Court File and Parties

COURT FILE NO.: CV-21- 00661981 DATE: 2022-08-15 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: JONATHAN A. LUBUS, MARCO STAJIC, MORDECAI BOBROWSKY, and KYLE YAMAMURA, Plaintiffs – and – WAYLAND GROUP CORP., BENJAMIN ALLAN WARD, CANACCORD GENUITY CORP., and GMP SECURITIES L.P., Defendants

BEFORE: Justice E.M. Morgan

COUNSEL: Albert Pelletier and Charlotte K.B. Harman, for the Plaintiffs Gillian Dingle and Craig Gilchrist, for the Defendants

HEARD: August 8, 2022

MOTION TO DISMISS FOR DELAY

[1] This motion is brought by the Defendants, Canaccord Genuity Corp. and RF Securities Clearing LP (formerly GMP Securities L.P.) (the “Underwriters”), who are the underwriters for the Defendant, Wayland Group Corp. (“Wayland”). The Underwriters seek to have the action dismissed for delay pursuant to section 29.1 of the Class Proceedings Act, 1992, SO 1992, c.6 (“CPA”).

[2] Wayland is, or, perhaps, was, a cannabis company that raised funds by way of public offerings in 2018. It entered into protection under the Companies’ Creditors Arrangement Act, RSC, 1985, c. C-36 (“CCAA”) in December 2019. The Statement of Claim alleges that a number of actionable misrepresentations were made by Wayland, the Underwriters, and Wayland’s former CEO, Benjamin Ward.

[3] The case against Wayland is stayed under the CCAA. But as of July 9, 2020, the court in the CCAA proceedings has permitted the action to proceed against the other parties.

a) Admissibility of emails

[4] As a preliminary issue, the Underwriters object to two pieces of email correspondence that Plaintiffs’ counsel have introduced into the record. This correspondence is between counsel for the Underwriters and counsel for the Plaintiffs; those parties are adverse in interest here, but, according to the Underwriters’ counsel, have (or had) a common interest in the Wayland CCAA proceedings. The Underwriters’ counsel submit that the material that was privileged due to their common interest in those proceedings is privileged here as well. It is important to the Underwriters that they not be taken to have waived any privilege to which they are entitled.

[5] The second of the two emails at issue was sent by Plaintiffs’ counsel to Underwriters’ counsel on April 20, 2020. This email is produced by the Plaintiffs in an effort to show that they, through counsel, were coordinating with other parties to take steps to advance this proceeding. Plaintiffs’ counsel submit that demonstrating that such steps were taken is important to the test for delay under s. 29.1 of the CPA.

[6] The first of the two emails is dated April 16, 2020 and is also between the Underwriters’ counsel and Plaintiff’s counsel in the context of the CCAA application. It says very little of substance, and is basically a message that contains one sentence about what documents have been filed with the CCAA court – i.e. information that was available to every party in that proceeding – with the balance of the message composed of greetings between the two lawyers and one telling the other that he has been busy lately. There really is little of relevance here except, again, to show that Plaintiffs’ counsel were in communication with other parties and were not, as it were, asleep at the wheel.

[7] In my view, the April 16, 2020 email is between two parties whose correspondence may be privileged due to their common interest in litigation, but the substance of the email does not evoke any privilege. Whether or not the parties had a common interest, it is not a breach of privilege to show that one lawyer told the other what material has been filed with the court, and then greeted his friend and wished him good health. One lawyer telling the other public information and then chatting about his workload and extending well wishes raises no concern of privilege for either client.

[8] The April 20, 2020 email contains more of substance. It schedules an upcoming telephone call, which is rather innocuous in the context of this case, but then goes on to discuss a strategic point of how to frame the present action in order to better attract insurance coverage. This discussion would fall under the common interest privilege claimed by the Underwriters.

[9] As indicated, Plaintiffs’ counsel wishes to make reference to this correspondence as one way of demonstrating that they have actively been taking steps to move this matter forward. Underwriters’ counsel, on the other hand, argue that this is irrelevant to the section 29.1 test. That section, they submit, is very straightforward in setting out certain specific steps that a plaintiff must be shown to have taken, and, Underwriters’ counsel say, corresponding with other parties’ counsel is not one of those steps.

[10] I do not want to pre-judge the question of how section 29.1 of the CPA applies to the facts of this case by answering this contention about the admissibility of this short email. Rather, I want to hear the motion under section 29.1 on its full merits.

[11] Section 29.1 is a relatively new addition to the CPA. As indicated at the outset of these reasons, the Underwriters have brought a motion under that section for dismissal for delay. Given that Plaintiffs’ counsel is of the view that the April 20, 2020 email is a necessary part of their argument about whether or not there has been undue delay, I would not want to exclude it at this point. That does not mean that the Underwriters’ lawyers are incorrect about how section 29.1 works, but I would like a full record in order to make that decision.

[12] It seems to me that the Underwriters cannot bring a motion for delay and then, before that motion is argued, exclude the Plaintiffs’ evidence that they say demonstrates that there has been no delay. To the extent that this evidence may fall under a category of privilege, that privilege has been waived by the Underwriters bringing this motion.

[13] To be clear, this is a very narrow waiver; it applies only to correspondence or communications that go to the question of delay. This one small piece of correspondence appears to be the only thing in the record that falls into that category. Anything else in either party’s possession that might be protected by what the Underwriters’ counsel assert is common interest privilege is not within the scope of this waiver. If anyone were to desire to produce other such communications, the question of privilege would have to be evaluated in the specific context of that communication.

[14] Accordingly, I will allow both of the contentious emails to be admitted into the record. In all other respects and for all other documents that might be considered privileged, such privilege is preserved.

b) Delay under the CPA

[15] Section 29.1 of the CPA provides:

29.1 (1) The court shall, on motion, dismiss for delay a proceeding commenced under section 2 unless, by the first anniversary of the day on which the proceeding was commenced,

(a) the representative plaintiff has filed a final and complete motion record in the motion for certification;

(b) the parties have agreed in writing to a timetable for service of the representative plaintiff’s motion record in the motion for certification or for completion of one or more other steps required to advance the proceeding, and have filed the timetable with the court;

(c) the court has established a timetable for service of the representative plaintiff’s motion record in the motion for certification or for completion of one or more other steps required to advance the proceeding; or

(d) any other steps, occurrences or circumstances specified by the regulations have taken place.

[16] September 3, 2019 and October 1, 2021 are the relevant dates. Those are the dates on which the claim was issued and the date on which section 29.1 would say the action is to be dismissed if the specified steps have not been taken. These dates are agreed upon by the parties.

[17] The Plaintiff has not filed a certification record. Further, there are no regulations of relevance that identify other steps that the Plaintiff may have taken in order to avoid dismissal. Accordingly, sections 29.1 (a) and (d) do not apply here.

[18] The Underwriters’ motion therefore turns on whether the steps identified in section 29.1(b) or (c) have been accomplished. That is, the parties must have either agreed on a timetable for the certification or the court must have established a timetable leading to certification.

[19] As explained above, in July 2020 the original stay of proceedings under the CCAA was lifted. That gave a green light to the Plaintiffs to pursue this action. The original Statement of Claim was issued in Sarnia, where, I am told, the lead Plaintiff resides. Plaintiffs’ counsel subsequently brought a motion to transfer the proceedings from Sarnia to Toronto. Plaintiffs’ counsel argue that this qualifies as a step taken by the Plaintiff for the purposes of fending off the delay accusation.

[20] The Underwriters’ counsel disagree. They submit that this was not a step “required to advance the proceedings”, as required by section 29.1(b) and (c) of the CPA. Rather, they contend that it was a convenience that did nothing to actually advance the proceedings.

[21] I agree with the Underwriters that changing venue from Sarnia to Toronto was an administrative measure; it was not a procedural step and was certainly not a matter of substance. If it helped to “advance the proceedings”, it did so in an infinitesimal way that can barely be perceived with the naked eye. I would not count this as a step that can realistically counter an accusation of delay.

[22] Plaintiffs’ counsel also point to the fact that they subsequently amended their pleading, and that the Underwriters in effect consented to this amendment. It is the Plaintiffs’ position that having done so, the Underwriters cannot now discount this as a step in advancing the proceedings.

[23] Again, counsel for the Underwriters argue that this was not a step that was required to advance the proceeding. They quote Plaintiffs’ counsel as characterizing it as an effort to “clarify the allegations” and to add two new Plaintiffs; in other words, it was a step that was done only for the Plaintiffs’ convenience.

[24] The Underwriters also say that they did not exactly consent to this amendment, as what actually happened is that the Plaintiffs issued a new claim that refined the allegations and added new Plaintiffs. They then obtained an Order consolidating the two actions. The Underwriters add, correctly, that there was no need for them to consent to this new claim. Indeed, one cannot object to a new claim being issued; a defendant can defend a new claim when it comes, but it does not have the opportunity to “object” to being sued. No doubt everyone would do so if given the chance.

[25] In any case, the issuance of a new claim – including one that refines and revises an older claim that then consolidated with it – is not in itself what I would consider a step to “advance the proceedings”. That interpretation would render the phrase meaningless since every claim has to be issued at some time. The point of subsections 29.1(b) and (c) is to identify a step taken after issuing the claim, but not the very act of issuing the claim. I agree with the Underwriters that issuance of a revised claim does not in itself counter the delay accusation.

[26] Plaintiffs’ counsel also point out that they took various procedural and substantive steps in the CCAA application that were necessary to allow this claim to be brought. They contend that those should count under s. 29.1(b) or (c) of the CPA. It is the Plaintiffs’ position that these subsections speak to the timetabling of “one or more other steps required to advance the proceeding”, but do not otherwise define what kind of steps are thereby captured. In their view, steps in a CCAA proceeding qualify as much as any other steps a plaintiff might take.

[27] While I agree that ss. 29.1(b) and (c) literally do not say that the steps have to be in this proceeding, I would think that is what the legislature intended. When the CPA talks about procedures to be taken in a proceeding, the assumption is that it is referring to the class proceeding in issue. It is not talking some other albeit related proceeding that is not a class proceeding.

[28] I concede that the present case is, as Plaintiffs’ counsel say, a procedurally unusual one and that it was, in fact, necessary to have the CCAA stay lifted in order to proceed here. However, I find it stretches the meaning of the CPA provision beyond all recognition to say that a step in a different proceeding qualifies as a step to “advance the proceeding”. If that were the case then any step whether within the proceeding at issue or not within that proceeding would count, so long as it could be characterized as advancing a plaintiff’s case. A plaintiff’s lawyer could then always point to the investigations undertaken by them, or extended discussions with their own client, as “advancing” the proceedings, even though those were not steps taken in the proceeding itself.

[29] In my view, ss. 29.1(b) and (c) refer to a step in this proceeding that advances the proceeding, and not to a step in some other proceeding that also helps the claimant along the way. The steps taken by Plaintiffs’ counsel in the CCAA proceeding may have been necessary in order to proceed with the present action, but they do not counter the Underwriters’ submission that the CPA action itself has been unduly delayed. Those steps were taken outside of the present action and are not the kind of steps to which the delay provision in the CPA refers.

[30] I will digress here to note that this is the issue to which Plaintiffs’ counsel submit that the April 20, 2020 email discussed in the first part of these reasons pertains. Now that I have heard and considered the motion in its entirety, I conclude that regardless of the question of privilege argued by the parties, this piece of email correspondence is not relevant to the motion as it does not show compliance with any of the criteria mentioned in section 29.1(b) or (c) of the CPA. It might illustrate that steps were being taken by the Plaintiffs in the CCAA application, but it does not represent a step actually being taken in this class proceeding.

[31] Finally, Plaintiffs’ counsel submits that arranging for and attending the initial case conference before me amounts to a step taken to “advance the proceeding” that serves to forestall the Underwriters’ motion under section 29.1. They also point out that at that time they tendered a proposed timetable leading to certification. I did not adopt that timetable, but it is the Plaintiffs’ position that the key to this motion is the fact that they proposed it. They submit that they would have been prepared to proceed in accordance with this timetable, which is what they were obliged to do if the action is to be preserved.

[32] The Underwriters’ counsel submits that scheduling a case conference does not establish a timetable or amount to a step necessary to advance the litigation. They argue that the initial case conference is the starting point for the case, but is not a step such as described in s. 29.1 that compels the action to move forward expeditiously. They argue, compellingly in my view, that a case conference is where the timetable for the action is set, and that the section speaks of setting a timetable, or schedule for the proceeding. It does not envision scheduling the case conference itself.

[33] As for what actually transpired at the case conference, it is Plaintiffs’ counsel that presents the more cogent understanding. The initial case conference before me was held in July 2021, some three months before the s. 29.1 deadline expired. As indicated, Plaintiffs’ counsel sought to schedule the steps leading to a certification motion. I did not do so, as described at paragraph 12 of Plaintiffs’ counsel’s factum:

Justice Morgan was assigned as the case management judge for the Plaintiffs’ proceeding and, on July 13, 2021, the parties attended a case conference. At the case conference, the Plaintiffs asked to schedule a date for their motion for leave to proceed against Wayland and Ward under Part XXIII.1 of the Securities Act, among other motions. However, Justice Morgan declined to schedule any step in the proceeding. Instead, His Honour directed the Plaintiffs to resolve the issues raised by their decision to commence multiple proceedings with the same allegations.

[34] I did not schedule the various motions as requested because of the confusing mass of Defendants and the representation and service issues that they raised at the case conference. Instead, I required each counsel to identify who they represented (which until then was not clear) and confirmed that no one represented Wayland (which had until then also not been clarified). I also asked Plaintiffs’ counsel to normalize the claim by adding the proposed new plaintiffs, by clarifying the style of cause, and by arranging for a new Toronto court file number.

[35] These matters required the Defendants to start to facilitate movement in this action. They also required the Plaintiffs to submit several motions in writing. Plaintiffs’ counsel says that those matters were, in effect, scheduled or timetabled at the case conference. The matters were completed within a month, and on August 19, 2021, I ordered that the two existing actions be consolidated.

[36] As previously indicated, section 29.1 is a relatively new provision in the CPA. It has only been considered in a small handful of motions, and never at an appellate level. However, the question of timetabling at a case conference, and the effect of that on the delay analysis under s. 29.1, has previously been before this court.

[37] In Bourque v. Insight Productions, 2022 ONSC 174, Justice Belobaba opined that section 29.1 was introduced to expedite cases for the benefit both plaintiffs and defendants, and that it be implemented without much in the way of judicial discretion – “interpreted and applied as written” as he put it. This thought was picked up by Gordon J. in St. Louis v. Canadian National Railway Company, 2022 ONSC 2556. He commented, at para 17, that, “If none of the requirements set out in s. 29.1 were satisfied by the one-year anniversary of the amendment, the court retains no residual discretion to order anything but dismissal.”

[38] This approach was followed in Lamarche v. Pacific Telescope Corp., 2022 ONSC 2553, where Justice S. Gomery reiterated the thought that there is no interpretive leeway in applying section 29.1. Similarly, Akbarali J. concluded in LeBlanc et al. v. The Attorney General of Canada, 2022 ONSC 3257, at para 15, that, “Applying the provision as written, I do not have discretion to delay the effective date of the dismissal of the proceeding.”

[39] I agree with my colleagues that the purpose of section 29.1 is to put an end to what seems to be chronic stagnation and to ensure that class actions keep moving along. I also agree with them that the wording of the section is strict and applied with that in mind; moreover, I am cognizant of the need for consistency in the way that the section is approached and the operation of what is called “horizontal stare decisis”: R. v. Sullivan, 2022 SCC 19, at para 6.

[40] All of that being the case, I am prepared to be the fifth dentist on sugarless gum. I disagree with the previous judgments insofar as they can be seen to pronounce blanket statements covering all circumstances. My colleagues may have been entirely correct in resolving the cases before them; but in implementing any statutory provision, including section 29.1 of the CPA, context counts.

[41] Plaintiffs’ counsel pointed out in argument that a motion under section 29.1 is not brought before the court registrar to be applied mechanically as an administrative matter. Rather, the motion for dismissal is brought before a judge – in most cases, the case management judge – because it requires adjudication.

[42] The aim of the exercise in a section 29.1 motion is not to implement the section literally no matter what the context or to apply a form of ‘zero tolerance’ regime to the delay question. Like any adjudicative question, it is the court’s role to interpret the statute as befitting the specific context and to apply to the circumstances the purpose that the statute seeks to address: Re Rizzo & Rizzo Shoes Ltd., 1998 CanLII 837 (SCC), [1998] 1 SCR 27, at para. 27. Adjudication of a delay question necessarily requires a careful consideration of the factual/procedural distinctiveness of the case at bar.

[43] Counsel for the Underwriters relies on the statement in Lamarche, at para 15, that a timetable “requires an undertaking to do something within a specific deadline. Merely considering, or even committing to, a sequence of events is not enough.” They argue that my direction at the initial case conference as to the steps to be taken did not contain a specific deadline, and that although all parties in fact responded promptly to my direction it did not satisfy ss. 29.1(b) or (c) as it did not identify a specific outside date for the accomplishment of the various steps. That strict view of the statutory language presumably applies even though the steps taken by counsel in implementation of my direction could hardly have been done more expeditiously no matter what outside deadline I had given.

[44] I do not agree with that approach. Section 29.1 is not there to catch plaintiffs out. Of course, where a plaintiff concedes or is shown to have taken no steps whatsoever since launching the action, and the action has therefore lay dormant, the section directs the court to dismiss: Stokker v. Illumati Inc., 2022 ONSC 3508.

[45] But circumstances do exist where a plaintiff might seek a written timetable from the court, but the case management judge has identified a number of steps that need to be taken first. If those steps entail matters that can be done in writing and therefore without a specific hearing date being scheduled, one can nevertheless say that a schedule has in effect been set for those necessary steps. If those steps are then done as quickly and efficiently as possible given the limitations of the court system overall, there is room to conclude that the terms of section 29.1(c) have thereby been met.

[46] At the initial case conference, the court had, in effect, established a form of timetable by directing the next steps to be taken. Although I did not specify an outside date, counsel correctly took the direction to be that the steps be taken as soon as practicable. Having done so, the timetable was adhered to and the case must go on.

c) Disposition

[47] The Underwriters’ motion is dismissed.

[48] Under the circumstances and given the newness of the section, it is understandable why the Underwriters attempted to have the action dismissed under section 29.1 of the CPA. Accordingly, there will be no costs of this motion for or against any party.

Date: August 15, 2022 Morgan J.