COURT FILE NO.: CV-19-00615070-00CP

DATE: 20210716

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

JOHN PETERS

Plaintiff

• and -

SNC-LAVALIN GROUP INC., KEVIN LYNCH, NEIL BRUCE, SYLVAIN GIRARD and HARTLAND PATERSON

Defendants

Jay Strosberg, and Scott Robinson for the Plaintiff

Katherine Kay, Daniel S. Murdoch, and Sinziana R. Hennig for the Defendants

Proceeding under the Class Proceedings Act, 1992

HEARD: June 1 and 2, 2021

PERELL, J.

REASONS FOR DECISION

A. Introduction. 2

B. Procedural Background. 4

C. Dramatis Personae. 6

D. Evidentiary Background. 6

E. Facts. 7

1. The Investigations of the Criminal Activities of Senior Executives of SNC Lavalin. 7

2. The SNC Campaign for an Amendment to the Criminal Code. 9

3. Negotiations for a Remediation Agreement and the September 2018 Message. 12

4. The September 4, 2018 Telephone Call 12

5. The Events from September 5, 2018 to October 10, 2018 and the Press Release. 13

6. Judicial Review, the Criminal Prosecution, and the Settlement 19

7. The Expert Evidence of Dr. McCann. 21

(a) The Admissibility of the Reports of Dr. McCann. 21

(b) Dr. McCann’s Admissible Evidence. 24

F. The Judge in the Room: How to Analyze the Role of Frank Iacobucci 25

G. Analysis and Discussion: Should Leave be Granted for Mr. Peters’ Statutory Claim?. 26

Introduction and Overview of the Analysis. 26

1. The Leave Requirement for the Statutory Cause of Action. 27

2. The Statutory Cause of Action and Material Facts and Material Changes. 29

3. Was the Message of September 4, 2018 a “Change”?. 34

4. Was the Message of September 4, 2018 a “Material Change”?. 37

5. Pertinent Case Law About Material Change. 39

H. Should the Common Law Negligence Claim be Certified as a Class Proceeding?. 46

I. Conclusion. 50

A. Introduction

[1] John Peters, the plaintiff in this proposed class action under the Class Proceedings Act, 1992,[^1] sues SNC-Lavalin Group Inc., and Kevin Lynch, Neil Bruce, Sylvain Girard, and Hartland Paterson, who are four senior officers and directors of SNC.

[2] Mr. Peters advances two causes of action: (a) a statutory cause of action for misrepresentation in the secondary market for securities pursuant to Part XXIII.1 of the Ontario Securities Act;[^2] and (b) common law misrepresentation.

[3] The statutory cause of action requires leave, and Mr. Peters moves for leave to assert it. He also moves for certification of both the statutory and the common law actions.

[4] The factual backdrop to Mr. Peters’ case against the Defendants involves: (a) alleged criminal activities by SNC in Africa; (b) the investigation of SNC by the World Bank and the RCMP in Canada; (c) criminal charges against SNC in Canada; (d) punitive business sanctions by the World Bank against SNC as a business carrying on criminal activities; (e) intensive lobbying efforts by SNC for amendments to the Criminal Code[^3] to introduce Remediation Agreements that would avoid crushing business sanctions; (f) unsuccessful efforts by SNC to be invited by the Prosecution Service to negotiate a Remediation Agreement; (g) a press release disclosing that SNC’s efforts to obtain an invitation had failed; and (h) enormous losses on the stock market for SNC’s shareholders. And, if that were not enough, Mr. Peters’ case involves what has come to be known as the SNC-Lavalin Affair, a political scandal involving the Director of the Public Prosecution Service of Canada (the “DPP”), an Attorney General, the Prime Minister’s Office, and the Prime Minister.

[5] The factual background has been well publicized and many aspects of it are matters of public record. For present purposes, the colourful and controversial background facts to the case are largely uncontested or uncontestable. The focus of attention is on the events between April and October 2018 and most particularly the events of a thirty-six day period where the facts are proven and corroborated by extensive and contemporaneous correspondence and memoranda.

[6] The briefer factual narrative that underpins the theory of Mr. Peters’ case against SNC and its directors may be summarized as follows:

a. After SNC was charged with offences under the Criminal Code and the Corruption of Foreign Public Officials Act.[^4] (for bribing government officials in Libya), its business was seriously imperiled. If SNC were convicted, then pursuant to government procurement policies, SNC would be disbarred from bidding on government contracts (“disbarment”). The resulting loss of business would be disastrous to SNC’s business enterprise. In its financial statements and core financial documents and in press releases SNC disclosed this business risk to its investors.

b. To avoid this business disaster, SNC lobbied for amendments to the Criminal Code that would provide prosecutors with the option of negotiating a “Remediation Agreement” also known as a “Deferred Prosecution Agreement.”

c. After SNC’s lobbying campaign was successful and the Criminal Code was amended, SNC then sought a Remediation Agreement with the DPP. The prosecutors and SNC agreed that their discussions were confidential and without prejudice.

d. However, on September 4, 2018, officials of the Prosecution Service told SNC’s Settlement Counsel that the DPP would not invite SNC to negotiate a Remediation Agreement.

e. Notwithstanding the message of September 4, 2018, intensive discussions continued between SNC’s Settlement Counsel and the officials of the Prosecution Service. In the days after September 4, 2018, SNC’s Settlement Counsel continued to address the Prosecution Service’s concerns about extending an invitation to negotiate. SNC’s senior management continued to lobby the government for a Remediation Agreement.

f. Thirty-six days passed after the message of September 4, 2018, and it was only on October 10, 2018, a day after the officials of the Prosecution Service repeated that there would be no invitation to negotiate a Remediation Agreement, that SNC issued a press release that disclosed that the DPP had decided not to extend to SNC an invitation to negotiate a Remediation Agreement.

g. After the IIROC (Investment Industry Regulatory Organization of Canada) temporarily suspended trading so that the public could consider the press release, the market capitalization of SNC’s shares plummeted by 13%. Millions of dollars of share value was lost.

h. Mr. Peters’ class action followed.

[7] The essential core of Mr. Peters’ two causes of action is the singular legal proposition that the message from the Prosecution Service on September 4, 2018 was a “material change” that was not disclosed as required by the Ontario Securities Act. His class action is totally dependent on the singular question of whether SNC’s disclosure of its failed negotiations to obtain an invitation to negotiate a Remediation Agreement came thirty-six days too late.

[8] In my opinion, there is no prospect that Mr. Peters’ action under Part XXIII.1 of the Ontario Securities Act can succeed. There was no material change to SNC’s business, operations, or capital. Further, in my opinion, standing alone, Mr. Peters’ common law negligence action is not certifiable as a class proceeding.

[9] I, therefore, dismiss his motion for leave to plead a cause of action under the Ontario Securities Act and I dismiss his motion for certification.

B. Procedural Background

[10] On February 25, 2019, Mr. Peters commenced this action by way of a Notice of Action.

[11] Proposed Class Counsel are Strosberg Sasso Sutts LLP.

[12] On March 25, 2019, Mr. Peters filed a Statement of Claim alleging statutory and common law misrepresentation as against the Defendants.

[13] On October 2, 2019, Mr. Peters delivered a Fresh as Amended Statement of Claim.

[14] The proposed class definition is:

All persons, other than Excluded Persons, who acquired SNC securities during the period from September 4, 2018 to the IIROC Halt on October 10, 2018 inclusive, and held some or all of such securities as of the IIROC Halt.

“SNC” means SNC-Lavalin Group Inc. and includes, as the context may require, its subsidiaries and affiliates.

“IIROC Halt” means the halt of trading of SNC securities issued by the Investment Industry Regulatory Organization of Canada at 9:33 a.m. Eastern Time on October 10, 2018.

“Excluded Persons” means SNC’s subsidiaries, affiliates, officers, directors, senior employees, legal representatives, heirs, predecessors, successors and assigns, and any member of the Individual Defendants’ families and any entity in which any of them has or had during the Class Period any legal or de facto controlling interest.

[15] Mr. Peters advances a common law misrepresentation cause of action and a statutory cause of action pursuant to Part XXIII.1 of the Ontario Securities Act.

[16] Mr. Peters asserts that the telephone call that occurred on September 4, 2018 was a “material change”. Relying on s. 138.3(4) of the Ontario Securities Act, he alleges that SNC’s failure to disclose the telephone call was a failure to disclose a material change. He further alleges that SNC breached sections 75 (1) and (2) of the Act, which provide that a reporting issuer shall forthwith issue a news release and file a material change report when a material change occurs in the affairs of a reporting issuer.

[17] Mr. Peters alleges that the disclosure of the DPP Decision on October 10, 2018 was a public correction of the failure to timely disclose the telephone call of September 4, 2018, and that SNC’s shares declined approximately 13 percent on October 10, 2018 following the disclosure of the DPP’s decision.

[18] The proposed common issues are the following:

(1) Was the Director of the Public Prosecution Service of Canada’s September 4, 2018 communication to SNC of the decision not to issue an invitation to negotiate a Remediation Agreement regarding the Charges (the “Communication”) a change in the business, operations or capital of SNC that could reasonably be expected to have a significant effect on the market price or value of SNC securities, and thus constitute a “Material Change”?

(2) If the answer to (1) is “yes”, did the Defendants, or any of them, fail to make timely disclosure of the Communication within the meaning of the OSA, if necessary the Equivalent Securities Acts, and any other applicable securities regulations?

(3) If the answer to (2) is “yes”, did the failure to make timely disclosure of the Communication constitute a misrepresentation at common law and, if leave is granted, within the meaning of the OSA and, if necessary, the Equivalent Securities Acts?

(4) Did the Defendants, or any of them, owe a duty of care to the Class Members?

(5) If the answer to (4) is “yes”, did the Defendants, or any of them, fail to meet the standard of conduct required in the circumstances?

(6) Was the market for SNC securities efficient?

(7) If the answer to (3) and (6) is “yes”, can each Class Member’s reliance on the misrepresentation be inferred from the fact that each Class Member decided to and did acquire SNC securities in an efficient market?

(8) Is SNC vicariously liable or otherwise responsible for the acts and/or omissions of the Individual Defendants and its other officers, directors, employees, agents and representatives?

(9) Can the amount of damages for negligent misrepresentation and/or the statutory claim pursuant to Part XXIII.1 of the OSA, and if necessary, the Equivalent Securities Acts, be determined on an aggregate basis pursuant to section 24 of the CPA? If so, who should pay it and in what amount?

(10) Should the Defendants, or any of them, pay the costs of administering and distributing any amount awarded under sections 24 and 25 of the CPA? If so, who should pay it and in what amount?

[19] On March 5, 2020, Mr. Peters delivered his motion record for certification and leave under Part XXIII.1 of the Ontario Securities Act (1,727 pages).

[20] In December 2020, SNC delivered its responding motion record. (328 pages).

[21] On February 1, 2021, Mr. Peters delivered his reply motion record (23 pages.).

C. Dramatis Personae

[22] The principal actors in the story of the immediate case are:

• The Defendant Neil Bruce: Mr. Bruce is SNC’s CEO. He was a member of the SNC leadership team that had the responsibility over the negotiations to obtain an invitation from the Director of Public Prosecutions of Canada (“DPP”) to negotiate a Remediation Agreement.

• Frank Iacobucci is a retired justice of the Supreme Court of Canada. He practises law as counsel with Torys LLP. He along with William McNamara was retained by SNC as Settlement Counsel to negotiate a Remediation Agreement with the DPP.

• William McNamara is a partner of Torys LLP. He along with Frank Iacobucci was retained by SNC as Settlement Counsel to negotiate a Remediation Agreement with the DPP.

• Anne-Marie Manoukian was a lawyer at the Public Prosecution Service of Canada.

• The Defendant Hartland Paterson. Mr. Paterson is SNC’s general counsel. He was a member of the SNC leadership team that had the responsibility over the negotiations to obtain an invitation from the DPP to negotiate a Remediation Agreement.

• The Plaintiff John Peters purchased SNC shares during the Class Period. He still holds the shares he purchased.

• Richard Roy: Mr. Roy was General Counsel at the Public Prosecution Service of Canada.

• Kathleen Roussel is the Director of Public Prosecutions (DPP). She is leader of the Public Prosecution Service of Canada.

• Erik Ryan: Mr. Ryan is SNC’s Vice President, Strategy, Marketing and External Relations. Mr. Ryan was a member of the SNC leadership team that had the responsibility over the negotiations to obtain an invitation from the DPP to negotiate a Remediation Agreement.

• Jody Wilson-Raybould is a former Attorney General of Canada.

D. Evidentiary Background

[23] Mr. Peters supported his motions with the following evidence:

• Affidavits of Craig McCann dated March 5, 2020 and February 1, 2021. Dr. McCann is the President of Securities Litigation and Consulting Group, Inc., which he founded. He has a Ph.D. in Economics from the University of California, at Los Angles and holds the Chartered Financial Analyst (CFA) designation. Before he commenced his own firm, among other experience, he was a senior financial economist in the Office of Economic Analysis at the Securities and Exchange Commission (the “SEC”), and he taught graduate investment management at Georgetown University and at the University of Maryland, College Park. Dr. McCann was cross-examined.

• Affidavit of John Peters dated February 26, 2020. Mr. Peters was cross-examined.

• Affidavit of Justin Smith dated March 5, 2020. Mr. Smith is lawyer at Strosberg Sasso Sutts LLP, the law firm representing the Plaintiff. Mr. Smith was not cross-examined.

[24] SNC resisted the certification and leave motions with the following evidence:

• Affidavit of Erik J. Ryan. Mr. Ryan was not cross-examined.

E. Facts

1. The Investigations of the Criminal Activities of Senior Executives of SNC Lavalin

[25] Founded in 1911, SNC is a fully integrated professional engineering services and project management company with offices around the world and headquarters in Montréal, Québec. In 1967, it was incorporated under the laws of Canada, and in 1980, it was continued under the Canada Business Corporations Act.[^5] It has over 45,000 employees with offices in approximately 50 countries. SNC-Lavalin International Inc. and SNC-Lavalin Construction Inc. are wholly owned subsidiaries.

[26] SNC’s shares trade on the Toronto Stock Exchange (“TSX”). It is a reporting issuer in Ontario. During the Class Period, SNC had an estimated market capitalization of $9 billion. Approximately seven million SNC shares traded during the Class Period.

[27] On September 6, 2011, SNC issued a press release announcing that the Royal Canadian Mounted Police (“RCMP”) and the World Bank were each investigating SNC’s activities in Bangladesh and Africa.

[28] On February 28, 2012, SNC issued a press release announcing that under the direction and oversight of SNC’s Audit Committee external independent counsel had been retained to investigate the facts and circumstances related to the RCMP and World Bank investigations.

[29] On March 26, 2012, SNC announced that as a result of the internal investigation, disciplinary action had been taken against SNC’s former Executive Vice-President, Construction, Riadh Ben Aïssa, and former Controller Construction, Stéphane Roy, whose employments were terminated. The press release reported that the Board had adopted the recommendations of the Audit Committee which were directed at reinforcing standards of conduct, strengthening and improving internal controls and reviewing the compliance environment of SNC.

[30] On April 13, 2012, the RCMP executed a search warrant at SNC’s headquarters in Montréal.

[31] On August 3, 2012, SNC disclosed that the RCMP’s investigation of the Bangladesh Project had resulted in charges being laid against two former employees under the Corruption of Foreign Public Officials Act. SNC also disclosed that the World Bank temporarily suspended a subsidiary’s ability to bid on new World Bank projects pending the conclusion of the World Bank’s investigation.

[32] On April 17, 2013, SNC disclosed that it had reached a settlement with the World Bank. The settlement did not impose a financial penalty but suspended SNC’s ability to bid on World Bank financed projects for a period of ten years.

[33] On March 6, 2014, SNC disclosed that the RCMP was investigating whether improper payments were offered to government officials in Bangladesh and in Africa to influence the awarding of engineering and construction contracts in violation of the the Corruption of Foreign Public Officials Act.

[34] On February 19, 2015, in Canada, SNC, SNC International, and SNC Construction were charged with one count of fraud under s. 380 of the Criminal Code and one count of corruption under s. 3(1)(b) of the Corruption of Foreign Public Officials Act. The criminal charges alleged that between 2001 and 2011, SNC paid over $47 million to public officials in Libya to influence government decisions and to defraud various Libyan organizations of approximately $130 million.

[35] On March 5, 2015, SNC issued a press release that provided a risk assessment with respect to the criminal and corruption charges, stating:

The 2015 outlook also assumes that the federal charges laid against the Company and its indirect subsidiaries SNC-Lavalin International Inc. and SNC-Lavalin Construction Inc. on February 19, 2015 will not have a significant adverse impact on the Company’s business in 2015. If these assumptions are inaccurate, the Company’s actual results could differ materially from those expressed in or applied by these forward-looking statements…these charges and investigations, and potential results thereof, could harm the Company’s reputation, result in suspension, prohibition or debarment of the Company from participating in certain projects, reduce its revenues and net income and adversely affect its business.

[36] The risk assessment from the March 5, 2015 press release was repeated in each of SNC’s quarterly and annual disclosure documents of financial results and financial outlook between 2015 and 2019.

[37] On July 3, 2015, the Canadian government announced its Integrity Regime for procurement and real property. Under this regime, SNC faced a debarment period of ten years upon conviction.

[38] In the immediate case, there is no issue that debarment would be devasting. In his opinion about materiality, Dr. McCann stated:

If SNC was convicted, it would not be allowed to participate in Canadian federal government contracts for five to ten years. SNC noted in its 2017 Annual Report that $2.9 billion (31%) of its 2017 revenue was from work in Canada. Analysts estimated that $1.4 billion to $1.9 billion of SNC’s revenue from Canada (15%-20% of total revenue) was from contracts with the Canadian federal government.

[39] On December 10, 2015, SNC announced it had entered into an “administrative agreement” with Public Services and Procurement Canada. This agreement allowed SNC to continue to contract with and supply the Federal Government while the criminal charges were pending.

[40] On March 31, 2016, SNC disclosed that the preliminary inquiry in respect of the criminal charges was scheduled for September 2018. Throughout 2016, 2017 and 2018, SNC repeated the following disclosure that appeared in the QI 2016 MD&A:

Due to the inherent uncertainties of these proceedings, it is not possible to predict the final outcome of the Charges, which could possibly result in a conviction on one or more of the Charges. The Company cannot predict what, if any, other actions may be taken by any other applicable government or authority or the Company’s customers or other third parties as a result of the Charges, or whether additional charges may be brought in connection with the RCMP investigation of these matters.

2. The SNC Campaign for an Amendment to the Criminal Code

[41] At the time when SNC was charged, Canada did not have a deferred prosecution regime as a part of the Criminal Code.

[42] SNC mounted extensive lobbying efforts for a deferred prosecution regime to be introduced in Canada. Between February 5, 2016 until September 24, 2018, there were 72 recorded lobbying efforts made by SNC to members or officials of the Federal Government.

[43] It was reported in the media that SNC was pressing Canada’s Liberal government to adopt a deferred prosecution agreement regime because SNC wanted to resolve the matter without admitting guilt, which could damage its ability to bid for contracts internationally and at home.

[44] On February 22, 2018, the Federal Government announced its decision to introduce legislation to adopt a deferred prosecution regime that would authorize Remediation Agreements.

[45] Around the time the amendments were announced, SNC’s Settlement Counsel at Torys LLP, Frank Iacobucci and William McNamara, approached officials of the Prosecution Service with the objective of obtaining an invitation from the Director of Public Prosecutions of Canada (“DPP”), Kathleen Roussel, to negotiate a Remediation Agreement.

[46] On April 10, 2018, Mr. Iacobucci and Mr. McNamara had their first meeting with Mr. Roy and Ms. Manoukian of the Prosecution Service. The purpose of the meeting was to discuss a Remediation Agreement, but Ms. Manoukain advised them that discussions were premature before the enactment of the amendments to the Criminal Code.

[47] However, Mr. Iacobucci and Mr. McNamara were told that the Prosecution Service would consider submissions as to why SNC might be a candidate for a Remediation Agreement. It was agreed that these discussions would be confidential and without prejudice.

[48] SNC did not announce or report to the public that it was having discussions with the officials of the Prosecution Service about a Remediation Agreement.

[49] In order to understand the discussions that subsequently took place between Mr. Iacobucci and Mr. McNamara and the officials of the Prosecution Service, it is necessary to understand the nature of Remediation Agreements, which were introduced into the Criminal Code as Part XXII.1.

a. Remediation Agreements suspend criminal prosecution in return for a corporate accused agreeing to abide by conditions. These conditions may include admitting to facts that would support a conviction, paying a financial penalty, cooperating with authorities, and undertaking remediation activities to address the alleged misconduct.

b. A prosecutor may only enter into negotiations for a remediation agreement if certain conditions are met including being of the opinion that negotiating the agreement is in the public interest and appropriate in the circumstances.

c. A prosecutor may only enter into negotiations for a remediation agreement if the Attorney General consents to the negotiation of the agreement.

[50] For the present purposes of understanding the factual background to Mr. Peters’ proposed class action, the following provisions from Part XXII.1 are pertinent.

PART XXII.1- Remediation Agreements

Definitions

715.3 (1) The following definitions apply in this Part.

remediation agreement means an agreement, between an organization accused of having committed an offence and a prosecutor, to stay any proceedings related to that offence if the organization complies with the terms of the agreement.

Purpose

715.31 The purpose of this Part is to establish a remediation agreement regime that is applicable to organizations alleged to have committed an offence and that has the following objectives:

(a) to denounce an organization’s wrongdoing and the harm that the wrongdoing has caused to victims or to the community;

(b) to hold the organization accountable for its wrongdoing through effective, proportionate and dissuasive penalties;

(c) to contribute to respect for the law by imposing an obligation on the organization to put in place corrective measures and promote a compliance culture;

(d) to encourage voluntary disclosure of the wrongdoing;

(e) to provide reparations for harm done to victims or to the community; and

(f) to reduce the negative consequences of the wrongdoing for persons — employees, customers, pensioners and others — who did not engage in the wrongdoing, while holding responsible those individuals who did engage in that wrongdoing.

Conditions for remediation agreement

715.32 (1) The prosecutor may enter into negotiations for a remediation agreement with an organization alleged to have committed an offence if the following conditions are met:

(a) the prosecutor is of the opinion that there is a reasonable prospect of conviction with respect to the offence;

(b) the prosecutor is of the opinion that the act or omission that forms the basis of the offence did not cause and was not likely to have caused serious bodily harm or death, or injury to national defence or national security, and was not committed for the benefit of, at the direction of, or in association with, a criminal organization or terrorist group;

(c) the prosecutor is of the opinion that negotiating the agreement is in the public interest and appropriate in the circumstances; and

(d) the Attorney General has consented to the negotiation of the agreement.

Factors to consider

(2) For the purposes of paragraph (1)(c), the prosecutor must consider the following factors:

(a) the circumstances in which the act or omission that forms the basis of the offence was brought to the attention of investigative authorities;

(b) the nature and gravity of the act or omission and its impact on any victim;

(c) the degree of involvement of senior officers of the organization in the act or omission;

(d) whether the organization has taken disciplinary action, including termination of employment, against any person who was involved in the act or omission;

(e) whether the organization has made reparations or taken other measures to remedy the harm caused by the act or omission and to prevent the commission of similar acts or omissions;

(f) whether the organization has identified or expressed a willingness to identify any person involved in wrongdoing related to the act or omission;

(g) whether the organization — or any of its representatives — was convicted of an offence or sanctioned by a regulatory body, or whether it entered into a previous remediation agreement or other settlement, in Canada or elsewhere, for similar acts or omissions;

(h) whether the organization — or any of its representatives — is alleged to have committed any other offences, including those not listed in the schedule to this Part; and

(i) any other factor that the prosecutor considers relevant.

Factors not to consider

(3) Despite paragraph (2)(i), if the organization is alleged to have committed an offence under section 3 or 4 of the Corruption of Foreign Public Officials Act, the prosecutor must not consider the national economic interest, the potential effect on relations with a state other than Canada or the identity of the organization or individual involved.

Notice to organization — invitation to negotiate

715.33 (1) If the prosecutor wishes to negotiate a remediation agreement, they must give the organization written notice of the offer to enter into negotiations and the notice must include

(a) a summary description of the offence to which the agreement would apply;

(b) an indication of the voluntary nature of the negotiation process;

(c) an indication of the legal effects of the agreement;

(d) an indication that, by agreeing to the terms of this notice, the organization explicitly waives the inclusion of the negotiation period and the period during which the agreement is in force in any assessment of the reasonableness of the delay between the day on which the charge is laid and the end of trial;

(e) an indication that negotiations must be carried out in good faith and that the organization must provide all information requested by the prosecutor that the organization is aware of or can obtain through reasonable efforts, including information enabling the identification of any person involved in the act or omission that forms the basis of the offence or any wrongdoing related to that act or omission;

(f) an indication of how the information disclosed by the organization during the negotiations may be used, subject to subsection (2);

(g) a warning that knowingly making false or misleading statements or knowingly providing false or misleading information during the negotiations may lead to the recommencement of proceedings or prosecution for obstruction of justice;

(h) an indication that either party may withdraw from the negotiations by providing written notice to the other party;

(i) an indication that reasonable efforts must be made by both parties to identify any victim as soon as practicable; and

(j) a deadline to accept the offer to negotiate according to the terms of the notice.

Admissions not admissible in evidence

(2) No admission, confession or statement accepting responsibility for a given act or omission made by the organization during the negotiations is admissible in evidence against that organization in any civil or criminal proceedings related to that act or omission, except those contained in the statement of facts or admission of responsibility referred to in paragraphs 715.34(1)(a) and (b), if the parties reach an agreement and it is approved by the court.

3. Negotiations for a Remediation Agreement and the September 2018 Message

[51] Returning to the discussions between SNC’s Settlement Counsel and the officials of the Prosecution Service, SNC did not publicly disclose that these discussions were ongoing, nor did SNC publicly disclose any views about the likelihood of successfully negotiating a Remediation Agreement.

[52] After April 10, 2018, Mr. Iacobucci and Mr. McNamara had ongoing communications and meetings and correspondence with the Prosecution Service. The discussions addressed: (a) the proposed test for a Remediation Agreement; (b) how a Remediation Agreement would discipline SNC while avoiding the costs and uncertainties associated with a criminal prosecution; (c) how the Prosecution Service could reinstitute legal proceedings if SNC failed to comply with the terms of the Remediation Agreement; (d) a description of the work SNC had undertaken since 2012 with respect to ethics and compliance; (e) the World Bank’s positive comments about SNC’s implementation of the World Bank’s Integrity Compliance Guidelines; and (f) details on the projects lost by SNC as a result of the criminal charges.

[53] On June 21, 2018, Bill C-74, which introduced the Remediation Agreement provisions to the Criminal Code received royal assent. (The provisions were to come into force on September 19, 2018.)

[54] On July 18, 2018, SNC’s Settlement Counsel provided the Prosecution Service extracts of the reports of the World Bank’s Monitor commenting on SNC’s efforts to comply with and implement the World Bank’s eleven Integrity Compliance Guidelines.

[55] On July 19, 2018, SNC’s Settlement Counsel wrote to the Prosecution Service providing additional information regarding projects lost by SNC because of the criminal charges and details regarding the ethics and compliance courses taken by SNC’s Board of Directors and SNC’s senior leadership team.

[56] On July 26, 2018, Mr. Iacobucci and Mr. McNamara attended a meeting with the Prosecution Service, which was represented by Hans Gervais, Ms. Manoukian, and Mr. Roy. The purpose of the meeting was to discuss the prospects of an invitation to negotiate a Remediation Agreement.

[57] As a follow up to the meeting of July 26, 2018, on August 13, 2018, SNC’s Settlement Counsel delivered a letter to the Prosecution Service describing SNC’s efforts with the RCMP and other authorities since 2012.

4. The September 4, 2018 Telephone Call

[58] Thus, there were ongoing discussions between SNC and officials of the Prosecution Service from April 10, 2018 to August 13, 2018, during which SNC was endeavoring to persuade the DPP to extend an invitation to SNC to negotiate a Remediation Agreement. The next communication between the Prosecution Service and SNC took place on September 4, 2018.

[59] When that communication happened, SNC was, however, unaware that by September 4, 2018, Ms. Roussel, the DPP, had decided not to invite SNC to negotiate a Remediation Agreement.

[60] On the morning of September 4th, pursuant to s. 13 of the Director of Public Prosecutions Act[^6] Ms. Roussel finalized her memorandum “Whether to issue an invitation to negotiate a remediation agreement to SNC Lavalin”. Section 13 of the Director of Public Prosecutions Act provides: “The Director must inform the Attorney General in a timely manner of any prosecution, or intervention that the Director intends to make, that raises important questions of general interest.” The purpose of Ms. Roussel’s Section 13 Memorandum was to bring the matter of her decision about SNC’s efforts to obtain a Remediation Agreement to the attention of Attorney General Wilson-Raybould. (Through a Freedom of Information Request, Mr. Peters produced a heavily redacted copy of the Section 13 Memorandum.)

[61] In her memorandum, Ms. Roussel concluded that “the DPP is of the view that an invitation to negotiate will not be made in this case. No announcement will be made by the PPSC.”

[62] On September 4, 2018, Mr. Iacobucci and Mr. McNamara received a telephone call from Mr. Roy and Ms. Manoukian. In the call, Mr. Roy told Mr. Iacobucci and Mr. McNamara that the Prosecution Service did not intend to invite SNC to negotiate a Remediation Agreement.

[63] Mr. Iacobucci and Mr. McNamara were surprised by the news. Mr. Iacobucci asked for an explanation, and Mr. Roy said he would seek instructions as to whether he could advise SNC of the DPP’s rationale for not extending an invitation to negotiate.

5. The Events from September 5, 2018 to October 10, 2018 and the Press Release

[64] On September 5, 2018, Mr. Roy emailed Mr. Iacobucci and advised that he was permitted to explain the rationale of the DPP’s decision, and later that day, in a telephone call, Mr. Roy informed Mr. Iacobucci and Mr. McNamara that although the Prosecution Service was impressed by SNC’s rehabilitation efforts, it would not invite SNC to negotiate a Remediation Agreement because of: (a) the “nature and gravity” of the acts alleged; and (b) the “degree of involvement of senior officers in the organization”.

[65] However, in the telephone call Mr. Roy told Mr. Iacobucci and Mr. McNamara that the Prosecution Service would be open to receiving additional submissions on these two points, which alluded to the stipulations of Part XXII.1 of the Criminal Code.

[66] On September 7, 2018, Mr. Iacobucci wrote Mr. Roy and Ms. Manoukian. Mr. Iacobucci’s letter states:

Re: Charges pursuant to the Corruption of Foreign Officials Act – Québec Court file no. […]

I write further to our recent discussions, during which you indicated that the Director of Public Prosecutions (DPP) has decided that it would not be in the public interest to issue an invitation to negotiate a remediation agreement […] to SNC-Lavalin.

You explained to us that the DPP’s conclusion … is based in large measure on an assessment of two criteria found in section 715.32 (2) of the Code, namely, the “nature and gravity of the act and the “degree of involvement of senior officers of the organization:. You referred specifically to the perception that the alleged infractions were at the high end of the scale in terms of seriousness (involving the payment of bribes totalling $46 million) and implicated senior management. […]

SNC-Lavalin appreciates the opportunity to make a further submission to address the DPP’s concerns. It should be noted that the need for further submissions arises from our learning that two of the remediation agreement criteria mentioned above are of particular importance to the DPP, namely, the “nature and gravity” of the alleged offences and the “degree of involvement of senior officers of the organization”. These had not been raised in our previous meetings and exchanges. This letter will address these issues along with other, related points.

A. Purpose of Remediation Agreements

1. Section 715.31(d) of the Code states that one of the objectives of the remediation agreement regime is to encourage voluntary disclosure of wrongdoing.

We respectfully suggest that these positive examples of self-reporting are in direct relation to the events that are the foundation of the charges against SNC-Lavalin. This self-reporting occurred before the amendments to the Code were in place and demonstrates that SNC-Lavalin was aware of its social responsibility with regards to the denunciation of wrongdoing by its own senior officers.

2. Section 715.31(f) of the Code further describes one of the six purposes of establishing the remediation regime as being to reduce the negative consequences of the wrongdoings for persons -employees, customers, pensioners and others – who did not engage in the wrongdoing. You advised me that the DPP has taken this factor into account, but, again, with respect, we do not know how the DPP has done so.

The Company made extensive submissions on this aspect during earlier discussions with the DPP before the criminal charges were laid in 2015. As discussed, the Company views a possible criminal conviction in Canada as potentially a life-threatening episode. A conviction will result in debarment of the Company from all public procurement in Canada and possibly elsewhere for years. It means a possible cancellation of a multitude of existing contracts, including long-term concession agreements for PPP projects involving many partners and investors. It will also result in the Company having to acknowledge in many, if not all, of its bid submissions globally and for an indefinite period of time that the Company has been convicted of a criminal charge and being required to report the details of the conviction. This of course greatly increases the risk of outright debarment from those procurements as well. In short, the Company’s continued viability will be in direct jeopardy.

SNC-Lavalin’s employee levels in Canada halved from 17,900 in 2012 to 8,900 in 2017 after the corruption allegations became publicly known … Many customers turned away from SNC-Lavalin as a result of those allegations […] many employees consequently lost their employment with us.

In large measure the marketplace has already punished SNC-Lavalin for any possible misconduct that it engaged in. […] but the extraordinary potential for harm on third parties who did not engage in the wrongdoing […] is a fact that should carry some weight in light of section 715.31(f) and a decision by the DPP regarding an invitation to negotiate. In very concrete terms, the correction of past failures […] may all be of little consequence or comfort for the thousands of employees, shareholders, retirees and other third parties who have a stake in the future of SNC-Lavalin if SNC-Lavalin were to be found guilty.

It is in this context that we suggest a remediation agreement with SNC-Lavalin is in the public interest.

B. Conditions for Remediation Agreement

We would now like to comment on the paragraphs of section 715.32(2) which contain the factors the DPP must consider to determine SNC-Lavalin’s eligibility for an invitation to negotiate a Remediation Agreement:

2. “The nature and gravity of the underlying facts and its impact on the victim” (para. 715.32(2)(b))

We understand that the magnitude of the sums involved are considered a factor militating against an invitation to negotiate a remediation agreement with SNC-Lavalin. However, as appears from the attached list, numerous deferred prosecution agreements have been entered into in other jurisdictions where the amount of the alleged bribe was of a similar magnitude or considerably exceeded the amount of the alleged bribe in this case.

SNC-Lavalin does not characterize the alleged $46 million in bribes or corrupt payments as de minimus or as not being very serious. However, we respectfully suggest that the amount should not be considered in itself as a factor preventing the issuance of an invitation to negotiate in this instance. […] We respectfully suggest that the DPP may be unintentionally undermining the purpose of the new provisions if any wrongdoing that involves a large bribe disqualifies a company or renders it ineligible for an invitation to negotiate a remediation agreement.

3. “The degree of involvement of senior officers of the organization in the act or omission” (para. 715.32(2)(c)

As stated above, the only senior officers who should be considered as having been effectively involved in the charged offence are those who had knowledge of the beneficiaries of the payments made to Duvel and Dinova. While one can question why other senior officers relied upon Ben Aïssa’s and Bebawi’s representations, it remains that the latter two are the only ones who had active involvement in the charged offences and knew (and personally greatly benefited from) the ownership and activities of Duvel and Dinova. […]

Therefore, although the degree of involvement of senior officers of the organization in the alleged “offence” must be considered in order to determine whether a remediation agreement “is in the public interest and appropriate in the circumstances, the involvement of a senior officer alone cannot be a factor preventing the negotiation of a remediation agreement since such involvement is a sine qua non element of the alleged offences in the case at hand.

We would be grateful for an opportunity to meet with you and the DPP to discuss the contents of this letter and the path forward in greater detail. I will contact you in this regard shortly. Respectfully,

Frank Iacobucci, Senior Counsel.

[67] A few days later, on September 10, 2018, Mr. Iacobucci spoke to Mr. Roy in a telephone call. Mr. Iacobucci asked if there was any additional information that would be useful to the DPP in reaching her decision. Mr. Iacobucci also asked for an in-person meeting with the DPP. Mr. Roy said that he would get back to Mr. Iacobucci.

[68] On September 11, 2018, having considered the Section 13 Memorandum, Attorney General Wilson-Raybould decided that she would not intervene in the matter of SNC’s request to be invited to negotiate a Remediation Agreement.

[69] SNC was not advised of the Attorney General’s decision, and on September 12, 2018, there was a telephone call among Mr. Iacobucci, Mr. McNamara, and Mr. Roy. Mr. Roy told Mr. Iacobucci that the DPP required further information on SNC’s submission that the conviction would be a possible life-threatening episode. Mr. Roy also requested a response to the allegation that the knowledge of the alleged wrongdoing had spread to the highest echelons of the Company.

[70] On September 17, 2018, Mr. Iacobucci wrote Mr. Roy. The nine-page letter stated:

Dear Mr. Roy,

I write further to our telephone conversation on Wednesday, September 13, 2018, during which you indicated that you would require additional information in respect of certain elements raised in our September 7th letter regarding whether an invitation to negotiate a remediation agreement with SNC-Lavalin Group Inc. (“SNC-Lavalin”) would be in the public interest.

SNC-Lavalin appreciates the opportunity to make a further submission to address your concerns.

A. Consequences of an eventual conviction on SNC-Lavalin’s sustainability

The first element was the statement in our September 7th letter to the effect that the Company views a criminal conviction as a possible “life-threatening episode” […]

1. Integrity Regime – Debarment

[…] Therefore, the consequences of an eventual conviction on SNC-Lavalin … provide for an automatic determination of ineligibility to work on Federal public works for a period of 10 years, which may be reduced to 5 years through an Administrative Agreement.

SNC-Lavalin believes that if it is the subject of a debarment by the Federal government, the provincial and territorial governments will follow suit, […]

[…] The Company’s lenders have inserted [provisions that would trigger a default in the event of a government debarment]. Debarment could lead to expensive refinancing of some several billions of dollars, lack of access to credit, and onerous financial covenants. All this will have a devastating effect on the Company […]

2. Duff & Phelps Report, 2015

[…] The conclusion of the Duff & Phelps Report was that a conviction and ensuing debarment would threaten SNC-Lavalin’s viability […]

3. Impacts experienced by SNC-Lavalin 2012-2017

[…] Indeed, there is no greater reason for SNC-Lavalin to seek a remediation agreement than a strong desire to avoid repeating the very negative, very real impacts detailed here. These impacts costs shareholders, employees and other stakeholders (including the Company’s Canadian-based supply chain) a great deal and the Company does not want to expose them to the same scenario again.

4. Restructuring by SNC-Lavalin

[…] Faced with possible criminal conviction of three group companies, the SNC-Lavalin Board of Directors must and will, in order to preserve shareholder value, consider bifurcating the SNC-Lavalin group to distance the untainted parts of the organization from the three criminally charged companies that risk possible conviction. […]

B. Degree of involvement of Senior Officers in the alleged misconduct

In conclusion, we respectfully submit the following:

Based on the above and information and submissions previously provided to you, we believe there are strong reasons to conclude that it is in the public interest and appropriate for the DPP to negotiate a remediation agreement with the Company.

We would be grateful for an opportunity to meet with you and the DPP to discuss the contents of this letter and the path forward in greater detail. I will contact you in this regard shortly.

Respectfully,

Frank Iacobucci, Senior Counsel

[71] On September 17, 2018, unbeknownst to SNC, Prime Minister Justin Trudeau raised the matter of SNC at a meeting with Attorney General Wilson-Raybould. The Prime Minister asked the Attorney General to “help find a solution” to the SNC matter. The Attorney General informed the Prime Minister that she had conducted her due diligence and had decided not to intervene.

[72] SNC was not aware of the conversations between the Prime Minister and the Attorney General, and on September 18, 2018, Mr. Iacobucci responded, via email, to a voicemail that Mr. Roy had left the day before. The email stated:

Dear Mr. Roy,

Thank you for your voice mail message yesterday and for reaching out to Bill in my absence. I acknowledge your confirmation to the effect that you may have indicated to us during our conference call on September 12 that, from the Crown’s perspective, a conviction in this case was a virtual certainty. That corresponds with our recollection as well. I also acknowledge that you never told us that this was an overriding factor militating against the issuance of an invitation to negotiate and that, consequently, you felt obliged to clarify the reference to this effect found at page 7 of our September 17th letter to you.

In this regard, and to ensure that the record is clear, we agree that, although you did not say that the virtual certainty of a conviction was an overriding factor militating against the issuance of an invitation to negotiate, this was the impression both Bill and I formed as a result of our discussion.

More specifically, it seemed to us that the certainty of a conviction was an important and possibly critical consideration for the DPP, while other factors which, in our respectful view, militate strongly in favour of the issuance of an invitation to negotiate a remediation agreement, were somewhat discounted or de-emphasized. The most important of these factors (and the sections in the Criminal Code to which they relate) are as follows:

(i) The transformation of the Company since 2012: the termination of various individuals connected or possibly connected to alleged wrongdoing (s. 715.32(2)(d)); the adoption of a strict ethics and compliance regime (s. 715.32(2)(d)); the independent verification of the successful implementation of that regime, and of the steps taken by the Company, by the World Bank Monitor (s. 715.32(2)(d));

(ii) The drastic consequences further proceedings will have on the Company’s innocent stakeholders whether a conviction is obtained or not (s. 715.31(f));

(iii) On a more general level, the seeming absence of any reference to the equivalency, from a practical point of view, of a remediation agreement and a guilty verdict or plea; and

(iv) The willingness of the Company to comply fully with the objectives of the remediation agreement regime set out in section 715.31, namely, denunciation of wrongdoing, payment of penalties, corrective measures/promotion of a compliance culture, voluntary disclosure, reparations for harm done to victims and reduction of harm to innocent persons).

In our view, all of these factors are related to the public interest in issuing an invitation to negotiate a remediation agreement and proceeding to a negotiation. I also note that you referred in passing during our conversation to the Libyan people as being the victim of the alleged wrongdoing. This is also not an issue that has come up to any great extent during our discussions to date but, as our letter of September 17th states, this is certainly an issue that we are prepared to address in the event that an invitation to negotiate is issued and accepted. I trust that this serves to clarify any inadvertent miscommunications. Please feel free to pass this email on to the DPP and of course feel free to contact either Bill or me should you wish to discuss in greater detail. Kind regards,

Frank Iacobucci

[73] Also on September 18, 2018, Mr. Bruce, SNC’s CEO, and Mr. Ryan met with, among others, Michael Wernick, the Clerk of the Privy Council of Canada. At this meeting, they discussed the possible consequences if the Prosecution Service did not invite SNC to negotiate a Remediation Agreement. Mr. Wernick informed Mr. Bruce and Mr. Ryan that SNC could continue its dialogue with the Prosecution Service and to make submissions regarding public interest considerations.

[74] On September 20, 2018, Mr. Iacobucci, Mr. McNamara, and Mr. Roy spoke again by telephone. Mr. Roy informed them that the content of the September 17, 2018 letter had been sent to the DPP.

[75] In an email sent later that day to Mr. Roy, Mr. Iacobucci repeated SNC’s request for an in-person meeting with the DPP to address any of her outstanding concerns. The email message stated:

Subject: Re: Telephone Call This Morning

Dear Mr. Roy,

Thank you again for taking the time to speak to us by telephone earlier this morning. We were pleased to hear that our most recent correspondence to you has been transmitted to the DPP and that you will advise us further once you have heard from her regarding the matters we have raised.

In the meantime, I take this opportunity to reiterate our request for a meeting with the DPP. As discussed, we would propose that Neil Bruce, the President and CEO of SNC-Lavalin, be in attendance at that meeting along with Bill McNamara and myself. Mr. Bruce of course is very knowledgeable about the matters raised in all our letters including in particular the negative impact the ongoing legal proceedings have had and will continue to have on the Company’s stakeholders, as well as on the Company itself. As we have indicated in our correspondence, as well in our in-person meetings, these considerations are among the many reasons why we respectfully submit that an invitation to negotiate in this matter would be in the public interest and should therefore be issued by the DPP at the earliest opportunity. I look forward to hearing from you. Kind regards,

Frank Iacobucci

[76] On September 21, 2018, the Criminal Code provisions relating to Remediation Agreements came into force.

[77] On September 26, 2018, Mr. Roy informed Mr. Iacobucci by telephone call, that the DPP’s decision on whether to invite SNC to negotiate a Remediation Agreement would be delivered later that week. Mr. Roy also stated that the DPP’s decision about an in-person meeting would be communicated later that week.

[78] Also on September 26, 2018, Mr. Iacobucci attempted unsuccessfully to speak to Ms. Roussel directly, but his telephone call was never returned.

[79] On September 27, 2018, following up on Mr. Wernick’s suggestion, SNC prepared a presentation on the public interest considerations relating to SNC’s request to be invited to negotiate a Remediation Agreement. A copy of this presentation was delivered to the Federal Government’s Department of Finance.

[80] Also on September 27, 2018, during a telephone call with Mr. Iacobucci, Mr. Roy requested a copy of SNC’s presentation. Mr. Iacobucci was told that the DPP would review the presentation. The presentation was provided to the Prosecution Service.

[81] The next significant event did not occur until October 9, 2018.

[82] Pausing here in the narrative, although as I shall explain below, in the analysis and discussion portion of these Reasons for Decision, the subjective views of the parties are not pertinent to determining whether SNC had an obligation to report a material change, Mr Ryan’s evidence was that after the September 4, 2018 message from the Prosecution Service’s officials until October 9, 2018, his personal beliefs, which were shared by Mr. Iacobucci, Mr. McNamara, Mr. Bruce, and Mr. Paterson were that: (a) the negotiations for an invitation were continuing; (b) it would be fatal to those ongoing negotiations and contrary to the agreement of the parties, which was to keep the discussions privileged and confidential, to make any public statement about the state of the negotiations; and (c) SNC was eventually going to be successful in obtaining an invitation to negotiate a Remediation Agreement.

[83] Returning to the narrative, on October 9, 2018, Mr. Ryan’s beliefs, which were shared by his colleagues at SNC and by Settlement Counsel, became disappointed beliefs.

[84] By letter dated October 9, 2018, at the direction of the DPP, Mr. Roy wrote to advise Settlement Counsel that Ms. Roussel had completed a thorough review of all the materials submitted by SNC, including the additional information provided on September 7, 17, 18, and 27, 2018. Mr. Roy advised Mr. Iacobucci that the DPP had decided that an invitation to negotiate a Remediation Agreement would not be appropriate. Mr. Roy further advised that the DPP refused to have an in-person meeting.

[85] On October 10, 2018, SNC issued the following press release:

Update on the federal charges by the Public Prosecutor Service of Canada

SNC-Lavalin (TSX:SNC) has been advised by the Director of the Public Prosecution Service of Canada (DPPSC) that at this time they will not invite SNC-Lavalin to negotiate a Remediation Agreement. SNC-Lavalin strongly disagrees with the DPPSC’s current position and remains open and committed to negotiating such an agreement in the interest of its employees, partners, clients, investors, pensioners and other stakeholders, all innocent parties that have been affected during the last six years, and now face an unnecessary extended period of uncertainty.

The Company will continue to operate as it has since the charges were laid in 2015, focused on bringing value to its shareholders and other stakeholders by continuing to offer industry leading engineering and professional services and by growing its business, all the while vigorously defending itself against the charges. The Company is reviewing its options to appeal this decision.

The government of Canada undertook an exhaustive legislative process that led to the adoption of a Remediation Agreement regime permitting companies to defer prosecution in exchange for fines, remediation and cooperation. This regime enables fair, effective and globally competitive resolution of issues for Canadian corporations, if companies admit wrongs, make compensation, pay fines, cooperate and help ensure the individuals responsible are held to account.

A key purpose of the legislation is “to reduce the negative consequences of the wrongdoing for persons — employees, customers, pensioners and others — who did not engage in the wrongdoing, while holding responsible those individuals who did engage in that wrongdoing.” The Company believes that the legislation should be utilized to its intent with regards to these innocent stakeholders.

[86] At 9:33 a.m. on October 10, 2018, the IIROC temporarily halted the trading of SNC’s securities on the TSX. After trading resumed, by the close of trading of almost 1.6 million shares, the price of SNC shares dropped from a price of $51.88 to a closing price of $44.96. The price had declined by over 13%. This drop was a loss of over $600 million of market capitalization.

6. Judicial Review, the Criminal Prosecution, and the Settlement

[87] Although SNC issued a press release, it never issued a material change notice with respect to the events between September 4, 2018 and October 10, 2018. The Ontario Securities Commission did not order an investigation of the timeliness of SNC’s disclosure of its negotiations to obtain an invitation to negotiate a remediation agreement.

[88] On October 15, 2018, Mr. Bruce wrote to Prime Minister Justin Trudeau requesting a discussion of “a matter of some urgency.” His letter stated as follows:

Dear Prime Minister

I am writing to request a meeting at your earliest convenience to discuss a matter of some urgency. […] Early last week, SNC-Lavalin was advised by the Director of the Public Prosecution Service of Canada (DPPSC) that at this time they will not invite SNC-Lavalin to negotiate a Remediation Agreement (RA). As a publicly traded company, we disclosed such material information the following day and experienced one of the darkest days in SNC-Lavalin’s history.

[…] Yet, for the present, the DPPSC has used her discretion not to apply the tool in the case of SNC-Lavalin.

This was very disappointing news for a number of reasons.

First, SNC-Lavalin has not been treated very well over the past several weeks.

o The Company’s adviser and counsel with the PPSC, a well-respected expert in the law whose credentials are impeccable, former Justice of the Supreme Court of Canada, was not afforded the courtesy of a meeting or even a call with the DPPSC after several requests were made, to explain SNC-Lavalin’s rationale to enter into RA negotiations.

o […]

Second, SNC-Lavalin believes that it does meet the requirements to enter into an RA negotiation with the PPSC and so therefore strongly disagrees with the DPPSC’s current position.

On this, we have been encouraged to write to the DPPSC to try and explain the rationale for reconsideration. Whatever the outcome, we remain open and committed to negotiating such an agreement in the interest of its employees, partners, clients, investors, pensioners and other stakeholders, all innocent parties that have been affected during the last six years, and now face an unnecessary extended period of uncertainty. […]

Third, it is in the public interest to enter into RA negotiations because SNC-Lavalin is a much changed company. […]

Fourth, SNC-Lavalin has experienced highly material impacts on all its stakeholders – all of whom are innocent bystanders – over the past six years. Last wee, they had to experience the negative impacts again, for a second time.

To conclude, Prime Minister, I have to ask if it is in the public interest to prosecute SNC-Lavalin, and to try and achieve a guilty verdict.

On behalf of SNC-Lavalin’s employees, both inside and outside Canada, and all of our stakeholders, I hope that we will be able to meet as soon as possible on this matter. […]

With best regards,

Neil Bruce

[89] On October 19, 2018, SNC filed an application for judicial review of the DPP’s decision declining to extend an invitation to SNC to negotiate a Remediation Agreement. SNC also sought an order by way of mandamus to direct the DPP to issue an invitation and to negotiate a remediation agreement in good faith.

[90] On October 29, 2018, a preliminary inquiry into the criminal charges against SNC began in the Court of Québec.

[91] On March 8, 2019, Justice Kane of the Federal Court dismissed SNC’s judicial review application.[^7] He held that the DPP’s decision was a matter of prosecutorial discretion that was not subject to judicial review.

[92] On May 29, 2019, the Court of Québec determined that there was sufficient evidence to commit the case to trial, which was anticipated to occur later in 2019 or in 2020.

[93] Approximately a half-year of trial preparations followed, but settlement negotiations continued.

[94] On December 18, 2019, SNC issued a press release announcing a settlement with respect to the criminal charges. As part of the Settlement, SNC Construction agreed to pay a $280 million fine and be subject to a three-year probation order. Because the settlement did not include a conviction of SNC but only its subsidiaries, the settlement did not result in SNC being debarred from participating in government projects.

[95] On December 19, 2019, SNC issued a material change report concerning the settlement.

[96] The announcement had a positive response in the secondary market for shares. Dr. McCann said that the disclosure of the settlement was a bookend to the disclosure of the DPP’s decision and that the settlement was in line with market expectations for a Remediation Agreement. Dr. McCann measured the positive market return on December 18, 2019 at over 19% or $4.76 per share.

7. The Expert Evidence of Dr. McCann

(a) The Admissibility of the Reports of Dr. McCann

[97] Mr. Peters retained Dr. McCann to deliver two reports. SNC asks that the two McCann Reports be struck out or accorded no or little weight.

[98] Dr. McCann’s First Report was an expert’s report about materiality, about the impact of the press release of October 10, 2018, which Dr. McCann regarded as a Corrective Disclosure, on the market value of SNC’s shares, and about a methodology to assess aggregate damages.

[99] Dr. McCann’s Second Report was professed to be a reply to the expert evidence in Mr. Ryan’s affidavit. As I shall detail below, Dr. McCann’s Second Report was inappropriate and improper because Mr. Ryan was not an expert witness but was a fact witness, and it was not Dr. McCann’s proper role to interpret and challenge Mr. Ryan’s fact evidence in what was a blatant usurpation of the court’s role to interpret evidence and to make findings of fact and of law.

[100] SNC objects to McCann’s First Report being admitted on the normative grounds that Dr. McCann’s expert evidence is not admissible in accordance with the law that governs the admission of opinion evidence. SNC objects to McCann’s Second Report as being improper case-splitting because it addresses points never raised by Mr. Ryan, who, in any event, was a fact witness not an expert witness for Dr. McCann to debate. Further, in a related objection, SNC submits that McCann’s Second Report is argument and advocacy that has been disguised as an expert’s opinion that rather demonstrates that Dr. McCann should be disqualified as a partisan.

[101] For the following reasons, I shall admit the First Report and strike out the Second Report.

[102] My assessment is that Dr. McCann’s First Report is admissible, and its frailties should go to its weight not its admissibility.

a. Dr. McCann is qualified to give expert evidence about materiality and about what counts as a material change from the perspective of an economist and as an expert in the operation of stock exchanges. He is qualified to give opinion evidence about what matters to investors, commentators, stock market analysts, and regulators about share values and the trading of shares.

b. In his First Report, for the most part, Dr. McCann stays in his lane.

c. However, from time to time, Dr. McCann does strays outside his lane and express opinions about legal matters and about issues of mixed fact and law that he is not qualified to express. From time to time, Dr. McCann offends the rule about expert evidence, and as will become apparent from the discussion later in these Reasons for Decision, on several important aspects about materiality, material facts, and material change, he is wrong in his legal analysis, his reasoning, and in his conclusions.

d. Given that sometimes Dr. McCann stays in his lane and sometimes he strays, in my opinion, the appropriate way to treat Dr. McCann’s First Report is to admit it and to give it the evidentiary weight it deserves as appropriate to the diverse issues it addresses.

[103] The appropriate way to treat Dr. McCann’s Second Report is to strike it.

a. In my opinion, all of SNC’s objections to the Second Report have merit, including the assertion that Dr. McCann had become a partisan and should be disqualified as an expert witness. In this last regard, I was initially inclined to disqualify Dr. McCann as an expert witness for both of his reports, but since I saw no improprieties in the First Report, I decided that only the Second Report should be struck.

b. Dr. McCann’s Report is 24 paragraphs in length. Seventeen paragraphs are rebuttals by Dr. McCann to what he says Mr. Ryan “states or implies” of opinion evidence. These rebuttal paragraphs are disingenuous. There are no “statements of opinion evidence” by Mr. Ryan in his affidavit, and it is not for Dr. McCann to interpret the implications of Mr. Ryan’s fact witness evidence and infer it to be expert’s testimony that Mr. Ryan would not have been qualified to give and did not in truth give.

c. Worse, many of the so-called implications drawn by Dr. McCann do not accurately reflect what Mr. Ryan actually said. Mr. Ryan was not cross-examined, and he did not say what he was said to have said, which explains why Dr. McCann in his affidavit coined the expression “states or implies.” This was not fair to Mr. Ryan or to SNC. In its Responding Factum, SNC attributed the unfairness to a breach of the Rule from Browne v. Dunn[^8] to which Mr. Peters in his Reply Factum took issue. I need not decide whether the rule from Browne v. Dunn was breached. The unfairness to Mr. Ryan was palpable; the prejudice of the smear campaign was great as compared to its miniscule probative value.

d. As confirmed by the Supreme Court of Canada in White Burgess Langille Inman v. Abbott and Haliburton Co.,[^9] there is a two-stage test for the admission of opinion evidence. In the first step, the threshold stage, the litigant proffering expert evidence must satisfy the factors from R. v. Mohan.[^10] In the second stage, the gatekeeper stage, the court makes a cost-benefit discretionary decision weighing the probative value of admitting the evidence against the potential adverse impacts of admitting the evidence, including the consumption of time, prejudice, and the risk of confusing the trier of fact. In the immediate case, I exercise my discretion to strike Dr. McCann’s Second Report.

e. Further, in my opinion, there is considerable merit to SNC’s submission that insofar as his Second Report is concerned, Dr. McCann should be disqualified for partisanship. A witness is not qualified to give an expert opinion if he or she is not neutral and objective, and while an expert’s opinion may support the client’s position, the opinion should be the independent product of the expert uninfluenced as to form or content by the exigencies of litigation or the pressure of the client.

f. I appreciate that Dr. McCann swore the acknowledgement of his duty to provide opinion evidence that is fair, objective, and non-partisan. While he did so with respect to his First Report, he did not do so with respect to his Second Report. The court retains a residual discretion to exclude the evidence of a proposed expert witness when the court is satisfied that the evidence is so tainted by bias or partiality as to render it of minimal or no assistance.

g. The Second Report is essentially a legal argument that would not have been proper in either of Dr. McCann’s reports, and worse, the Second Report was not a fair argument because, in the main, it anticipated by implication SNC’s arguments that were not accurately or fairly stated and some of them were never made. Much of Dr. McCann’s Second Report would not have been proper argument for legal counsel in a factum.

h. Moreover, in my opinion, there is also merit to SNC’s objection that through the proffering of the Dr. McCann’s Second Report, Mr. Peters has split his case by improper Reply. Mr. Ryan was a fact witness who did not express opinion evidence. It is intrinsically unfair for a plaintiff, applicant, or moving party to add new evidence or new argument after the defendant, respondent, or responding party has completed his or her evidence and argument.[^11] Reply evidence is admissible only when defendant, respondent, or responding party has raised a new matter that could not be reasonably anticipated by the plaintiff, applicant, or moving party or where the reply evidence is in response to an issue enlarged by the opponent in a manner that could not have been reasonably foreseen.[^12] Dr. McCann’s Second Report was not a proper reply.

[104] I, therefore, conclude that Dr. McCann’s Second Report should be struck. However, before moving on to discuss Dr. McCann’s admissible evidence from his First Report as tested in cross-examination, there is one additional matter that I must address. Mr. Peters submits that I cannot strike Dr. McCann’s Second Report because SNC did not bring a formal strike motion. His argument is set out in paragraphs 100 and 101 of his Reply Factum as follows:

100. Despite the defendants’ now apparent prayer for relief – raised for the first time in their responding factum delivered on May 14, 2021 – that Dr. McCann’s second report should be “struck”,123 the defendants have not brought a formal strike motion with respect to this report. No notice of strike motion was ever served. No notice was ever provided to the plaintiff, who would have contested it. Such a motion has not been formally briefed. It has only now been first advanced in the defendants’ responding factum on these leave/certification motions. This should not be countenanced.

101. There is no strike motion before this Court. The defendants could have brought a strike motion but chose not to. Alternatively, even if it could somehow be said that such a strike motion is presently before the Court, this Court has inherent jurisdiction to quash or dismiss such a motion that has been improperly advanced.

[105] There is no merit whatsoever in this audacious argument. It is the court’s responsibility to determine what evidence is admissible, most particularly with respect to the evidence of experts which has been notoriously problematic leading to rule changes such as the requirement that the expert acknowledge his or her duties to the court. It is normative that challenges to the admissibility of evidence are made as preliminary motions without the formality of a notice of motion. Mr. Peters was not taken by surprise that Dr. Peters’ Second Report would be challenged. Mr. Peters had notice of the challenge and a full opportunity to meet the challenge in both his Factum and most especially in his Reply Factum where 38 paragraphs over 17 pages with copious excerpts from Dr. McCann’s cross-examination transcript are used to defend Dr. McCann’s indefensible Second Report.

(b) Dr. McCann’s Admissible Evidence

[106] Turning to Dr. McCann’s admissible evidence.

[107] Dr. McCann opined that the September 4, 2018 message was a material change.

[108] Dr. McCann arrived at his opinion by a deductive argument. In his opinion, the negative abnormal reaction in the share value of SNC’s shares in the market on October 10, 2018 was due to the investor’s reaction to the information in the October 10, 2018 press release, which in his opinion was a Corrective Disclosure.

[109] Dr. McCann reasoned that the information in the Corrective Disclosure press release would have caused the same share price reaction if it had been disclosed on September 4, 2018. He reasoned that if the Corrective Disclosure had been made on September 4, 2018, the share price reaction would have been negative and statistically significant even if the DPP's communication to SNC on September 4, 2018 was a preliminary indication rather than a final decision.

[110] Dr. McCann concluded that SNC's decision to publish the Corrective Disclosure on October 10, 2018 rather than September 4, 2018 caused SNC's common share price to be artificially inflated during the Class Period and that the artificial share price inflation caused damages to any investor who purchased common shares during the Class Period and held the acquired shares until after the Corrective Disclosure.

[111] Dr. McCann further opined that the aggregate damages suffered by the Class is the damages per share, multiplied by the estimated number of damaged shares. He submitted that aggregate damages could be calculated using the event study methodology to calculate the artificial share price inflation and using a trading model to estimate the number of damaged shares.

F. The Judge in the Room: How to Analyze the Role of Frank Iacobucci

[112] Before undertaking the legal analysis, it is necessary to acknowledge and not politely ignore the problems of how to analyze Mr. Iacobucci’s role in the case at bar.

[113] As the above account of the facts reveals, Mr. Iacobucci had a pivotal role in the facts of the immediate case. As the analysis below will reveal, Mr. Iacobucci also had a pivotal role in developing the law to be applied to the pivotal role he played. Among other things, Justice Iacobucci wrote Pezim v. British Columbia (Superintendent of Brokers),[^13] the seminal case about “material change,” and along with Justice Sopinka, Justice Iacobucci wrote the main judgment in Queen v. Cognos Inc.,[^14] the leading case about the constituent elements of negligent misrepresentation.

[114] Before his appointment to the bench, in addition to having practiced law in the private sector, Mr. Iacobucci was a renowned scholar in commercial and corporate law. Before his appointment to the bench, Mr. Iacobucci was amongst other things, dean of the Faculty of Law at the University of Toronto, where he taught commercial and corporate law. Between 1985 and 1988, Mr. Iacobucci was a Deputy Minister of Justice and Deputy Attorney General for Canada, where he would have had responsibilities over all manner of civil, administrative, and criminal cases. After his appointments to the Federal Court, where he was Chief Justice, and to the Supreme Court of Canada, Mr. Iacobucci wrote some of those courts’ most important judgments in many areas of the law, including the criminal law, administrative law, corporate law, and securities law that is pertinent to the immediate case.

[115] Mr. Iacobucci was not called as a witness, but his factual role is readily knowable from the documentary evidence and the evidence of what he wrote and said is not hearsay or was admissible as a hearsay exception. To the extent anything Mr. Iacobucci wrote or said was proffered for the truth of its contents, it was Mr. Peters’ who relied on it as an admission.

[116] In their factums and in their oral arguments, the parties politely ignored the problem of how to analyze the role played by Mr. Iacobucci. Counsel for Mr. Peters did not challenge Mr. Iacobucci’s credibility, and with respect to the facts of the immediate case, counsel for Mr. Peters let what Mr. Iacobucci did, what he wrote, and what he was reported to have said speak for themselves. The parties were silent on the significance of Mr. Iacobucci’s legal expertise to my making findings of fact and of law. Counsel for Mr. Peters let what Mr. Iacobucci wrote as an academic or judge also speak for itself. Counsel for SNC did much the same thing and never suggested, for instance, that given Justice Iacobucci’s legal expertise, there might not be anybody more able in Canada to recognize a “material change” than him.

[117] I confess to being a great admirer of Mr. Iacobucci, as I expect most judges are, but in the analysis that follows, I shall analyze Mr. Iacobucci’s pivotal role in the case at bar precisely in the way that he would expect himself to be analyzed and how the parties’ respectively analyzed his role in their oral and written submissions, which is to say respectfully, but without any deference or any inferences to be taken from his expertise in criminal, administrative, commercial, and corporate law or his experience as a Deputy Attorney General or a judge.

G. Analysis and Discussion: Should Leave be Granted for Mr. Peters’ Statutory Claim?

Introduction and Overview of the Analysis

[118] In this section of my Reasons for Decision, I shall analyze and discuss Mr. Peters’ statutory cause of action pursuant to Part XXIII.1 of the Ontario Securities Act and address whether leave should be granted to him to prosecute this cause of action.

[119] To advance this cause of action, the Act requires that Mr. Peters obtain the leave of the court. The test for leave is that leave should not be granted if having considered the evidence and having regard to the limitations of the motions process and the early stage of the action, the plaintiffs' case is so weak or has been so successfully rebutted by the defendant, that the plaintiff’s case has no reasonable possibility of success.

[120] It is Mr. Peters’ argument that leave should be granted because the evidentiary record demonstrates that he has a plausible claim under Part XXIII.1 of the Act. He asserts that his claim is plausible because SNC failed to disclose a “material change” when it waited 36 days before disclosing the DPP’s September 4, 2018 message that the Prosecution Service did not intend to invite SNC to negotiate a Remediation Agreement.

[121] In the discussion below, I shall explain why there is no prospect that Mr. Peters’ action under Part XXIII.1 of the Ontario Securities Act can succeed. In the discussion below, I shall analyze and explain why I agree with the ultimate conclusion of some of SNC’s several arguments. The ultimate conclusion of these argument is that there was no “material change” in the immediate case and, therefore, there was no failure to disclose and no feasible statutory cause of action.

[122] For the discussion below, I shall not discuss several other SNC arguments associated with submissions that SNC or its Settlement Counsel reasonably thought it was prudent or necessary or in keeping with SNC’s responsibilities to its stakeholders to remain silent about the message received on September 4, 2018. I shall not discuss SNC’s arguments associated with submissions that SNC or its Settlement Counsel stayed silent to keep alive SNC’s aspirations for a Remediation Agreement or so as to not violate the confidentiality agreement with the officials of the Prosecution Service. I will only discuss SNC’s arguments that conform with the law about what counts for a material change.

[123] In this last regard, I agree with Mr. Peters’ arguments that if the message of September 4, 2018 was a material change, then SNC’s subjective needs and thoughts or fiduciary or other corporate responsibilities and the business judgment rule could not obviate its obligation to disclose a material change. I agree with Mr. Peters’ arguments that if there was a material change it would be necessary for SNC to disclose it notwithstanding that it had an arrangement that its communications with the Prosecution Service were confidential and privileged.

[124] My explanation of why I conclude that Mr. Peters’ case is so weak or has been so successfully rebutted by SNC that it has no reasonable possibility of success will have five parts. First, I shall describe the details of the test for leave. Second, I shall describe the law about the statutory cause of action and an issuer’s duty to disclose material facts and material changes. Third, I shall analyze whether the message of September 4, 2018 was a “change.” Fourth, I shall analyze whether the message of September was a “material change.” Fifth, I shall discuss pertinent jurisprudence about material change.

[125] I foreshadow the discussion below to say that there are two Achilles’ heels in Mr. Peters’ case. The first fatal weakness in Mr. Peters’ case is that independent of its materiality, the message received by SNC on September 4, 2018 was not a “change” requiring disclosure under the Ontario Securities Act. The second fatal weakness in Mr. Peters’ case is that if the message was a “change” it was not a material change to SNC’s operations, capital or business. Because the evidence does not credibly point to a material change that could have triggered timely disclosure obligations, there is no reasonable possibility that Mr. Peters’ action under Part XXIII.1 of the Ontario Securities Act could succeed. I, therefore, do not grant leave.

1. The Leave Requirement for the Statutory Cause of Action

[126] Section 138.3 (4) of the Ontario Securities Act creates a statutory cause of action for a reporting issuer’s failure to make a timely disclosure of a material change in the manner required under the Act. The cause of action is available to any person who acquires or disposes of the issuer’s securities between the time when the material change was required to be disclosed in the and the subsequent disclosure of the material change, which is known as a “public correction.”

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

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

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

[128] In the immediate case, it is not suggested nor contested that Mr. Peters’ the action is being not brought in good faith.

[129] If the plaintiff’s action is brought in good faith, the test then is that leave should not be granted if having considered all the evidence and having regard to the limitations of the motions process, the plaintiffs' case is so weak or has been so successfully rebutted by the defendant, that the plaintiff’s case has no reasonable possibility of success; otherwise leave should be granted.[^15]

[130] The leave requirement was designed to have a gatekeeper function.[^16] In Theratechnologies inc. v. 121851 Canada inc.,[^17] Justice Abella, writing for a unanimous Supreme Court, described the test for leave as a "robust deterrent screening mechanism." The leave test is meant to create a robust deterrent screening mechanism with a reasoned consideration of the evidence from both parties so that cases without merit are prevented from proceeding.[^18]

[131] The reasonable possibility of success requirement of the leave test is a meaningful but low threshold, merits-based test that is more than a superficial examination of the merits of the plaintiff’s statutory cause of action but a meaningful examination of the evidence to ensure that the action has some merit.[^19] While relatively low, the test for leave is a different and more robust standard than the general threshold for the authorization of a class action.[^20]

[132] For the purposes of the leave motion, the evidentiary burden placed on the plaintiff is considerably less than the burden of a trial or a mini-trial. In Theratechnologies inc. v. 121851 Canada inc.,[^21] the Supreme Court of Canada described the plaintiff’s burden. Justice Abella said that the leave motion should not be treated as a mini-trial or be so onerous as to essentially replicate the demands of a trial.

[133] Using the record of affidavit evidence and cross-examinations, the court hearing the leave motion is entitled to weigh the evidence, but the court must take into account that the leave motion involves merely a paper record and that the statutory leave test sets a low evidentiary threshold.[^22] The motions judge should be cognizant that full production has not been made and that the defendant may have relevant documentation and evidence that is not before the court.[^23] On a leave motion, a full analysis of the evidence is unnecessary, and the plaintiff need only provide a plausible analysis of the applicable legislative provisions and some credible evidence in support of the claim sufficient to persuade the court that there is a reasonable possibility that the action will be resolved in the plaintiff’s favour.[^24]

[134] If a defence is raised by a defendant at a plaintiff’s leave motion, then the test for the plaintiff is whether there is a reasonable possibility that the defendants will not be able to establish the defence; if there is a reasonable possibility that the defendants will not be able to establish the defence at trial, the motion for leave should be granted.[^25]

[135] In the immediate case, at this juncture, SNC does not rely on a defence to meet Mr. Peters’ case. SNC’s argument is that weighing the evidence and taking into account that the leave motion involves a low evidentiary standard, Mr. Peters has not shown a reasonable possibility that the action will be resolved in his favour. SNC’s argument is that acknowledging that there is a low evidentiary burden, Mr. Peters’ proposed action has no reasonable possibility of success because he cannot establish that the September 4, 2018 message was a “change” or that it was a “material change” to SNC’s operations, capital, or business.

2. The Statutory Cause of Action and Material Facts and Material Changes

[136] Corporations that issue stocks and bonds that trade on the primary and the secondary markets administered by stock exchanges are obliged to disclose “material facts” and “material changes.” Securities statutes enforce the disclosure requirements imposed on companies with statutory causes of action. Part XXIII.1, s. 138.3(4) of the Ontario Securities Act creates a statutory cause of action for purchasers of securities on the secondary market as follows:

138.3 (4) Where a responsible issuer fails to make a timely disclosure, a person or company who acquires or disposes of the issuer’s security between the time when the material change was required to be disclosed in the manner required under this Act or the regulations and the subsequent disclosure of the material change has, without regard to whether the person or company relied on the responsible issuer having complied with its disclosure requirements, a right of action for damages against,

(a) the responsible issuer;

(b) each director and officer of the responsible issuer who authorized, permitted or acquiesced in the failure to make timely disclosure; […]

[137] The major constituent elements of the statutory causes of action for misrepresentations in the secondary market are: (a) the making of a misrepresentation or the failure to disclose a material fact; (b) a public correction of the false information; and (c) the trading of a security between the time of the misrepresentation or the failure to disclose a material fact. To plead the statutory causes of action, the plaintiff should: (a) identify the inculpatory statement or omission and when it was made or ought to have been made; (b) specify the falseness of the inculpatory statement; and (c) identify the public correction and when it was made.[^26]

[138] The essence of Mr. Peters’ statutory cause of action is that SNC ought to have disclosed a material change but did not do so and, therefore, SNC is liable under Part XXIII.1 of the Ontario Securities Act. In the immediate case, Mr. Peters has adequately pleaded his statutory cause of action.

[139] For the statutory causes of action under the Ontario Securities Act, “misrepresentation,” “material change,” and “material fact,” are defined in s. 1(1) of the Act as follows:

“misrepresentation” means,

(a) an untrue statement of material fact, or

(b) an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in the light of the circumstances in which it was made;

“material change”,

(a) when used in relation to an issuer other than an investment fund, means,

(i) a change in the business, operations or capital of the issuer that would reasonably be expected to have a significant effect on the market price or value of any of the securities of the issuer, or

(ii) a decision to implement a change referred to in subclause (i) made by the board of directors or other persons acting in a similar capacity or by senior management of the issuer who believe that confirmation of the decision by the board of directors or such other persons acting in a similar capacity is probable, and

(b) when used in relation to an issuer that is an investment fund, means,

(i) […]

“material fact”, when used in relation to securities issued or proposed to be issued, means a fact that would reasonably be expected to have a significant effect on the market price or value of the securities;

[140] The concept of materiality is common to material facts and material changes. Materiality is determined objectively from the perspective of what a reasonable investor would consider important in deciding to invest and at what price, and what counts for a material change is independent of the subjective assessment views of company executives and the business judgment rule does not apply to determine what is material.[^27]

[141] The definition of a misrepresentation of material fact in Canada is derived from American jurisprudence; namely, the U.S. Supreme Court’s decision in TSC Industries, Inc. v. Northway, Inc.[^28] A fact may be considered material if there is a substantial likelihood that a reasonable investor would consider it important in deciding whether to invest and at what price.[^29]

[142] Materiality is a contextual and fact-specific inquiry, determined on a case-by-case basis from the perspective of the reasonable investor, and the inquiry engages the application of a legal standard to specific facts in light of all of the relevant circumstances and the total mix of information.[^30] The court must therefore inquire into what the reasonable investor would consider as significantly altering the total mix of information made available to him or her in the particular circumstances; this is a fact-specific inquiry, and except in those cases where common sense inferences are sufficient, the party alleging materiality must provide evidence in support of that contention.[^31]

[143] In Sharbern Holding Inc. v. Vancouver Airport Centre Ltd.,[^32] Justice Rothstein summarized the test for materiality and the methodology for applying the test as follows:

61. In sum, the important aspects of the test for materiality are:

(i) Materiality is a question of mixed law and fact, determined objectively, from the perspective of a reasonable investor;

(ii) An omitted fact is material if there is a substantial likelihood that it would have been considered important by a reasonable investor in making his or her decision, rather than if the fact merely might have been considered important. In other words, an omitted fact is material if there is a substantial likelihood that its disclosure would have been viewed by the reasonable investor as having significantly altered the total mix of information made available;

(iii) The proof required is not that the material fact would have changed the decision, but that there was a substantial likelihood it would have assumed actual significance in a reasonable investor's deliberations;

(iv) Materiality involves the application of a legal standard to particular facts. It is a fact-specific inquiry, to be determined on a case-by-case basis in light of all of the relevant considerations and from the surrounding circumstances forming the total mix of information made available to investors; and

(v) The materiality of a fact, statement or omission must be proven through evidence by the party alleging materiality, except in those cases where common sense inferences are sufficient. A court must first look at the disclosed information and the omitted information. A court may also consider contextual evidence which helps to explain, interpret, or place the omitted information in a broader factual setting, provided it is viewed in the context of the disclosed information. As well, evidence of concurrent or subsequent conduct or events that would shed light on potential or actual behaviour of persons in the same or similar situations is relevant to the materiality assessment. However, the predominant focus must be on a contextual consideration of what information was disclosed, and what facts or information were omitted from the disclosure documents provided by the issuer.

[144] The Ontario Securities Commission’s National Policy 51-201 states, among other things, the following about the materiality determination:

In making materiality judgements, it is necessary to take into account a number of factors that cannot be captured in a simple bright-line standard or test. These include the nature of the information itself, the volatility of the company’s securities and prevailing market conditions. The materiality of a particular event or piece of information may vary between companies according to their size, the nature of their operations and many other factors. An event that is ‘significant’ or ‘major’ for a smaller company may not be material to a larger company. Companies should avoid taking an overly technical approach to determining materiality.

[145] Under the Ontario Securities Act, there are two categories of continuous disclosure: (1) periodic disclosure of “material facts” in documents such as financial statements, proxy circulars, and insider trading reports; and (2) timely disclosure when there has been a “material change” in the company’s affairs. Under the Act a material change must be disclosed at the time it occurs.

[146] The Ontario Securities Act supplants the “buyer beware” orientation of the common law with compelled disclosure of relevant information, but in compelling disclosure, the Act recognizes the burden it places on issuers and the legislation sets the limits on what is required to be disclosed; namely, material facts, which are to be disclosed periodically, and material changes, which are to be timely disclosed, i.e., forthwith.[^33] A matter that materially affects the company’s business, operations, or capital must be disclosed at the time it occurs.”[^34]

[147] A material change has two components: (a) there must be a change in the business, operations or capital of the issuer; and (b) the change must be material, which means it would reasonably be expected to have a significant effect on the market price or value of the securities of the issuer.[^35]

[148] Pursuant to s. 75 (1) of the Ontario Securities Act, where a material change occurs in the affairs of a reporting issuer, it shall forthwith issue and file a news release authorized by a senior officer disclosing the nature and substance of the change. Pursuant to s. 75 (2), the reporting issuer shall file a report of such material change in accordance with the regulations as soon as practicable and in any event within 10 days of the date on which the change occurs. Similarly, National Policy 51-201 of the Ontario Securities Commission states that “Companies are required by law to immediately disclose a ‘material change’ in their business”, and that “Announcements of material changes should be factual and balanced. Unfavourable news must be disclosed just as promptly and completely as favourable news.” The TSX “Policy Statement on Timely Disclosure” (August 2017) states that for TSX-listed issuers (like SNC):

A listed company is required to disclose material information concerning its business and affairs forthwith upon the information becoming known to management, or in the case of information previously known, forthwith upon it becoming apparent that the information is material. Immediate release of information is necessary to ensure that it is promptly available to all investors and to reduce the risk of persons with access to the information acting upon undisclosed information.

[149] The distinction between material facts and material changes is a matter of legislated design to regulate what and when and why information should be disclosed by an issuer. In Kerr v. Danier Leather Inc.,[^36] Justice Binnie for the Supreme Court of Canada discussed the difference between material change and material fact. He stated at paragraph 38 of the Court’s judgment:

38. The distinction between “material change” and “material fact” is deliberate and policy-based, as explained by a former chairman of the O.S.C.:

The term “material fact” is necessary when an issuer is publishing a disclosure document, such as a prospectus or a take-over bid circular, where all material information concerning the issuer at a point in time is published in one document which is convenient to the investor. The term “material change” is limited to a change in the business, operations or capital of the issuer. […] .

[150] The definition of material fact is broader than that of material change because it encompasses any fact that reasonably would be expected to have a significant effect on the market price or value of the securities of an issuer and thus encompasses more than facts that affect the business, operations, or capital (assets or ownership) of the issuer or facts that would be expected to have such an effect.[^37]

[151] The distinction between material change and material fact was a deliberate and policy-based legislative decision to relieve reporting issuers of the obligation to continually interpret external political, economic, and social developments as they affect the affairs of the issuer, unless the external change will result in a change in the business, operations or capital of the issuer, in which case, timely disclosure of the change must be made.[^38]

[152] However, the requirement to make timely disclosure of a material change is not an obligation to provide running commentary on the company's progress or to comment on internal or external events that may impact on the company’