entitled to rescission.

[59] The detailed theory of the first branch of Mr. Singh’s case was: (a) the sale of the Hotel Units was the sale of a security under the Securities Act; (b) the sale, therefore, required a prospectus or an exemption from the prospectus requirement; (c) Talon was granted an exemption and thus was permitted to use an Offering Memorandum instead of a prospectus; (d) pursuant to the OSC’s exemption ruling, the Offering Memorandum (called a Disclosure Statement or Disclosure Document) was to be constituted by the Disclosure Statement required under Ontario’s Condominium Act, 1998 augmented by some of the requirements of Form 45-906F of the Securities Act (British Columbia); (e) in its exemption ruling, the OSC stipulated that Hotel Units were to be marketed primarily as first-class luxury hotel condominium units and prospective purchasers were not to be provided with rental or cash flow forecasts or any other form of financial projection; (f) in purported compliance with the OSC’s ruling, Talon did provide a Disclosure Document or Statement; (g) however, Talon breached the OSC’s ruling by providing prospective purchasers with the Estimate, which was a rental or cash flow forecast or other form of financial projection; therefore, (h) in accordance with the authority of Jones v. F. H. Deacon Hodgson Inc.,[^6] the breach of the OSC’s ruling had the effect of vitiating the prospectus exemption, which meant, in turn, that (i) the sales agreements procured without a prospectus were illegal and void, entitling Mr. Singh to rescission.

[60] The theory of the second branch of Mr. Singh’s case was that the Estimate contained numerous misrepresentations with the result that he had a statutory misrepresentation claim under the s. 130.1 of the Securities Act.

[61] The theory of the third branch of Mr. Singh’s case was that the misrepresentations in the Estimate constituted common law and equitable claims for rescission and negligent misrepresentation.

[62] The theory of the fourth branch of Mr. Singh’s case theory was that Messrs. Trump, Levitan, and Shnaider were personally liable.

[63] In my summary judgment decision, I addressed all four branches of Mr. Singh’s case.

[64] With respect to the first branch, I found that notwithstanding the OSC’s exemption ruling, the Hotel Units were sold as an investment. However, I found that the investment was not an investment contract; i.e., the agreements were an investment but not a security instrument. Further, I found that Talon did not breach the OSC’s ruling by selling an investment contract or by providing prospective purchasers with rental or cash flow forecasts or guarantees or any other form of financial projection or commitment. In this regard, the parties were in agreement that the Estimates, whatever they were, they were not rental guarantees, cash flow guarantees, or a type of financial commitment.

[65] Because I anticipated an appeal, I considered whether, contrary to my finding, Mr. Singh had a claim based on a breach of the OSC’s ruling. I analyzed whether the breach would support a claim for rescission or damages. My analysis, which is necessary to repeat for the purposes of the proposed class action now before the court was set out in paragraphs 119-133 of my Reasons for Decision as follows:

119. Before undertaking that analysis, because my decision may be appealed, in this section I will assume that the Plaintiffs did establish a breach of the OSC’s ruling, and I will analyze whether the breach would support a claim for rescission or damages based on the Plaintiffs’ theory. Here it may be recalled that the Plaintiffs’ theory relies on Justice Henry’s decision in Jones v. F. H. Deacon Hodgson Inc., supra that a breach of the OSC’s ruling would entail a revocation of the prospectus exemption and make illegal the sales to Mr. Singh and Mrs. Lee, which were made without a prospectus.

120. I foreshadow the conclusion of this analysis to say that in my opinion, the available remedy for a breach of the OSC’s ruling would only be statutory and common law misrepresentation claims. In other words, I disagree with the Plaintiffs’ theory that a breach of the OSC’s ruling supports a mutually exclusive claim for rescission based on an illegal contract analysis.

121. I begin my analysis of the remedial consequences of a breach of the OSC’s ruling with the observation that the ultimate purpose of the OSC’s ruling was to protect prospective purchasers of Hotel Units. It was a consumer protection ruling. Although the OSC decided that the purchasers did not need the protection of receiving a prospectus, the OSC decided instead that Talon should provide purchasers with an Offering Memorandum; i.e., a Disclosure Document or Statement in the form required by Ontario’s Condominium Act, 1998 augmented by the content of Form 45-906F of the Securities Act (British Columbia) and subject to the remedies available under both statutes.

122. The OSC’s ruling answers the questions of what remedies the prospective purchasers would have for failed or non-compliance by Talon of its disclosure obligations. Here it may be recalled that paragraph 27 of the ruling states:

123. Each initial purchaser of a Hotel Unit will have a statutory right of action referred to in section 130.1 of the Act. The Disclosure Document will describe the statutory right of action, including any defences available to the Applicant, the limitation periods applicable to the exercise of the statutory right of action, and will indicate that the rights are in addition to any other right or remedy available to the purchaser.

124. Section 130.1 of the Securities Act and its limitation period, found in s. 138 state:

125. Here, it also may be noted that the prospective purchasers of a Hotel Unit had their common law remedies and the remedies provided by sections 72-74 and 133 of the Condominium Act, 1998, which state:

126. In my opinion, it is transparent that the OSC did not intend to revoke Talon’s exemption from the prospectus requirements of the Securities Act if Talon breached the OSC’s exemption ruling. Rather, the OSC intended that the purchasers would be protected by s. 130.1 of the Securities Act, sections 72-74 and 133 of the Condominium Act and all that protection without derogation of the purchasers’ rights at common law and in equity for rescission or damages.

127. The Plaintiffs rely on Jones v. F.H. Deacon Hodgson Inc., supra for the proposition that if the OSC’s exemption ruling is breached then the exemption is revoked and the vendor who has sold pursuant to an Offering Memorandum has breached the Securities Act by selling securities without a required prospectus making the sales illegal and void and, in turn, entitling the purchaser to claim rescission and damages.

128. Jones v. F.H. Deacon Hodgson Inc., however, does not support the Plaintiffs’ complicated theory in pursuit of rescission and damages.

129. The facts of Jones v. F.H. Deacon Hodgson Inc. were that in January 1982, the defendant F.H. Deacon Hodgson Inc., an investment dealer, offered for sale shares in Bacova Investments Limited, a company that had been incorporated for the purpose of investing in an oil exploration company whose shares are traded over the counter. In January, 1982, Deacon offered for sale shares in Bacova and solicited subscribers. This subscription program constituted a distribution of shares to the public within the meaning of s. 52(1) of the Securities Act but Bacova did not file a prospectus with the Ontario Securities Commission as required by s. 52(1)(a) of the Act.

130. One of the subscribers, Mr. Jones, sought to have his purchase of shares rescinded because there had been a sale without a prospectus, but F.H. Deacon Hodgson Inc. moved to have the action dismissed. It argued that Mr. Jones’ remedy was under s. 130 of the Securities Act, which provides a purchaser a right of rescission within a three-year period if he or she is a purchaser to whom a prospectus was required to be sent or delivered but to whom the prospectus was not sent or delivered. F.H. Deacon Hodgson Inc. argued that Mr. Jones had waited too long to seek rescission.

131. Mr. Jones’ counter to F.H. Deacon Hodgson Inc.’s argument was that he was not relying on s.130 of the Securities Act but on the common law that makes an illegal contract void; i.e. a contract contrary to statute void. His argument was that F.H. Deacon Hodgson Inc. had sold shares without any prospectus contrary to the Securities Act making the sales contracts illegal and void. He argued that this common law action was not precluded by the Securities Act and it was a timely action.

132. Justice Henry agreed with Mr. Jones’ argument. Justice Henry noted that s. 52 of the Securities Act dealt with the circumstance where there was a prospectus but a failure to deliver it to the purchaser but that Mr. Jones was alleging a different contravention of the Act, that of selling shares without a prospectus. The Act itself did not expressly provide a remedy for this situation. Justice Henry noted, however, that in Re Northwestern Trust Co., McAskill's Case, 1926 57 (SCC), [1926] S.C.R. 412, the Supreme Court had held that the sale of shares contrary to statute made the sale void. The issue then for Justice Henry was whether, as a matter of statutory interpretation, s. 52(1) of the Ontario Securities Act left unimpaired the common law principle that a breach of a statutory prohibition results in a sale of shares that is void. Justice Henry concluded there was no reason to think that the Legislature had intended to alter this principle. Justice Henry summarized his reasoning in paragraphs 31 and 32 of his judgment, where he stated:

133. By way of recapitulation:

(a) No prospectus was filed with the Ontario Securities Commission and the sale by Deacon was in breach of s. 52(1) which is a fundamental element of the statutory scheme of full disclosure and regulation by the commission for protection of the investing public in cases not exempt by the Act from the prospectus requirements.

(b) Section 70 does not here create a remedy for the plaintiff because that section applies only where a prospectus has been filed and a receipt obtained from the director.

(c) Breach of s. 52(1) does not "trigger" an offence under s. 70(1) where no prospectus is filed; the limitation in s. 135 does not apply because no cause of action is here created by Part XXII.

(d) Breach of s. 52(1) stands on its own; it is subject to a quasi-criminal penalty and regulatory action under Part XXI. The general rule, however, is that the sale is void in common law. That principle requires a clear expression by the Legislature if it was intended to abrogate it -- there is none here.

32. While the court should be reluctant to interfere with contracts freely made, in this case the overriding consideration is the need to support the fundamental purpose of the statute as a matter of public policy to protect the integrity of the regulatory scheme of the Act; contractual integrity must give way; the penalty alone and the remedies available to the commission, in my opinion, ought not to be the only deterrent or remedy. Moreover, the scheme would be seriously impaired were the court to preserve the legal transaction and deprive the purchaser of a remedy where no prospectus has been filed at all and to recognize his only civil remedy is that created by s. 70 and other provisions of Part XXII all of which are limited to cases where s. 52 has been complied with; that would ignore the fundamental breach and support only the remedies provided in cases in which the prospectus has been filed and accepted as required.

(e) I am aware that while my decision precludes the dealer from enforcing an illegal contract against the purchaser, the purchaser cannot enforce it against the vendor should he prefer to do so; he, of course, may prefer not to exercise his remedy and continue to hold the shares. It seems to me, however, that the purchaser otherwise may maintain an action for a declaration that the contract is void and that he is entitled to recover the price paid for the shares as a form of unjust enrichment in the hands of the vendor. The court ought to provide him with that remedy at least as an innocent party (so far as this motion is concerned). On the other hand, I should deem it sound judicial policy for the court to refuse to entertain an action by the vendor (or allow it a defence), in reliance on the void transaction on the ground that to do so would enable the vendor to profit by his illegal conduct. This latter point I am frank to say is obiter as I am not obliged to decide it.

132. Jones v. F.H. Deacon Hodgson Inc. does not assist the Plaintiffs in the case at bar because it deals with the circumstance of a sale of securities without a prospectus when there were no disclosure documents at all. The case at bar is about the sale of securities with an Offering Memorandum because the OSC exempted the vendor from delivering a prospectus, which is a different situation. Unlike the situation in Jones v. F.H. Deacon Hodgson Inc., there is no lacuna in the protection provided to the purchasers of the Hotel Units by the absence of a prospectus. The purchasers received the Offering Memorandum, statutory remedies under both the Securities Act and the Condominium Act, 1998, and any common law and equitable remedies for misrepresentation.

133. In my opinion, the purchasers, however, do not have a common law remedy based on a theory that a breach of the OSC’s ruling retrospectively revoked the prospectus exemption making the distribution of Hotel Units an illegal contract. The conclusion of my analysis is that in the case at bar, the only remedies for any breach of the OSC’s ruling are the statutory and common law misrepresentation claims to which I now turn.

[66] Turning to the second and third branches of Mr. Singh’s case, having concluded that Mr. Singh did not have a claim based on a breach of the OSC’s ruling, I turned to Mr. Singh’s common law and statutory claims for misrepresentation.

[67] I concluded that although Talon had not breached the OSC ruling, that this finding did not preclude Mr. Singh’s statutory or common law misrepresentation claims. I concluded that the Estimate contained several actionable misrepresentations. I concluded that the Estimates bore no relation to financial reality. I found the Estimates to be deceptive documents replete with misrepresentations of commission, omission, and of half-truth. These findings are an example of where the Court of Appeal agreed with my analysis.

[68] However, I dismissed Mr. Singh’s claim, for fraudulent misrepresentation because I did not believe that a claim for fraud had been pleaded. This is an example of where the Court of Appeal disagreed with my analysis.

[69] As for the negligent misrepresentation claim, I dismissed the claim because I concluded that Mr. Singh had not proven that he reasonably relied on the Estimates and reasonable reliance is a constituent element of the common law negligent misrepresentation claim. Further, I concluded that Talon was protected from liability by the entire agreement clause and the other exculpatory provisions of the Agreement of Purchase and Sale and the related contracts that applied to preclude Mr. Singh’s misrepresentation-based claims

[70] I dismissed Mr. Singh’s statutory misrepresentation claim because the misrepresentations of the Estimate were not a part of the disclosure documents under the Condominium, 1998. At paragraphs 222-223 of my Reasons for Decision, I stated:

222. As appears from the above discussion, Mr. Singh’s and Mrs. Lee’s misrepresentation claims are rooted in the Estimate. The Estimate came before and was extraneous to the Offering Memorandum or Disclosure Documents directed by the OSC, and the Estimate is extraneous to the Disclosure Statements required by the Condominium Act, 1998.

223. Mr. Singh and Mrs. Lee do not allege actionable misrepresentations in the Offering Memorandum or false and misleading statements in the Disclosure Documents provided to them pursuant to the Condominium Act, 1998, and they thus have only their common law claim for negligent misrepresentation and their equitable claim for rescission potentially available to them.

[71] Mr. Singh appealed to the Court of Appeal, and he relied on all four of his case theories.

[72] The Court of Appeal granted the appeal based only on the negligent misrepresentation theory, and the Court left open the possibility that Mr. Singh might have a fraudulent misrepresentation claim.

[73] To describe the Court of Appeal’s reasons, it is helpful to begin with paragraphs 92-97 of Justice Rouleau’s reasons for the Court. In those paragraphs, he summarized the Court’s conclusions, as follows:

Overview

92. The plaintiffs appeal the motions judge's decision to dismiss the motions as against Talon on all three grounds they raised in the court below. They also appeal the dismissal of the claims against Shnaider, Levitan and Trump.

93. In my view, the appeal as against Talon can be decided on the basis that the motions judge, having found that four of the five elements for a claim of negligent misrepresentation were made out, erred in holding that the plaintiffs failed to establish the fifth element, reasonable reliance.

94. I would also hold that the motions judge erred in enforcing the entire agreement and other exculpatory clauses to bar the plaintiffs' actions. In light of the circumstances and context in which the clauses were entered into, it would be unconscionable to enforce those clauses to bar the plain-tiffs' claims.

95. In addition, I would set aside the motions judge's dismissal of Mrs. Lee's claim as time-barred. Although they raised limitation provisions in the Securities Act and the Condominium Act in their statement of defence, the defendants did not plead the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B., nor did they seek leave to amend to do so. Further, they failed to raise a Limitations Act defence in their written submissions on the motions for summary judgment. In these circumstances, it was not appropriate for the motions judge to invoke the Limitations Act to dismiss Mrs. Lee's claim.

96. I also disagree with the motions judge's conclusion that fraudulent misrepresentation had not been pleaded. Although the statement of claim does not use the words "fraudulent misrepresentation", all of the elements and materials facts for such a claim are pleaded and the claim was brought to the respondents' attention in the factum filed on the summary judgment motions. Be-cause the motions judge did not make the necessary factual findings, this claim should simply be remitted to be determined on a subsequent motion or at trial.

97. With respect to the action against Shnaider, Levitan, and Trump, I agree that the claims that were the subject of the motions for summary judgment were properly dismissed. In my view, how-ever, the motions judge erred in dismissing the claims against the three individual defendants that were not properly before him.

[74] To the above overview, which summarizes the findings of the Court of Appeal, it should be observed that in the context of concluding that it would be unconscionable to enforce the exculpatory provisions in the agreements of purchase and sale and in the other documents, the Court of Appeal held that Talon in contravention of the OSC’s ruling marketed the Hotel Units as investments, investment vehicles, and as investment contracts. This is another example where the Court of Appeal disagreed with my analysis.

[75] In the context of determining whether the exculpatory provisions in the sales contract were enforceable, the Court of Appeal also held that the Estimates provided rental or cash flow forecasts or guarantees or a financial projection or commitment and the providing of the Estimates was a breach of the OSC’s ruling. Justice Rouleau stated at para. 129 of his judgment that it was unconscionable to enforce the exculpatory provisions to escape liability for misrepresentations made in breach of the terms of granting an exemption; he stated:

120. In my view, it would be unconscionable and would shock the conscience to allow a party to use an entire agreement or other exculpatory clause to escape liability for misrepresentations made in breach of the OSC's terms for granting an exemption from the Securities Act requirements. The entire agreement and other exculpatory clauses would operate to negate a negligent misrepresentation claim and the misrepresentation itself was only possible in this case because Talon evaded protective requirements under the Securities Act by obtaining the exemption and then breaching that exemption.

[76] The Court concluded that Mr. Singh was entitled to the remedy of rescission. For reasons that will become clearer in the discussion below, it is important to repeat that although Mr. Singh appealed relying on all three of his theories of liability, the Court of Appeal expressly indicated that it was deciding the appeal only on the basis of the common law misrepresentation claim supporting a claim for rescission. The Court of Appeal felt it unnecessary to rule on whether Talon, without any ruling by the OSC, had lost the exemption from having to provide a prospectus and whether Mr. Singh had a rescission claim based on an illegal contract analysis.

[77] In paragraph 159, the Court set aside my decision and made a substitute order as follows, with respect to Mr. Singh’s action:

DISPOSITION

159. For these reasons I would set aside the motions judge's order and substitute an order:

160. rescinding Mr. Singh's agreement of purchase and sale;

161. as against Shnaider, Levitan and Trump, dismissing only those of the appellant's claims that were advanced for breach of the OSC Ruling and for misrepresentations;

162. remitting the claim for fraudulent misrepresentation to be decided on a further motion for summary judgment or at trial before the Superior Court;

163. for costs of the appeal on a partial indemnity basis to the appellants as against Talon fixed in the amount of $35,000, inclusive of disbursements and applicable taxes.

[78] In the result, Mr. Singh was successful in obtaining rescission based on his common law negligent misrepresentation claim because he had proven all the constituent elements of his claim and his claim was not barred by the exculpatory provisions in the contract documents that were unenforceable on the grounds of unconscionability.

[79] In May 2017, Mr. Singh was repaid the amount of his deposit of $173,400 plus interest due under the Condominium Act, 1998.

[80] The rescission claims of other purchasers, however, remain unresolved. Talon refused to treat the cases as test cases applicable to determine the outcome of the sixteen individual cases.

[81] Ms. Persuad’s class action is intended to resolve the purchasers claims for rescission and a refund of the deposits.

[82] In accordance with the provisions of s. 81 of the Condominium Act, 1998, the deposits are either being held in trust by Talon’s lawyers, the Toronto law firm of Harris Sheaffer LLP or are insured by Northbridge Insurance. There is approximately $20 million in trust or covered by insurance policies.

[83] Ms. Persaud does not know how much of this money relates to deposits paid by purchasers of Hotel Units and how much relates to the deposits of purchasers of residential condominium units.

C. Procedural Background

[84] Talon was not prepared to treat the outcome in the Singh v. Talon appeal as dispositive of the claims by purchasers who had paid deposits but not closed their Hotel Unit purchases, and on February 3, 2017, the Plaintiffs commenced this proposed class action.

[85] Levine, Sherkin, Boussidan is the proposed Class Counsel.

[86] The action included Ten Eight Vacations Ltd. notwithstanding that its corporate charter had been cancelled in 2016. For the purposes of this certification motion, I am going to assume that Ten Eight Vacations Ltd. will take the necessary steps to revive its corporate status or the Defendants may move to have Ten Eight Vacations Ltd.’s action dismissed. Alternatively, I am simply going to ignore Ten Eight Vacations Ltd. because the genuine necessary plaintiff is Ms. Persaud who signed the agreement of purchase and sale with Talon.

[87] In their Statement of Claim, the Plaintiffs advanced the following causes of action: (a) breach of the OSC ruling; (b) a statutory misrepresentation claim pursuant to s.131.1 of the Securities Act; (c) fraudulent misrepresentation; and (d) negligent misrepresentation. In the proposed class action, the Plaintiffs seek rescission of the Class Members’ agreements of purchase and sale and the return of their deposits. No claim for damages is being asserted.

[88] The Plaintiffs also seek a declaration that all settlements between Talon and the purchasers entered into after the release of the Court of Appeal’s decision in Singh v. Trump on October 13, 2016 are null and void.

[89] The legal basis or the various causes of action supporting the Plaintiffs’ claims, which reiterate three of the four theories advanced by Mr. Singh and discussed above, are set out in paragraphs 75-77 of the Amended Statement of Claim as follows:

75. The Plaintiffs plead all APS’s entered into by purchasers of Hotel Units should be rescinded in accordance with the decision in Singh v. Trump in that:

(a) Talon breached its obligations to the OSC in the Ruling. Accordingly, it is not entitled to rely upon the exemption provided by the OSC from the requirements of the Act. Talon, therefore, sold the Hotel Units to purchasers without registering as a dealer with the OSC and filing a prospectus. All sales of securities without a prospectus are void;

(b) Talon's misrepresentations to purchasers constituted a misrepresentation under the provisions of the [Securities] Act;

(c) Talon's misrepresentations constituted a negligent misrepresentation at common law;

(d) Talon's misrepresentations constituted a fraudulent misrepresentation at common law; and

(e) Talon failed to properly tender to purchasers of Hotel Units on the closing date fixed for completion of the APS's.

76. The Plaintiffs plead on their behalf and on behalf of the Class that they are entitled to rescission of their APS and repayment of their deposit plus interest plus legal costs from either Harris Sheaffer or Northbridge Insurance.

77. The Plaintiffs plead that any settlements entered into between purchasers of Hotel Units and Talon on or after October 13, 2016 should be set aside by this Court due to Talon's failure to advise purchasers they had a legal light to obtain rescission of their APS' as a result of the Court of Appeal's decision in Singh v. Trump.

[90] The Plaintiffs bring their proposed class action on behalf of the following class:

All purchasers of hotel condominium units (the “Hotel Units”) in the hotel portion (the “Trump Hotel”) of the Trump International Hotel and Tower Toronto (the “Trump Tower”) who paid deposits to the developer of the Trump Tower, the Defendant (“Talon”), but did not complete their transactions with Talon;

[91] The Plaintiffs propose that Ms. Persaud be the Representative Plaintiff. Once again, it appears that Ten Eight Vacations Ltd.’s involvement is superfluous.

[92] The Plaintiffs propose the following common issues:

(i) Background: The Court of Appeal held in Singh v. Trump, 2016 ONCA 747 that Talon breached representations 23, 24, 28 and 29 (the “OSC Representations”) made to the Ontario Securities Commission (the “OSC”) with respect to the marketing and sale of the Hotel Units in return for which Talon had been exempted (section 74) from the ordinary requirement under the Securities Act, R.S.O. 1990, c. S-5 (the “Securities Act”) to file a prospectus (section 53) and register as a dealer with the OSC (section 25) prior to offering securities (the Hotel Units) for sale. The exemption was provided in a ruling issued by the OSC on May 25, 2004 (the “Ruling”).

Question: What is the appropriate remedy for Talon’s breach of the OSC Representations made to the OSC?

(ii) Background: The Court of Appeal held in Singh v. Trump that Talon made two negligent misrepresentations to the Plaintiffs Sarbjit Singh (“Singh”) and Se Na Lee (the “Misrepresentations”) as follows:

(a) Talon misrepresented in a forecast/projection distributed to potential purchasers entitled Estimated Return on Investment (the “Estimates”) that it had used proper care to gather and use the best available information to forecast revenue, expenses and net income; and

(b) Talon misrepresented that the Hotel Units would be profitable upon the opening of the Trump Hotel, not after a period of “ramp-up” or “stabilization”.

Question: Were the Misrepresentations misrepresentations as defined in the Securities Act (section 130.1)? Were the Misrepresentations material statements that were false, deceptive or misleading as defined by the Condominium Act, 1998 (section 133) If the answer is yes to either question, what is the appropriate remedy?[^7]

(iii) Were the Misrepresentations also fraudulent misrepresentations at common law? Is the answer is yes, what is the appropriate remedy?

(iv) In considering a claim that the Misrepresentations were negligent misrepresentations made to Class Members requiring proof of reasonable reliance by the Class Members, is the Court able to infer reliance by the Class Members on the Estimates?

(v) If any purchasers of Hotel Units agreed to a settlement with Talon on or after October 13, 2016 (the date Singh v. Trump was released by the Court of Appeal), was Talon obligated to disclose to those purchasers the Court of Appeal decision? If Talon did not make such disclosure, what is the appropriate remedy?

(vi) If any purchasers of Hotel Units agreed to a settlement with Talon on or after this class proceeding was commenced, February 3, 2017, was Talon obligated to disclose to those purchasers that a class proceeding was pending? If Talon did not make such disclosure, what is the appropriate remedy?

(vii) Is this class proceeding barred by virtue of section 4 of the Limitations Act, 2002, S.O. 2002, c. 28?

D. Certification: General Principles

[93] The court has no discretion and is required to certify an action as a class proceeding when the following five-part test in s. 5 of the Class Proceedings Act, 1992 is met: (1) the pleadings disclose a cause of action; (2) there is an identifiable class of two or more persons that would be represented by the representative plaintiff; (3) the claims of the class members raise common issues; (4) a class proceeding would be the preferable procedure for the resolution of the common issues; and (5) there is a representative plaintiff who: (a) would fairly and adequately represent the interests of the class; (b) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and (c) does not have, on the common issues for the class, an interest in conflict with the interests of other class members.

[94] For an action to be certified as a class proceeding, there must be a cause of action shared by an identifiable class from which common issues arise that can be resolved in a fair, efficient, and manageable way that will advance the proceeding and achieve access to justice, judicial economy, and the modification of behaviour of wrongdoers.[^8] On a certification motion, the question is not whether the plaintiff's claims are likely to succeed on the merits, but whether the claims can appropriately be prosecuted as a class proceeding.[^9] The test for certification is to be applied in a purposive and generous manner, to give effect to the goals of class actions; namely: (1) providing access to justice for litigants; (2) encouraging behaviour modification; and (3) promoting the efficient use of judicial resources.[^10]

[95] The purpose of a certification motion is to determine how the litigation is to proceed and not to address the merits of the plaintiff's claim; there is to be no preliminary review of the merits of the claim.[^11] However, the plaintiff must show “some basis in fact” for each of the certification criteria other than the requirement that the pleadings disclose a cause of action.[^12] In the context of the common issues criterion, the "some basis in fact" standard involves a two-step requirement that: (1) the proposed common issue actually exists; and (2) the proposed issue can be answered in common across the entire class.[^13]

[96] The “some basis in fact” test sets a low evidentiary standard for plaintiffs, and a court should not resolve conflicting facts and evidence at the certification stage or opine on the strengths of the plaintiff’s case.[^14] In particular, there must be a basis in the evidence to establish the existence of common issues.[^15] To establish commonality, evidence that the alleged misconduct actually occurred is not required; rather, the necessary evidence goes only to establishing whether the questions are common to all the class members.[^16]

[97] The representative plaintiff must come forward with sufficient evidence to support certification, and the opposing party may respond with evidence of its own to challenge certification.[^17] Certification will be denied if there is an insufficient evidentiary basis for the facts on which the claims of the class members depend.[^18]

[98] On a certification motion, evidence directed at the merits may be admissible if it also bears on the requirements for certification but, in such cases, the issues are not decided on the basis of a balance of probabilities, but rather on the much less stringent test of some basis in fact.[^19] The evidence on a motion for certification must meet the usual standards for admissibility.[^20] While evidence on a certification motion must meet the usual standards for admissibility, the weighing and testing of the evidence is not meant to be extensive, and if the expert evidence is admissible, the scrutiny of it is modest.[^21] In a class proceeding, the close scrutiny of the evidence of experts should be reserved for the trial judge.[^22]

E. Cause of Action Criterion

1. General Principles: Cause of Action Criterion

[99] The first criterion for certification is that the plaintiff's pleading discloses a cause of action. The "plain and obvious" test for disclosing a cause of action from Hunt v. Carey Canada,[^23] is used to determine whether a proposed class proceeding discloses a cause of action for the purposes of s. 5(1)(a) of the Class Proceedings Act, 1992. To satisfy the first criterion for certification, a claim will be satisfactory, unless it has a radical defect, or it is plain and obvious that it could not succeed.[^24]

[100] In a proposed class proceeding, in determining whether the pleading discloses a cause of action, no evidence is admissible, and the material facts pleaded are accepted as true, unless patently ridiculous or incapable of proof. The pleading is read generously, and it will be unsatisfactory only if it is plain, obvious, and beyond a reasonable doubt that the plaintiff cannot succeed.[^25]

2. Analysis: Cause of Action Criterion

[101] The Plaintiffs plead five causes of action.

[102] Four causes of action are pled in support of their claim for rescission and for return of the deposits; namely: (1) Talon contravened the ruling of the OSC voiding the exemption and, therefore it unlawfully sold securities without a prospectus; (2) statutory misrepresentation contrary of the Securities Act; (3) statutory misrepresentation contrary to the Condominium Act, 1998; (4) negligent misrepresentation; and (5) fraudulent misrepresentation.

[103] The Plaintiffs also plead a cause of action for rescission of the releases signed by purchasers who had settled their claims against Talon after October 13, 2016.

[104] Albeit not particularly artfully, I am satisfied that the Plaintiffs have disclosed a cause of action for: negligent misrepresentation and fraudulent misrepresentation. They also have a cause for the subclass of purchasers who signed releases after October 13, 2016.

[105] The Plaintiffs, therefore, satisfy the first criterion for certification.

[106] For the reasons that I set out in Singh v. Trump, which aspect of my decision, I believe, survived the appeal to the Court of Appeal, I conclude that it plain and obvious that the Plaintiffs do not have a cause of action leading to rescission from an alleged breach of the OSC ruling.

[107] In Singh v. Trump, I concluded that if I was wrong and there had been a sale of a security or a breach of the OSC’s rule, then the breach of the ruling did not vitiate the exemption granted by the OSC and the purchasers were left with the remedies that the OSC prescribed for the sale of the Hotel Units.

[108] For the purposes of the certification motion now before the court, I also conclude that it is plain and obvious that the Plaintiffs do not have a statutory cause of action under either the Securities Act or under the Condominium Act.

[109] The Plaintiffs emphasized in their factum that all of their causes of action, including the statutory causes of action, crystalized when a purchaser paid his or her deposit between 2008 and 2012. Accepting the Plaintiffs at their word, it is plain and obvious that the statutory misrepresentation claims, which involve absolute limitation periods (i.e., discoverability is not a factor) now come too late.

[110] Section 138(a) of the Securities Act includes a 180-day limitation period for proceedings under section 130.1 as follows:

Unless otherwise provided in this Act, no action shall be commenced to enforce a right created by this Part more than,

(a) in the case of an action for rescission, 180 days after the date of the transaction that gave rise to the cause of action…

[111] To rescind an agreement of purchase and sale under s. s. 72 of the Condominium Act, 1998, a purchaser or the purchaser’s solicitor shall give a written notice of rescission to the declarant or to the declarant’s solicitor who must receive the notice within 10 days of the later of: (a) the date that the purchaser receives the disclosure statement; and (b) the date that the purchaser receives a copy of the agreement of purchase and sale executed by the declarant and the purchaser.

[112] Thus, taking the Plaintiffs at their word that their statutory causes of action crystalized when they paid their deposits, it is now too late to rely on s. 131 of the Securities Act or on the Condominium Act, 1998.

[113] The Plaintiffs also argue that the limitation period under s. 131 of the Securities Act has not begun to run because 180 days after the date of the transaction that gave rise to the cause of action has not occurred because no transaction occurred. With respect, this argument makes no sense. The transaction for which rescission is sought is the entering into of the agreements of purchase and sale and that transaction occurred when the deposits were paid.

[114] The common law claims for negligent misrepresentation and fraudulent misrepresentation, however, are not statute barred, because there is a 10-year limitation period for a claim for the return of a deposit in a transaction involving the sale of a condominium unit.[^26]

F. Identifiable Class Criterion

1. General Principles: Identifiable Class Criterion

[115] The second certification criterion is the identifiable class criterion. The definition of an identifiable class serves three purposes: (1) it identifies the persons who have a potential claim against the defendant; (2) it defines the parameters of the lawsuit so as to identify those persons bound by the result of the action; and (3) it describes who is entitled to notice.[^27]

[116] In Western Canadian Shopping Centres v. Dutton,[^28] the Supreme Court of Canada explained the importance of and rationale for the requirement that there be an identifiable class:

First, the class must be capable of clear definition. Class definition is critical because it identifies the individuals entitled to notice, entitled to relief (if relief is awarded), and bound by the judgment. It is essential, therefore, that the class be defined clearly at the outset of the litigation. The definition should state objective criteria by which members of the class can be identified. While the criteria should bear a rational relationship to the common issues asserted by all class members, the criteria should not depend on the outcome of the litigation. It is not necessary that every class member be named or known. It is necessary, however, that any particular person’s claim to membership in the class be determinable by stated, objective criteria.

[117] In identifying the persons who have a potential claim against the defendant, the definition cannot be merits-based.[^29] In Frohlinger v. Nortel Networks Corporation[^30] at para. 21, Justice Winkler, as he then was, explained why merits-based definitions are prohibited; he stated:

21. The underlying reason for each of these prohibitions is readily apparent. Merits-based class definitions require a determination of each class member's claim as a pre-condition of ascertaining class membership. Carrying that concept to its logical conclusion, it would mean that at the conclusion of a class proceeding only those individuals who were successful in their claims would be members of the class and, therefore, bound by the result. Theoretically, unsuccessful claimants would not be "class members" and would be free to commence further litigation because s. 27(3) of the CPA, which states in part:

A judgment on common issues of a class or subclass binds every class member who has not opted out of the class proceeding [....]

would not bind them or bar them from commencing further actions.

[118] In defining the persons who have a potential claim against the defendant, there must be a rational relationship between the class, the cause of action, and the common issues, and the class must not be unnecessarily broad or over-inclusive.[^31] An over-inclusive class definition binds persons who ought not to be bound by judgment or by settlement, be that judgment or settlement favourable or unfavourable.[^32] The rationale for avoiding over-inclusiveness is to ensure that litigation is confined to the parties joined by the claims and the common issues that arise.[^33] The class should not be defined wider than necessary, and where the class could be defined more narrowly, the court should either disallow certification or allow certification on condition that the definition of the class be amended.[^34]

[119] A proposed class definition, however, is not overbroad because it may include persons who ultimately will not have a claim against the defendants.[^35]

2. Analysis: Identifiable Class Criterion

[120] Talon submits that Ms. Persuad’s class definition is overbroad and that class members would not be able to self identify.

[121] In advancing this argument, Talon submits that the class definition includes a diverse group of purchasers including: (a) ten purchasers who only partially paid their deposits (the Early Defaulters); (b) approximately nine purchasers who purchased in bulk for resales (Resellers); (c) approximately three corporate purchasers who no longer exist (Non-existent Purchasers); (d) approximately 113 purchasers who did not take interim occupancy (Non-occupant Purchasers); (e) an unknown number of assignee purchasers who did not have dealings with Talon (Third Party Purchasers); (f) an unknown number of purchasers who accessed a website, lawyerDoneDeal.com, to review and download closing documents (Website Purchasers); (g) an unknown number of purchasers who bought for other purposes and not primarily as an investment (Occupant Purchasers); (h) an unknown number of purchasers who never attended in Toronto or met with a Talon representative (Absent Purchasers); (i) three purchasers against whom Talon has judgments (Judgment Debtor Purchasers); and (j) five purchasers who have judgments against Talon (Judgment Creditor Purchasers)[^36].

[122] Notwithstanding Talon’s submission, in my opinion, subject to certain adjustments to the proposed definition, the Plaintiffs satisfy the identifiable class criterion.

[123] By way of adjustments, the Judgment Debtor Purchasers and the Judgment Creditor Purchasers should not be included as class members. These purchasers’ claims have been discharged by judgments.

[124] Apart from Judgment Debtor Purchasers and Judgment Creditor Purchasers, the other putative class members should have no difficulty self-identifying.

[125] The indicia of class membership are: (a) he or she signed or had signed on their behalf an agreement of purchase and sale with Talon to purchase a Hotel Unit; (b) pursuant to the agreement of purchase and sale, he or she paid or had paid on their behalf a deposit or a portion of a deposit; and (c) he or she did not close the purchase of the Hotel Unit.

[126] The adjustments (underlined or struck out text) to the class definition to narrow the class to its appropriate membership are as follows:

All purchasers except “Excluded Purchasers”, defined below, of hotel condominium units (the “Hotel Units”) in the hotel portion (the “Trump Hotel”) of the Trump International Hotel and Tower Toronto (the “Trump Tower”) who: (a) signed or who had signed on their behalf agreements of purchaser and sale with the developer, the Defendant (“Talon”); (b) paid or who had paid on their behalf deposits or portions of deposits to Talon; the developer of the Trump Tower, the Defendant (“Talon”), but and (c) did not complete their transactions with Talon.

“Excluded Purchasers” are: (a) purchasers against whom Talon has obtained a judgment forfeiting their deposit(s); and (b) purchasers who have obtained a judgment against Talon for repayment of their deposit(s).

[127] I appreciate that some class members may choose to opt out and that some class members may not have viable claims; for examples, subject to re-instatement of their corporate charters, the Non-existent Purchasers do not have the status to sue and depending upon which cause of action, the Third Party Purchasers who did not deal directly with a Talon Representative may fail to prove a claim, but class definitions are not merits-based and these putative Class Members will have no difficulty self-identifying as class members.

[128] I conclude that the Plaintiffs satisfy the identifiable class criterion.

G. Common Issues Criterion

1. General Principles: Common Issues

[129] The third criterion for certification is the common issues criterion. For an issue to be a common issue, it must be a substantial ingredient of each class member's claim and its resolution must be necessary to the resolution of each class member's claim.[^37] The underlying foundation of a common issue is whether its resolution will avoid duplication of fact-finding or legal analysis of an issue that is a substantial ingredient of each class member’s claim and thereby facilitate judicial economy and access to justice.[^38] In Pro-Sys Consultants Ltd. v. Microsoft Corporation,[^39] the Supreme Court of Canada describes the commonality requirement as the central notion of a class proceeding which is that individuals who have litigation concerns in common ought to be able to resolve those common concerns in one central proceeding rather than through an inefficient multitude of repetitive proceedings.

[130] All members of the class must benefit from the successful prosecution of the action, although not necessarily to the same extent. The answer to a question raised by a common issue for the plaintiff must be capable of extrapolation, in the same manner, to each member of the class.[^40]

[131] An issue is not a common issue if its resolution is dependent upon individual findings of fact that would have to be made for each class member.[^41] Common issues cannot be dependent upon findings which will have to be made at individual trials, nor can they be based on assumptions that circumvent the necessity for individual inquiries.[^42]

[132] Commonality is a substantive fact that exists on the evidentiary record or it does not, and commonality is not to be semantically manufactured by overgeneralizing; i.e., by framing the issue in general terms that will ultimately break down into issues to be resolved by individual inquiries for each class member.[^43] In Rumley v. British Columbia,[^44] Chief Justice McLachlin stated that an issue would not satisfy the common issues test if it was framed in overly broad terms; she stated:

[….] It would not serve the ends of either fairness or efficiency to certify an action on the basis of issues that are common only when stated in the most general terms. Inevitably such an action would ultimately break down into individual proceedings. That the suit had initially been certified as a class action could only make the proceeding less fair and less efficient.

[133] However, the commonality requirement does not mean that an identical answer is necessary for all the members of the class, or even that the answer must benefit each of them to the same extent; it is enough that the answer to the question does not give rise to conflicting interests among the members; success for one member must not result in failure for another.[^45]

[134] The common issue criterion presents a low bar.[^46] An issue can be a common issue even if it makes up a very limited aspect of the liability question and even though many individual issues remain to be decided after its resolution.[^47] Even a significant level of individuality does not preclude a finding of commonality.[^48]A common issue need not dispose of the litigation; it is sufficient if it is an issue of fact or law common to all claims and its resolution will advance the litigation.[^49]

[135] As already noted above, in the context of the common issues criterion, the some basis in fact standard involves a two-step requirement that: (1) the proposed common issue actually exists; and (2) the proposed issue can be answered in common across the entire class.

[136] Where questions relating to causation or damages are proposed as common issues, the plaintiff must demonstrate with supporting evidence that there is a workable methodology for determining such issues on a class-wide basis.[^50]

2. Common Issues: Discussion and Analysis

[137] It is axiomatic that there cannot be a common issue for a cause of action that does not satisfy the cause of action criterion for certification. As explained above, I have found that only the negligent misrepresentation and fraudulent misrepresentation claims are certifiable. During the argument of the motion, I asked Ms. Persuad’s proposed Class Counsel to submit a new set of common issues that would reflect the two certifiable causes of action.

[138] Counsel submitted the following list of questions, which I have slightly edited. The new list of questions, however, did not faithfully respond to my request, because, and I do not fault him for trying, he would not abandon the other causes of action:

(1) In this class proceeding is there issue estoppel with respect to the findings of fact and law of the Court of Appeal in Singh v. Trump, 2016 ONCA 747?

(2) Did Talon breach its obligations/representation to the Ontario Securities Commission as set out in the May 2004 ruling? If so, what the appropriate remedy.

(3) Did Talon make representations contrary to the provisions of s. 130.1 of the Securities Act? If so, what is the appropriate remedy?

(4) Did Talon make false, deceptive, or misleading material statements contrary to the provisions of s. 133 of the Condominium Act, 1998? If so what is the appropriate remedy?

(5) Did Talon make fraudulent misrepresentations? If so, what is the appropriate remedy?

(6) Did Talon make negligent misrepresentations? If so, what is the appropriate remedy?

(7) Can the requirement for reliance upon Talon’s representation be inferred by the court?

(8) What is the appropriate limitation period governing the Plaintiff’s cause(s) of action.

[139] I shall, however, be equally resolute, and I, therefore, shall not certify any of the original questions and I shall not certify questions 2, 3, 4, 7, and 8 of the revised list. The new questions are either not based on certifiable causes of action or they raise individual issues and not common ones.

[140] In the result, the Plaintiffs satisfy the common issues criterion for questions 1, 5, and 6 of the new list.

H. Preferable Procedure Criterion

1. General Principles: Preferable Procedure

[141] Under the Class Proceedings Act, 1992, the fourth criterion for certification is the preferable procedure criterion. Preferability captures the ideas of: (a) whether a class proceeding would be an appropriate method of advancing the claims of the class members; and (b) whether a class proceeding would be better than other methods such as joinder, test cases, consolidation, and any other means of resolving the dispute.[^51]

[142] In AIC Limited v. Fischer,[^52] the Supreme Court of Canada emphasized that the preferability analysis must be conducted through the lens of judicial economy, behaviour modification, and access to justice. Justice Cromwell for the court stated that access to justice has both a procedural and substantive dimension. The procedural aspect focuses on whether the claimants have a fair process to resolve their claims. The substantive aspect focuses on the results to be obtained and is concerned with whether the claimants will receive a just and effective remedy for their claims if established. Thus, for a class proceeding to be the preferable procedure for the resolution of the claims of a given class, it must represent a fair, efficient, and manageable procedure that is preferable to any alternative method of resolving the claims.[^53] Arguments that no litigation is preferable to a class proceeding cannot be given effect.[^54] Whether a class proceeding is the preferable procedure is judged by reference to the purposes of access to justice, behaviour modification, and judicial economy and by taking into account the importance of the common issues to the claims as a whole, including the individual issues.[^55]

[143] Relevant to the preferable procedure analysis are the factors listed in s. 6 of the Class Proceedings Act, 1992, which states:

6. The court shall not refuse to certify a proceeding as a class proceeding solely on any of the following grounds:

7. The relief claimed includes a claim for damages that would require individual assessment after determination of the common issues.

8. The relief claimed relates to separate contracts involving different Class Members.

9. Different remedies are sought for different Class Members.

10. The number of Class Members or the identity of each Class Member is not known.

11. The class includes a subclass whose members have claims or defences that raise common issues not shared by all Class Members.

[144] To satisfy the preferable procedure criterion, the proposed representative plaintiff must show some basis in fact that the proposed class action would: (a) be a fair, efficient and manageable method of advancing the claim; (b) be preferable to any other reasonably available means of resolving the class members' claims; and (c) facilitate the three principal goals of class proceedings; namely: judicial economy, behaviour modification, and access to justice.[^56]

[145] In considering the preferable procedure criterion, the court should consider: (a) the nature of the proposed common issue(s) and their importance in relation to the claim as a whole; (b) the individual issues which would remain after determination of the common issue(s); (c) the factors listed in the Act; (d) the complexity and manageability of the proposed action as a whole; (e)alternative procedures for dealing with the claims asserted; (f) the extent to which certification furthers the objectives underlying the Act; and (g) the rights of the plaintiff(s) and defendant(s).[^57]

[146] The court must identify alternatives to the proposed class proceeding.[^58] The proposed representative plaintiff bears the onus of showing that there is some basis in fact that a class proceeding would be preferable to any other reasonably available means of resolving the class members’ claims, but if the defendant relies on a specific non-litigation alternative, the defendant has the evidentiary burden of raising the non-litigation alternative.[^59] It is not enough for the plaintiff to establish that there is no other procedure which is preferable to a class proceeding; he or she must also satisfy the court that a class proceeding would be fair, efficient and manageable.[^60]

[147] In AIC Limited v. Fischer, Justice Cromwell pointed out that when the court is considering alternatives to a class action, the question is whether the alternative has potential to provide effective redress for the substance of the plaintiff’s claims and to do so in a manner that accords suitable procedural rights. He said that there are five questions to be answered when considering whether alternatives to a class action will achieve access to justice: (1) Are there economic, psychological, social, or procedural barriers to access to justice in the case? (2) What is the potential of the class proceeding to address those barriers? (3) What are the alternatives to class proceedings? (4) To what extent do the alternatives address the relevant barriers? and (5) How do the two proceedings compare?[^61]

[148] And in light of the Supreme Court of Canada’s directives in Hryniak v. Mauldin[^62] and Bruno Appliance and Furniture, Inc. v. Hryniak,[^63] one should now add to the preferable procedure factors the factor of the relationship between access to justice, which is the preeminent concern of class proceedings, and proportionality in civil procedures. The proportionality analysis, which addresses how much procedure a litigant actually needs to obtain access to justice, fits nicely with the focus on judicial economy and with the part of the preferable procedure analysis that considers manageability and whether the claimants will receive a just and effective remedy for their claims.

[149] In cases, particularly cases where the individual class members’ respective harm is nominal, or cases where an aggregate assessment of damages in whole or in part is possible, a class action may more readily satisfy the preferable procedure criterion because the common issues trial may be the only viable means for remedying the wrong and for calling the wrongdoer to account because individual litigation may be prohibitively expensive.[^64]

[150] In undertaking a preferable procedure analysis in a case in which individual issue trials are inevitable, it should be appreciated that the Class Proceedings Act, 1992 envisions the prospect of individual claims being litigated and it should be noted that sections 12 and 25 of the Act empower the court with tools to manage and achieve access to justice and judicial economy; thus the inevitability of individual issues trials is not an obstacle to certification. In the context of misrepresentation claims, numerous actions have been certified notwithstanding individual issues of reliance and damages.[^65]

[151] That said, in a given particular case, the inevitability of individual issues trials may obviate any advantages from the common issues trial and make the case unmanageable and thus the particular case will fail the preferable procedure criterion.[^66] Or, in a given case, the inevitability of individual issues may mean that while the action may be manageable, those individual issue trials are the preferable procedure and a class action is not the preferable procedure to achieve access to justice, behaviour modification, and judicial economy. A class action may not be fair, efficient and manageable having regard to the common issues in the context of the action as a whole and the individual issues that would remain after the common issues are resolved.[^67] A class action will not be preferable if, at the end of the day, claimants remain faced with the same economic and practical hurdles that they faced at the outset of the proposed class action.[^68]

2. Analysis: Preferable Procedure

[152] In the immediate case, a class proceeding is an appropriate method of advancing the claims of the class members and it would be better than other methods such as joinder, test cases, consolidation, and any other means of resolving the dispute.

[153] The issue estoppel question is a particularly productive common issue, but all the certified common issues would go a great distance in advancing the litigation.

[154] If Talon were successful on all three common issues, there is a dispositive result in favour of Talon and the action would be dismissed. If the Plaintiffs were successful on the estoppel issue, and the Plaintiffs also proved fraud, then there would be a dispositive result in favour of the Class Members. If the Plaintiffs were successful on the estoppel issue but the Plaintiffs did not prove fraud, the litigation would be substantially advanced and there would be individual issues trials to determine individual reliance by the Class Members.

[155] In the immediate case, a class action represents a fair, efficient, and manageable procedure that is preferable to any alternative method of resolving the claims and provides access to justice, behaviour modification, and judicial economy.

[156] I conclude that the preferable procedure criterion is satisfied in the immediate case.

I. Representative Plaintiff Criterion

1. General Principles: Representative Plaintiff Criterion

[157] The fifth and final criterion for certification as a class action is that there is a representative plaintiff who would adequately represent the interests of the class without conflict of interest and who has produced a workable litigation plan. The representative plaintiff must be a member of the class asserting claims against the defendant, which is to say that the representative plaintiff must have a claim that is a genuine representation of the claims of the members of the class to be represented or that the representative plaintiff must be capable of asserting a claim on behalf of all of the class members as against the defendant.[^69]

[158] Whether the representative plaintiff can provide adequate representation depends on such factors as: his or her motivation to prosecute the claim; his or her ability to bear the costs of the litigation; and the competence of his or her counsel to prosecute the claim.[^70]

[159] While a litigation plan is a work in progress, it must correspond to the complexity of the particular case and provide enough detail to allow the court to assess whether a class action is: (a) the preferable procedure; and (b) manageable including the resolution of the common issues and any individual issues that remain after the common issues trial.[^71] The litigation plan will not be workable if it fails to address how the individual issues that remain after the determination of the common issues are to be addressed.[^72]

2. Analysis: Representative Plaintiff

[160] Ms. Persuad is a genuine representation of the claims of the members of the class to be represented, and she is capable of asserting a claim on behalf of all of the Class Members as against Talon.

[161] All of Talon’s arguments that Ms. Persaud does not have a claim or cannot represent the class members are belied by the fact that Talon is suing her and she could have and perhaps should have raised her claim as a counterclaim to Talon’s claim.

[162] The circumstance that Ms. Persuad directed title to the currently defunct Ten Eight Vacations Ltd. is a matter that can be rectified or ignored because Ms. Persaud is the person who signed the agreement with Talon to purchase a Hotel Unit. Her position is representative of the rest of the Class Members, and provided that she retains a new Class Counsel, she has no conflict with the rest of the Class Members. She qualifies to be a representative plaintiff.

[163] Her current litigation plan, which is based on causes of action and questions that were not certified is deficient, but it should be a straight forward matter and relatively easy to amend the current overly complex plan to accommodate the three common issues that have been certified. Any disputes about the litigation plan can be resolved by the normal case management of the litigation.

[164] There is, however, one major problem. The problem with respect to Ms. Persaud’s qualifications to be a representative plaintiff is that she has selected Levine, Sherkin, Boussidan to be Class Counsel and that firm is also lawyer of record for the plaintiffs in sixteen individual actions.

[165] The plaintiffs in those sixteen actions are putative Class Members. The plaintiffs in those sixteen actions must each make a decision whether to participate in the class action or to opt-out.

[166] While conceding that the plaintiffs in each of the sixteen actions must obtain independent legal advice about whether to opt out of the class action, it is apparent that Levine, Sherkin, Boussidan wish to continue to act for the plaintiffs in the sixteen individual actions and also be Class Counsel for Ms. Persaud and her fellow Class Members. This is not permissible. Class Counsel cannot act for a representative plaintiff and also act for putative Class Members who have opted out of the class action.[^73]

[167] Levine, Sherkin, and Boussidan argue that they have no conflict of interest in simultaneously acting for the plaintiffs in the sixteen actions and the Class Members because it has not been suggested that there is a conflict of interest and they have not been disqualified from acting simultaneously for the plaintiffs in the sixteen actions.

[168] This argument is fallacious for two reasons. First, whether it has been suggested or not, there is indeed a conflict of interest in the law firm acting for the plaintiffs in the sixteen actions. The truth is that Levine, Sherkin, and Boussidan do have a conflict of interest, but it is inchoate or a waivable conflict arising from joint retainers with the plaintiffs in the sixteen actions.

[169] The law firm has the inchoate conflict of interest associated with a joint retainer. Rule 3.4-5 of the Law Society of Ontario's Rules of Professional Conduct requires that in cases of joint retainers, where a conflict of interest develops that cannot be resolved, the lawyer cannot continue to act for both or all of the clients and may have to withdraw completely. The firm has joint retainers with the plaintiffs in the sixteen actions and those clients can waive the conflict in accordance with the Rules of Professional Conduct promulgated by the Ontario Law Society.

[170] At the moment, the conflicts of interest associated with Levine, Sherkin, and Boussidans’ joint retainers for the plaintiffs in the sixteen actions are not particularly acute because the plaintiffs in the sixteen actions are collectively seeking a judgment against Talon and the other defendants, and all of the plaintiffs in the sixteen actions are united in pursuing a claim against the defendants.

[171] There is a pending summary judgment motion and thus the Plaintiffs in the sixteen actions are further advanced in their litigation than the Class Members. Conflicts of interest amongst the clients of the sixteen actions retainers, however, may yet arise and become quite acute, particularly if there are settlement negotiations with the plaintiffs in the sixteen actions.

[172] There, however, is nothing inchoate or waivable in the conflict of interest arising from action for the plaintiffs in the sixteen actions and simultaneously acting for the Class Members.

[173] For present purposes, the point to emphasize is that Levine, Sherkin, and Boussidans’ argument that they have no conflicts of interest in acting for the plaintiffs in the sixteen actions is incorrect, and the firm’s conflicts of interest will be exacerbated if it were to act simultaneously for the plaintiffs in the sixteen actions and also the Class Members, who are already being asked to give instructions to pursue fewer remedies and to pursue fewer defendants than the plaintiffs in the sixteen actions are pursuing.

[174] The second reason why Levine, Sherkin, and Boussidan’s argument is incorrect, is that with joint retainers outside of the Class Action, Levine, Sherkin, and Boussidan have a conflict of interest in acting for the Class Members who as a collective are entitled to an unconflicted representation. It is not for the court to waive those conflicts and indeed the conflicts are irreconcilable and the Class Proceedings Act, 1992 directs that the court not certify a class action if there is a conflict of interest.

[175] In the context of class proceedings, there are three types of conflict of interest that require examination:[^74] (1) conflicts of interest arising from a lawyer's direct financial interest in the class proceedings, which are an inherent conflict allowed by the entrepreneurial model of the class proceedings legislation; (2) conflicts arising from a divergence of interest between the representative plaintiff and class members; and (3) conflicts arising from the lawyer's divided loyalties arising outside of the class proceeding. In the immediate case, all three types of conflict of interest would be present should Levine, Sherkin, and Boussidan simultaneous act for the plaintiffs in the sixteen actions and for the Class Members.

[176] As already noted, Class Members will seek a different set of remedies against Talon from the remedies being sought by the plaintiffs in the sixteen actions, and there is a different set of defendants in the sixteen actions and the class action that only includes Talon as a defendant. That is not an unconflicted representation, and it is a retainer that will raise enormous problems in settling the class action.

[177] For certain, the Class Members cannot be used as a lever to increase the pressure on the defendants in the sixteen actions to settle the sixteen actions. There is an obvious conflict in Levine, Sherkin, and Boussidan purporting to act on a contingency fee basis for a collective while at the same time having joint retainers with the plaintiffs in sixteen individual actions.

[178] There is the inherent conflict of interest of entrepreneurial class actions, where Class Counsel may be incentivized to recommend a settlement that provides a very provident recovery from contingency fees and an escape from the risks of litigation but which settlement may provide miserly access to justice for the Class Members. If Class Counsel also acts for the sixteen plaintiffs and the Class Members, the conflicts would propagate.

[179] For example, the sixteen plaintiffs may be best served if the Class Members settled cheaply because the proportion of the deposits not returned to the Class Members will be the monetary resource for payment of the damages claims of the sixteen plaintiffs, claims not being advanced by the sixteen plaintiffs.

[180] For example, the Class Members may be best served if they retained a greater proportion of the deposits and the sixteen plaintiffs received less for their deposits because the proportion of the deposits not returned to the plaintiffs in the sixteen actions will be the monetary resource for the Class Members’ claims for costs and pre and post-judgment interest.

[181] Further, the Class Members and the plaintiffs in the sixteen actions may differ on tactics and strategy. There is a strong potential for conflicting instructions to Levine, Sherkin, and Boussidan regarding the prosecution of the claims in the sixteen actions and the singular claim for rescission in the class action.

[182] In my opinion, it would be inappropriate to make it a condition of the certification decision that Levine, Sherkin, and Boussidan remove itself as lawyer of record for the sixteen plaintiffs who after obtaining independent legal advice may decide to opt out of the class action. It is, however, appropriate to recognize that Levine, Sherkin, and Boussidan are disqualified as Class Counsel.

[183] I note that if Levine, Sherkin, and Boussidan are disqualified as Class Counsel, then their conflict in advising the plaintiffs in the sixteen actions whether to participate instead in the Class Action is not removed, and, as already acknowledged by Levine, Sherkin, and Boussidan, the firm’s clients should obtain independent legal advice about whether they should participate in the Class Action.

[184] Therefore, I shall allow Ms. Persaud sixty days to retain a new Class Counsel and subject to court approval of her choice, her action shall be certified as a class action.

[185] If Ms. Persaud fails to satisfy the above condition, then I shall dismiss her motion to certify the action as a class action, but her action may continue as an individual action to be consolidated with action CV-14-498306.

J. Conclusion

[186] For the above reasons: (a) I conditionally approve the certification of Ms. Persaud’s action as a class action; and (b) in any event, I consolidate the action in which Ms. Persaud is a defendant with the class action in which she is plaintiff.

[187] I shall determine the matter of costs after it is determined whether or not Ms. Persaud has satisfied the conditions for certification.

[188] Order accordingly.

Perell, J.

Released: September 13, 2018

COURT FILE NO.: CV-17-569023CP

DATE: 2018/09/13

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Ashleka Persaud and Ten Eight Vacations Ltd.

Plaintiff

– and –

Talon International Inc.

Defendant

REASONS FOR DECISION

PERELL J.

Released: September 13, 2018

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Boehringer Ingelheim (Canada) Ltd., 2017 ONSC 53, aff'd, 2017 ONSC 6098 (Div. Ct.), leave to appeal refused (28 February 2018) (C.A.); Dine v. Biomet, 2015 ONSC 7050, aff'd 2016 ONSC 4039 (Div. Ct.); Good v. Toronto Police Services Board, 2014 ONSC 4583 (Div. Ct.); McCracken v. Canadian National Railway Company, 2012 ONCA 445; Fulawka v. Bank of Nova Scotia, 2012 ONCA 443; Martin v. Astrazeneca Pharmaceuticals PLC, 2012 ONSC 2744; Williams v. Canon Canada Inc., 2011 ONSC 6571, aff'd 2012 ONSC 3992 (Div. Ct.). [^14]: Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57; McCracken v. CNR Co., 2012 ONCA 445. [^15]: Singer v. Schering-Plough Canada Inc., 2010 ONSC 42 at para. 140; Fresco v. Canadian Imperial Bank of Commerce, 2009 31177 (ON SC), [2009] O.J. No. 2531 at para. 21 (S.C.J.); Dumoulin v. Ontario, [2005] O.J. No. 3961 at para. 25 (S.C.J.). [^16]: Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57 at para. 110. [^17]: Hollick v. Toronto (City), 2001 SCC 68 at para. 22. [^18]: Williams v. Canon Canada Inc., 2011 ONSC 6571, aff’d 2012 ONSC 3992 (Div. Ct.); Ernewein v. General Motors of Canada Ltd., 2005 BCCA 540 (C.A.), leave to appeal to S.C.C. ref’d, [2005] S.C.C.A. No. 545; Chadha v. Bayer Inc.(2003), 2003 35843 (ON CA), 63 O.R. (3d) 22 (C.A.), leave to appeal to S.C.C. ref’d [2003] S.C.C.A. No. 106; Taub v. Manufacturers Life Insurance Co., 1998 14853 (ON SC), 40 O.R. (3d) 379 (Gen. Div.), aff’d (1999), 1999 19922 (ON SC), 42 O.R. (3d) 576 (Div. Ct.). [^19]: Cloud v. Canada (2004), 2004 45444 (ON CA), 73 O.R. (3d) 401 at para. 50 (C.A.), leave to appeal to the S.C.C. ref'd, [2005] S.C.C.A. No. 50, rev'g (2003), 2003 72353 (ON SCDC), 65 O.R. (3d) 492 (Div. Ct.); Hollick v. Toronto (City), 2001 SCC 68 at paras. 16-26. [^20]: Martin v. Astrazeneca Pharmaceuticals PLC, 2012 ONSC 2744; Williams v. Canon Canada Inc., 2011 ONSC 6571, aff’d 2012 ONSC 3992 (Div. Ct.); Schick v. Boehringer Ingelheim (Canada) Ltd., 2011 ONSC 63 at para.13; Ernewein v. General Motors of Canada Ltd. 2005 BCCA 540 (C.A.), leave to appeal to S.C.C. ref’d, [2005] S.C.C.A. No. 545. [^21]: Griffin v. Dell Canada Inc., 2009 3557 (ON SC), [2009] O.J. No. 418 at para. 76 (S.C.J.). [^22]: Stanway v. Wyeth Canada Inc., 2011 BCSC 1057, aff’d 2012 BCCA 260. [^23]: 1990 90 (SCC), [1990] 2 S.C.R. 959. [^24]: 176560 Ontario Ltd. v. Great Atlantic & Pacific Co. of Canada Ltd. (2002), 2002 6199 (ON SC), 62 O.R. (3d) 535 at para. 19 (S.C.J.), leave to appeal granted, 2003 36393 (ON SCDC), 64 O.R. (3d) 42 (S.C.J.), aff'd (2004), 2004 16620 (ON SCDC), 70 O.R. (3d) 182 (Div. Ct.); Anderson v. Wilson (1999), 1999 3753 (ON CA), 44 O.R. (3d) 673 at p. 679 (C.A.), leave to appeal to S.C.C. ref'd, [1999] S.C.C.A. No. 476. [^25]: Cloud v. Canada (Attorney General) (2004), 2004 45444 (ON CA), 73 O.R. (3d) 401 at para. 41 (C.A.), leave to appeal to the S.C.C. refused, [2005] S.C.C.A. No. 50, rev'g, (2003), 2003 72353 (ON SCDC), 65 O.R. (3d) 492 (Div. Ct.); Hollick v. Toronto (City), 2001 SCC 68 at para. 25; Abdool v. Anaheim Management Ltd. (1995), 1995 5597 (ON SCDC), 21 O.R. (3d) 453 at p. 469 (Div. Ct.). [^26]: [^27]: Bywater v. Toronto Transit Commission, [1998] O.J. No. 4913 (Gen. Div.). [^28]: 2001 SCC 46 at para. 38. [^29]: Keatley Surveying Ltd. v. Teranet Inc., 2012 ONSC 7120 at paras. 159-167; Frohlinger v. Nortel Networks Corporation, 2007 696 (ON SC), [2007] O.J. No. 148 at para. 21 (S.C.J.); Chadha v. Bayer Inc. (2003), 2003 35843 (ON CA), 63 O.R. (3d) 22 (C.A.), leave to appeal to S.C.C. ref’d [2003] S.C.C.A. No. 106; Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46 at para. 38. [^30]: 2007 696 (ON SC), [2007] O.J. No. 148 (S.C.J.). [^31]: Pearson v. Inco Ltd. (2006), 2006 913 (ON CA), 78 O.R. (3d) 641 at para. 57 (C.A.), rev'g 2004 34446 (ON SCDC), [2004] O.J. No. 317 (Div. Ct.), which had aff'd [2002] O.J. No. 2764 (S.C.J.). [^32]: Robinson v. Medtronic Inc., 2009 56746 (ON SC), [2009] O.J. No. 4366 at paras. 121-146 (S.C.J.). [^33]: Frohlinger v. Nortel Networks Corporation, 2007 696 (ON SC), [2007] O.J. No. 148 at para. 22 (S.C.J.). [^34]: Fehringer v. Sun Media Corp., [2002] O.J. No. 4110 at paras. 12-13 (S.C.J.), aff’d [2003] O.J. No. 3918 (Div. Ct.); Hollick v. Toronto (City), 2001 SCC 68 at para. 21. [^35]: Silver v. Imax Corp., 2009 72334 (ON SC), [2009] O.J. No. 5585 at para. 103-107 (S.C.J.) at para. 103-107, leave to appeal to Div. Ct. refused 2011 ONSC 1035 (Div. Ct.); Boulanger v. Johnson & Johnson Corp., 2007 735 (ON SC), [2007] O.J. No. 179 at para. 22 (S.C.J.), leave to appeal ref’d [2007] O.J. No. 1991 (Div. Ct.); Ragoonanan v. Imperial Tobacco Inc. (2005), 2005 40373 (ON SC), 78 O.R. (3d) 98 (S.C.J.), leave to appeal ref’d 2008 19242 (ON SCDC), [2008] O.J. No. 1644 (Div. Ct.); Bywater v. Toronto Transit Commission, [1998] O.J. No. 4913 at para. 10 (Gen. Div.) at para. 10. [^36]: Messrs. or Mesdames Singh, Lee, Ram Harvey, and Yim have been repaid their deposits. [^37]: Hollick v. Toronto (City), 2001 SCC 68 at para. 18. [^38]: Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46 at paras. 39 and 40. [^39]: 2013 SCC 57 at para. 106. [^40]: Batten v. Boehringer Ingelheim (Canada) Ltd., 2017 ONSC 53, aff’d, 2017 ONSC 6098 (Div. Ct.), leave to appeal refused (28 February 2018) (C.A.); Amyotrophic Lateral Sclerosis Society of Essex County v. Windsor (City), 2015 ONCA 572 at para. 48; McCracken v. CNR, 2012 ONCA 445 at para. 183; Merck Frosst Canada Ltd. v. Wuttunee, 2009 SKCA 43 at paras. 145-46 and 160, leave to appeal to S.C.C. refused, [2008] S.C.C.A. No. 512; Ernewein v. General Motors of Canada Ltd., 2005 BCCA 540 (C.A.), leave to appeal to S.C.C. ref’d, [2005] S.C.C.A. No. 545; Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46 at para. 40. [^41]: Fehringer v. Sun Media Corp., [2003] O.J. No. 3918 at paras. 3, 6 (Div. Ct.). 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