Court File and Parties

COURT FILE NOS.: CV-22-685386-00CP; CV-22-684723-00CP; CV-22-690373-00CP; CV-22-690374-00CP; CV-22-690519-00CP; CV-22-691343-00CP; CV-22-691344-00CP; CV-23-697428-00CP DATE: 20230801 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Ciardullo AND: 1832 Asset Management L.P. et al.

AND RE: Ciardullo AND: 1832 Asset Management L.P. et al.

AND RE: Yeats AND: 1832 Asset Management L.P.

AND RE: Woodard AND: Canadian Imperial Bank of Commerce et al.

AND RE: Yeats AND: BMO Investments Inc. et al.

AND RE: DeJong AND: RBC Global Asset Management Inc. et al.

AND RE: Aggarwal AND: TD Asset Management Inc.

AND RE: Aizic AND: Natcan Trust Company et al.

BEFORE: J.T. Akbarali J.

COUNSEL: Michael Robb and Garrett M. Hunter, for the moving parties/plaintiffs in Sage v. 1832 Asset Management L.P., Court File No. CV-18-00600380-00CP, Gilani v. BMO Investments Inc., Court File No. CV-18-00611748-00CP, Pozgaj v. Canadian Imperial Bank of Commerce et al., Court File No. CV-18-00605345-00CP, Pozgaj v. Mackenzie Financial Corporation et al., Court File No. CV-18-00610311-00CP, Pozgaj v. National Bank Investments Inc. et al., Court File No. CV-18-00611745-00CP, Ross v. RBC Global Asset Management Inc. et al., Court File No. CV-18-00611743-00CP, and Westwood v. TD Asset Management Inc., Court File No. CV-18-595380-00CP (collectively, the “2018 actions”)

Paul Guy and Serge Kalloghlian, for the plaintiffs in Ciardullo v. 1832 Asset Management L.P. et al., Court File No. CV-22-684723-00CP, Ciardullo et al. v. 1832 Asset Management L.P. et al., Court File No. CV-22-685386-00CP, Yeats v. 1832 Asset Management L.P., Court File No. CV-22-690373-00CP, Woodard v. Canadian Imperial Bank of Commerce et al., Court File No. CV-22-690374-00CP, Yeats v. BMO Investments Inc., Court File No. CV-22-690519-00CP, DeJong v. RBC Global Asset Management Inc. et al., Court File No. CV-22-691343-00CP, Aggarwal v. TD Asset Management Inc., Court File No. CV-22-691344-00CP, and Aizic v. Natcan Trust Company et al., Court File No. CV-23-00697428-00CP (collectively, the “2022 actions”)

Adrian Pel and Nadine Tawdy, for the defendant BMO Investments Inc. Caroline Humphrey, for the defendant 1832 Asset Management L.P. Caitlin Sainsbury and Monica Kozycz, for the defendant Mackenzie Financial Corporation and Mackenzie Financial Capital Corporation Leah Ostler, for the defendant TD Asset Management Inc. Ryan Lax, for the defendants Canadian Imperial Bank of Commerce and CIBC Trust Corporation Diane Shnier, for the defendant National Bank Investments Inc. and Natcan Trust Company Gregory Sheppard, for the defendants RBC Global Asset Management Inc. and RBC Investor Services Trust

HEARD: June 28, 2023, by videoconference, with further written submissions received thereafter

Proceedings under the Class Proceedings Act, 1992

Endorsement

Overview

[1] The plaintiffs in the 2022 actions (as defined above), all of which are putative class actions, commenced claims which overlap significantly with the claims commenced by the plaintiffs in the 2018 actions (as defined above). Some of the 2018 actions are certified, while others are moving towards that stage.

[2] In this motion, the plaintiffs in the 2018 actions ask me to temporarily stay the 2022 actions, arguing that the 2022 actions are causing delay in the prosecution of the 2018 actions, and that a stay of the 2022 actions will be efficient and in the interests of justice. The 2022 plaintiffs disagree, and argue that the actions should proceed to a common issues trial together. The defendants in the actions take no position on the outcome of this motion, although they seek to preserve their rights to take further steps as they consider appropriate during the conduct of the proceedings at issue, and in particular, are concerned about efficiencies in the conduct of the litigation.

Background

[3] In brief, the common factual matrix and allegations of all the actions is as follows. The defendants were trustees and managers of mutual funds held by the plaintiffs. The mutual funds were held by those who purchased through discount brokers (the proposed class in the 2018 actions) and by those who purchased through non-discount brokers (the proposed class in the 2022 actions).

[4] The defendants paid trailing commissions to discount brokers which payments the plaintiffs in all actions allege were inappropriate, in breach of the trust documents, and in breach of the defendants’ fiduciary duties to the plaintiffs and the class members.

[5] The plaintiffs in the 2018 actions argue that the losses from the improper payments were suffered by the proposed class members in the 2018 actions only, because the payments were made on their behalf to discount brokers for advice and services that were not provided to them.

[6] The plaintiffs in the 2022 actions argue that the improper fees were paid out of the mutual funds, and accordingly, the proposed class members in the 2022 actions also suffered a loss as a result of the payments.

[7] The fees alleged to have been improperly paid are a fixed amount. Assuming the plaintiffs are correct that the fees should not have been paid, the 2022 actions do not increase the pot of damages claimed. Rather, the allocation of the damages, if established, is a matter with respect to which the 2018 plaintiffs and the 2022 plaintiffs are adverse in interest.

[8] Since the commencement of the 2022 actions, the progress in the 2018 actions has slowed. The defendants, who are all common to both sets of actions, are concerned with efficiencies in the litigation given the overlap in the issues and factual matrix between the actions.

[9] Because of the delay in the prosecution of their actions, the plaintiffs in the 2018 actions move to temporarily stay the 2022 actions until (i) the resolution of the common issues, other than those issues pertaining to the allocation or distribution of aggregate damages in the applicable 2018 action(s); (ii) the settlement of the claims in either the 2018 or 2022 action(s); or (iii) the dismissal, discontinuance or abandonment of the 2018 action(s) such that the trial of the common issues will not occur. They argue that they are capable of adjudicating what they characterize as the threshold issue – whether the payments to the discount brokers were improper – which will advance all the actions, including the 2022 actions. Assuming that determination is made in favour of the plaintiffs, the 2018 plaintiffs argue that, at that point, the stay will be lifted, and the 2022 plaintiffs can participate in the question of remedy, and allocation of damages.

[10] The plaintiffs in the 2022 actions argue that the common issues (already certified in certain of the 2018 actions) extend beyond the question of whether the fees were wrongly paid (which the parties referred to as the “improper payment” theory), to the “separate series” argument. According to the plaintiffs in the 2022 actions, the separate series argument is an alternate basis for liability which posits that the defendants had trust and fiduciary obligations to ensure that all discount unitholders were placed into a separate mutual fund series that paid no trailing fees. They argue that if that theory of liability is accepted, and they have not been able to participate in the trial of that issue because their actions are stayed, the determination of liability will determine the allocation of damages. Thus, they argue, their interests diverge from the interests of the plaintiffs in the 2018 actions such that their access to justice depends on advancing their claims, and not waiting for the 2018 actions to address the improper payment issue.

[11] The plaintiffs in the 2018 actions argue that the question of whether the payments are improper is the threshold question and can be litigated first. On their approach, the separate series common issues speak to allocation, and can be bifurcated from the common issues to be addressed in a manner that includes the plaintiffs in the 2022 actions if the threshold question is resolved in favour of the plaintiffs.

The Law

[12] Under r. 6.01(1) of the Rules of Civil Procedure R.R.O. 1990, Reg. 194, where two or more proceedings are pending in court and it appears to the court that they have a question of fact or law in common, or the relief claimed in them arises out of the same transaction or occurrence, the court may order that any of the proceedings be stayed until after the determination of any other of them.

[13] The underlying purpose of the rule is to avoid multiplicity of proceedings, promote expeditious and inexpensive determination of disputes, and to avoid inconsistent judicial findings Yorkville East Developments Inc. v. York Condominium Corporation No. 194, 2021 ONSC 5678, at para. 45.

[14] Under s. 106 of the Courts of Justice Act, R.S.O. 1990 c. C.43, the court has wide discretion to order a stay on such terms as are considered just.

[15] Under s. 12 of the Class Proceedings Act, 1992, S.O. 1992, c. 6, the court may, on its own initiative, make any order it considers appropriate respecting the conduct of a proceeding under the Act to ensure its fair and expeditious determination, and for the purpose, may impose such terms on the parties as it considers appropriate. The Court of Appeal has noted that this provision is procedural and allows the judge to engage in active, strategic and effective case management to ensure the “just, most expeditious and least expensive determination” of the proceeding on its merits.

[16] Under s. 13 of the Class Proceedings Act, 1992, the court, on its own initiative, may stay any proceeding related to the class proceeding before it on such terms as it considers appropriate.

[17] The factors a court considers when determining whether to grant a temporary stay are set out in, for example, Hollinger International Inc. v. Hollinger Inc., at para. 5 and Workman Optometry v. Aviva Insurance, 2021 ONSC 3843, at para. 14:

a. whether there is substantial overlap of issues in the relevant proceedings; b. whether the two cases share the same factual background; c. whether issuing a temporary stay will prevent unnecessary and costly duplication of judicial and legal resources; and d. whether the temporary stay will result in an injustice to the party resisting the stay.

[18] In this case, it is apparent that there is substantial overlap of the issues in the relevant proceedings, and that the two sets of cases share the same factual background. The plaintiffs in the 2022 actions have stated that they copied significant parts of the 2018 statements of claim by design, given the success of the plaintiffs in the two certified 2018 class proceedings, in which certification was opposed.

[19] The plaintiffs in the 2018 actions argue that a temporary stay will prevent unnecessary and costly duplication of judicial and legal resources. On their plan, they will litigate the threshold issue of whether the trailing commissions were improperly paid. They argue that this issue need only be litigated once.

[20] I note that there is no suggestion that class counsel to the 2018 actions is not capable of competently litigating the improper payment issue.

[21] While technically, the improper payments issue would remain open for determination in the 2022 actions even after being litigated in the 2018 actions, effective case management of class proceedings requires that a sense of practicality be brought to the proceedings. If the plaintiffs in the 2018 actions succeed on the threshold issue, the defendants are unlikely to seek to challenge it again in the 2022 actions, and may be prevented from doing so in any event: see, for example, British Columbia (Attorney General) v. Malik, 2011 SCC 18.

[22] If the plaintiffs in the 2018 actions succeed on the improper payments issue, the plaintiffs in the 2022 actions will be more than happy to accept that conclusion as binding in their litigation. At the same time, if the plaintiffs in the 2018 actions do not succeed on the threshold issue, it is unlikely that the plaintiffs in the 2022 actions will, practically speaking, seek to litigate that issue, recognizing that the representative plaintiffs will be concerned about an adverse costs award, and class counsel will be concerned about dedicating significant resources to an issue likely to fail.

[23] Thus, I conclude that a temporary stay of the 2022 actions will prevent unnecessary and costly duplication of judicial and legal resources.

[24] As with most of these cases, the difficult issue is the question of whether a temporary stay will result in an injustice to the plaintiffs in the 2022 actions.

[25] There is the obvious potential prejudice that, if stayed, the 2022 actions will run afoul of the one-year limitation period in s. 29.1 of the Class Proceedings Act, 1992 (as distinct from the limitation period motion the defendants have already indicated they seek to bring in those actions). The former prejudice would only arise as a result of the stay, and can be remedied by an order, proposed by the plaintiffs in the 2018 actions, suspending the running of the s. 29.1 limitation period in the 2022 actions during the period of time the 2022 actions are stayed.

[26] The plaintiffs in the 2022 actions argue that they do not wish to be represented by class counsel to the 2018 actions. Class counsel in the 2018 actions considered the claims of the proposed class in the 2022 actions before they commenced the 2018 actions and reached the conclusion that only those who purchased through discount brokers suffered the loss. Those who purchased through non-discount brokers (the proposed class in the 2022 actions) do not want the improper payments issue litigated by counsel that does not believe they suffered any losses.

[27] I do not accept that allowing class counsel in the 2018 actions to litigate the threshold improper payments issue will prejudice the plaintiffs or proposed class members in the 2022 actions. On the improper payments issue, all plaintiffs are aligned. The proposal of the plaintiffs in the 2018 action, to bifurcate the separate series issue and allocation issues until after the improper payments issue is determined (assuming it is determined in the plaintiffs’ favour) means that the stay will be lifted when the interests of the plaintiffs in the 2018 and 2022 actions diverge, but not before. I accept that the separate series issue can be litigated after the improper payments issue is determined, if it is necessary to litigate the separate series issue at all. I also note that no defendant took any position on the proposal to bifurcate the common issues for trial, although they had the opportunity to do so.

[28] It is possible, of course, that the delay the plaintiffs in the 2018 actions seek to avoid at this juncture will arise before the separate series issue can be litigated, if the 2022 plaintiffs have to catch up their actions after the improper payments issue is determined. This risk can be mitigated by practical case management. For example, much of the production burden in the actions will lie with the defendants, who will have already produced almost all, if not all, of the documents relevant to the 2022 actions in the 2018 actions, when the stay is lifted. Production should be able to be made to the plaintiffs in the 2022 actions in short order on the stay being lifted. At the same time, the defendants may seek to limit duplicative expense by seeking orders deferring certain areas of discovery until after the improper payments issue is litigated, in view of the bifurcation proposed by the 2018 plaintiffs. If appropriate, such case management orders may be granted.

[29] The defendants have indicated their collective intention to move for summary judgment in the 2022 actions based on the limitation period. Subject to the submissions of the parties in the 2022 actions, any stay of the 2022 actions could be lifted for that purpose, to ensure the 2022 actions are ready to catch up with the 2018 actions if it becomes necessary for them to do so.

[30] Although the defendants took no position on the stay motion, I directed all parties to deliver additional submissions with respect to their proposed case management plans for the 2018 and 2022 actions in the event the 2022 actions are not stayed. I have now received and reviewed those submissions.

[31] The defendants’ submissions, unsurprisingly, are concerned with duplication of efforts and costs, and with proportionality, if the 2018 and 2022 actions proceed, but not in tandem. It is clear from their submissions that if the 2022 actions are not stayed, the management of both sets of actions will be contentious, and the resolution of the improper payments issue will be delayed.

[32] In effect, staying the 2022 actions at this stage trades certain delay for possible delay. At the very least, it defers the delay and creates the potential for benefits to flow from that deferral. This works to the benefit of all parties to all the actions.

[33] Having considered the relevant factors, I conclude that a temporary stay is just in these circumstances, which include the deferral of the separate series issue (and allocation issues) to a later stage in the litigation. I grant the motion brought by the 2018 plaintiffs in all actions seeking the relief set out at paras. 103 of the Amended Notice of Motion. However, the relief sought does not include all the necessary ancillary relief.

[34] I direct the parties to confer on the appropriate form of order, having regard in particular to the necessity of bifurcation of the issues on which the interests of the 2018 and 2022 plaintiffs depart, which must be reflected in the final order in each action as appropriate having regard to the stage of each individual action. Once the parties have reached agreement, they shall provide me with an order for review.

Costs

[35] On consent of the parties, each of them will bear their own costs of this motion.

J.T. Akbarali J. Date: August 1, 2023