Court File and Parties

COURT FILE NO.: CV-10-405156-00CP DATE: 20220627 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Gerald Czamanske AND: Canadian Royalties Inc., et al.

BEFORE: J.T. Akbarali J.

COUNSEL: Jonathan Foreman, for the plainatiff David Gadsden, for the defendants Canadian Royalties Inc. and Jien Canada Mining Ltd. David Wilson, for the defendant P & E Mining Consultants; Linda Fuerst, for the defendant SNC-Lavalin Inc. Aoife Quinn, for the defendants BMO Nesbitt Burns, Raymond James Ltd., MacQuarie Private Wealth Inc., and Desjardins Securities Inc.

HEARD: June 14, 2022

Proceeding under the Class Proceedings Act, 1992

ENDORSEMENT

[1] The plaintiff seeks an order discontinuing this putative class action, and terms directing the notice required to be provided to the class of its discontinuance.

[2] The claim alleges that the defendant Canadian Royalties Inc., made misrepresentations to security holders contrary to s. 138.3 in part XXIII.1 of the Ontario Securities Act, R.S.O. 1990, c. S.5 (the “OSA”) between June 21, 2007 and August 5, 2008. Claims were also advanced on behalf of shareholders who purchased under a prospectus, and those who purchased under a bond offering. It thus included both primary market and secondary market purchasers. The plaintiff himself purchased in the secondary market.

[3] The plaintiff contacted counsel on the eve of the expiry of the three-year limitation period applicable to claims advanced under s. 138.3 of the OSA. On June 17, 2010, a Notice of Action was issued, before the limitation period expired. The Statement of Claim was issued on July 15, 2010. Service was cumbersome, and took nearly a year. Two orders extending the time to serve the Statement of Claim were sought and granted.

[4] Claims under s. 138.3 of the OSA require leave to proceed. The leave motion has never been heard and, more importantly in this case, could not have been heard before the expiry of the limitation period in part XXIII.1 of the OSA.

[5] At the time the claim was commenced, there was very little jurisprudence around the interaction between the tolling provision contained in s. 28 of the Class Proceedings Act, 1992, S.O. 1992, c. 6, and the limitation period in part XXIII.1 of the OSA.

[6] The jurisprudence relating to that question began to develop with the decision of Perell J. in Sharma v. Timminco Ltd., 2011 ONSC 8024. Sharma held that, as long as the statement of claim contained a plea under s. 138.3 of the OSA, s. 28 would suspend the OSA’s statutory limitation period. However, Sharma was overturned on appeal: Sharma v. Timminco Ltd., 2012 ONCA 107. The import of the Court of Appeal’s decision was that the plaintiff had no viable secondary market misrepresentation claim; it was out of time.

[7] At the time the Court of Appeal released Sharma, Strathy J. (as he then was) was in the midst of a certification motion hearing in Green v. Canadian Imperial Bank of Commerce, 2012 ONSC 3637. In that case, the plaintiff had brought a motion for leave to proceed under s. 138.3 of the OSA but had not yet been granted an order for leave. Strathy J. concluded that the plaintiff’s statutory claims were barred, relying on the decision in Sharma.

[8] Thereafter, decisions in the Superior Court of Justice in Silver v. Imax Corp., 2012 ONSC 4881, and Trustees of the Millwright Regional Council of Ontario Pension Trust Fund v. Celestica Inc., 2012 ONSC 6083, left open the possibility that various doctrines might apply to allow a plaintiff to proceed with their claim even if they had not obtained an order for leave to proceed on the expiry of the limitation period. In Silver, van Rensburg J. (as she then was) invoked the doctrine of actus curiae neminem gravabit (that is, what the court does ought not to prejudice a litigant) to make an order nunc pro tunc to grant leave to proceed where the limitation period expired while the leave motion was under reserve. In Celestica, Perell J. held it was not plain and obvious that the doctrine of special circumstances would not apply to the plaintiff’s statutory claims, so declined to strike those claims.

[9] The result of the Silver and Celestica decisions was that the plaintiff in this action believed his secondary market claim might again be viable. He retained an expert and prepared a motion record for certification and leave to proceed.

[10] The appeals in Green, Silver, and Celestica were consolidated and argued before a panel of five judges in the Court of Appeal. Pending the court’s decisions, counsel in this matter agreed to stay this action.

[11] The Court of Appeal released reasons on February 3, 2014, overturning its previous ruling in Sharma. The plaintiff’s claim under s. 138.3 of the OSA had new life.

[12] However, the jurisprudential saga did not end there. The Supreme Court of Canada granted leave to appeal in the consolidated appeal of Green, Silver, and Celestica under the style of cause Green v. Canadian Imperial Bank of Commerce, [2014] S.C.C.A. No. 137. Counsel in this action again agreed to hold this action in abeyance pending the decision from the Supreme Court.

[13] In the interim, the Ontario legislature amended the OSA to add a procedural feature whereby the statutory limitation period in part XXXII.1 would be suspended on the date that a plaintiff filed a notice of motion for leave to proceed under s. 138.8. However, this statutory amendment was of no use to the plaintiff, as it was unavailable at the time the action was commenced. In addition, no leave motion was, or realistically could have been, filed by the time of the expiry of the limitation period given the retainer of counsel just eleven days before the expiry of the limitation period.

[14] The final word came from the Supreme Court of Canada in Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60. The majority of the Court restored the Court of Appeal’s decision in Sharma, finding that an order for leave under s. 138.8 must have been made before s. 28 of the CPA operates to suspend the statutory limitation period. The Court also found that the doctrine of special circumstances was unavailable in this context. The Court allowed for some discretion to make orders nunc pro tunc where leave had been sought prior to the expiry of the limitation period. The import of this decision was to render the plaintiff’s secondary market misrepresentation claims unviable.

[15] Problems with the primary market claims also became apparent. It appeared that the prospectus offering pre-dated the period of time within which the alleged misrepresentations had been made.

[16] The strongest claim remaining appeared to be the primary market claim for those who purchased under the bond offering. The record indicates that, despite efforts by counsel, no bondholder is prepared to act as representative plaintiff.

[17] In these circumstances, the plaintiff has reached the decision that the only realistic course of action is to discontinue the proceedings. The defendants consent to the discontinuance on a without costs basis.

[18] A discontinuance under s. 29 of the CPA requires court approval. It also requires the court to consider whether notice should be given under s. 19 of the CPA and what the notice should include.

[19] In considering a motion for discontinuance, the court should consider whether the proceeding was commenced for an improper purpose, whether there is a viable replacement party so that putative class members are not prejudiced; or whether the defendant will be prejudiced: Lam v. Canada Goose Holdings Inc., 2021 ONSC 2627, at para. 16.

[20] Approving a discontinuance is different than approving a settlement. A discontinuance need not be beneficial or in the best interests of the putative class members: Johnson v. North American Palladium Ltd., 2021 ONSC 3346, at para. 15.

[21] I accept that this proceeding was commenced in good faith for a legitimate purpose. However, the development of the jurisprudence has rendered the representative plaintiff’s personal claim unviable. To the extent either or both of the primary market claims might be viable, no class member is willing to step forward to assume the risks and responsibilities to act as representative plaintiff. A class proceeding requires an engaged representative plaintiff. Without a representative plaintiff, there is no class proceeding.

[22] There is no question of prejudice to the defendants here. As I have noted, the defendants consent to the order.

[23] In the circumstances, I am satisfied that leave to discontinue the action shall be granted.

[24] Counsel proposes to post the notice of discontinuance on their website and to make their reasonable best efforts using the last known contact information in their possession to advise directly all those putative class members who have had direct contact with counsel about the proceeding of its discontinuance. I am satisfied that this notice is reasonable.

[25] Order to go in accordance with the draft I have signed.

J.T. Akbarali J.

Date: June 27, 2022