Court File and Parties

COURT FILE NOS.: CV-22-690519-00CP; CV-23-697428-00CP; CV-22-684723-00CP; CV-22-690373-00CP; CV-22-690374-00CP; CV-22-691343-00CP DATE: 20241105 SUPERIOR COURT OF JUSTICE - ONTARIO

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

AND RE: Aizic AND: Natcan Trust Company 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: DeJong AND: RBC Global Asset Management Inc. et al.

BEFORE: J.T. Akbarali J.

COUNSEL: Paul Guy and Serge Kalloghlian, for the plaintiffs in Yeats v. BMO Investments Inc., Court File No. CV-22-690519-00CP, Aizic v. Natcan Trust Company et al., Court File No. CV-23-00697428-00CP, Ciardullo v. 1832 Asset Management L.P. et al., Court File No. CV-22-684723-00CP, 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, and DeJong v. RBC Global Asset Management Inc. et al., Court File No. CV-22-691343-00CP, and (collectively, the “2022 actions”) Ian Matthews and Adrian Pel, for the defendant BMO Investments Inc. Brookelyn Kirkham and Emily Young, for the defendant National Bank Investments Inc. and Natcan Trust Company Paul-Erik Veel, for the defendant 1832 Asset Management L.P. Graham Splawski and Caitlin Sainsbury, for the defendant Mackenzie Financial Corporation and Mackenzie Financial Capital Corporation Ryan Lax, for the defendants Canadian Imperial Bank of Commerce and CIBC Trust Corporation Daniel Szirmak, for the defendants RBC Global Asset Management Inc. and RBC Investor Services Trust

HEARD: October 24, 2024

Proceedings under the Class Proceedings Act, 1992

Endorsement

Overview

[1] The defendants in these related actions brought motions for summary judgment, seeking to dismiss the plaintiffs’ actions on the basis that the limitation period has expired. In addition, defendants in two actions, BMO Investments Inc. (“BMO”), and National Bank Investments Inc. and Natcan Trust Company (collectively, “National Bank”) brought motions for summary judgment arguing that the plaintiffs’ actions against them were a nullity because they required, but did not obtain, leave to commence the actions.

[2] For reasons I describe below, I adjourn the summary judgment motions that are based on the limitation period. I dismiss the motions of BMO and National Bank based on the leave requirement.

Procedural History – Need for Adjournment

[3] The procedural history of these actions requires some explanation.

[4] The claims listed above are all putative class actions, commenced by the respective plaintiffs in 2022. I refer to these as the 2022 actions.

[5] The claims in the 2022 actions overlap in significant measure with claims commenced by a series of plaintiffs in 2018 against the same defendants, alleging the same wrongful conduct. I refer to the claims commenced in 2018 as the 2018 actions. Many of the 2018 actions are certified, some on consent, some unopposed, and some after contested certification motions.

[6] Both the 2018 actions and the 2022 actions allege that the defendants were trustees and managers of mutual funds in which the plaintiffs and class members in the 2018 and 2022 actions held units. The defendants are alleged to have wrongfully paid trailing commissions to discount brokers in breach of the trust documents and in breach of the defendants’ fiduciary duties to the plaintiffs and class members.

[7] The 2018 actions were commenced by plaintiffs who held their units in the defendants’ mutual funds through discount brokers, on behalf of class members who also held through discount brokers.

[8] The 2022 actions were commenced by plaintiff who held their units in the defendants’ mutual funds through full-service brokers, on behalf of class members who also held through full-service brokers.

[9] In June 2023, I heard a motion to stay the 2022 actions brought by the plaintiffs in the 2018 actions: Ciardullo v. 1832 Asset Management L.P. et al., 2023 ONSC 4466. In my reasons, I noted that the actions raised a common factual matrix. The plaintiffs in the 2022 actions candidly admitted copying large portions of the 2018 plaintiffs’ statements of claim. I found there was substantial overlap of the issues in the relevant proceedings, and that the two sets of cases share the same factual background.

[10] I concluded that the actions raise a threshold issue: whether the payments of trailing commissions to discount brokers were improper. I found that, on that issue, all plaintiffs were aligned.

[11] At the same time, I concluded there were other issues on which the interests of the 2018 and 2022 plaintiffs diverged, including the separate series issue (further explained in my endorsement on the stay motion) and allocation of damages issues.

[12] At para. 27, I wrote:

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.

[13] My stay reasons contemplated that the defendants to the 2022 actions could seek to lift the stay of the 2022 actions to bring a summary judgment motion based on the limitation period. I was subsequently asked by the defendants to lift the stay of the 2022 action for that purpose.

[14] On December 12, 2023, I released an unreported endorsement on the lift stay motion, granting the defendants’ request to bring the summary judgment motions. In my reasons I concluded that a temporary lifting of the stay to allow the summary judgment motions to be brought would not lead to unnecessary and costly duplication of resources. I found that the summary judgment motions do not overlap with any of the 2018 actions, but would be unique to the 2022 actions.

[15] Shortly before the summary judgment motions were scheduled to be heard, counsel for the 2018 plaintiffs served a motion to intervene in the summary judgment motions. At a case conference before me, they raised their concerns that the 2022 summary judgment motions were not unique to the 2022 actions at all, but that they had been briefed in such a way as to require me to make findings that would impact the 2018 actions.

[16] In particular, the motions, as structured, include disclosure arguments that are directly engaged by certified common issues in the 2018 actions. The defendants argue that their disclosure documents adequately disclosed the payment of trailing commissions to discount brokers; this is closely related to the question in the common issues trials of the certified proceedings relating to whether the same disclosure documents contained misrepresentations.

[17] It is apparent from my reasons on the stay motion that the intention was for the 2018 plaintiffs to proceed to trial on the common issues on which the plaintiffs in both actions are aligned, including the threshold question of the propriety of the payment of the trailing commissions. It is equally apparent from my reasons on the lift stay motion that I was lifting the stay to address issues unique to the 2022 actions. The limitation period arguments raised by the defendants are only unique in the sense that the determinations would bind the 2022 plaintiffs only. However, the import of my findings on such a motion would undoubtedly have a practical impact on the issues that the 2018 plaintiffs are litigating in accordance with my reasons on the stay motion.

[18] In the circumstances, I adjourn the motions for summary judgment in the 2022 actions based on the limitation period. The question of the propriety of the payment of the trailing commissions, which includes whether there were misrepresentations in the disclosure documents, shall be determined in the 2018 common issues trials. The summary judgment motions may be revisited thereafter.

Summary Judgment Motions – Leave Requirement

Background to the Motion

[19] The motions for summary judgment that are based on the claim that the 2022 actions against National Bank and BMO required leave are independent of the 2018 actions, and as such, I heard those motions on the merits.

[20] The 2022 actions against National Bank and BMO were commenced after the 2018 actions against those defendants were certified. Each certification order contains a stay provision and leave provision. For example, the 2018 action against BMO includes the following two paragraphs:

THIS COURT ORDERS that any other proceeding relating to the subject matter of this action is hereby stayed, except for (1) Michaud et al. v. BBS Securities Inc. et al., Supreme Court of British Columbia, Court File No. VLC-S-1912710; (2) Frayce et al. v. BMO InvestorLines Inc. et al., Ontario Superior Court of Justice, Court File No. CV-20-00638868-00CP; and (3) Frayce v. BMO InvestorLines Inc. et al., Ontario Superior Court of Justice, Court File No. CV-20-00634551-00CP.

THIS COURT ORDERS that no other proceeding relating to the subject matter of this action may be commenced without leave of the Court, excluding any proceeding that may be commenced by the Bank of Montreal, its subsidiaries and/or affiliates.

[21] For purposes of this motion, the stay and leave provisions in the 2018 action against National Bank are materially similar.

[22] National Bank and BMO argue that the 2022 actions commenced against them relate to the subject matter of the 2018 actions commenced against them, and as such, leave was required in order to commence those actions. They argue that the 2022 actions are thus a nullity, or an abuse of process, and must be dismissed.

[23] The plaintiffs argue that leave is not required by the terms of the orders in the 2018 actions against BMO and National Bank.

Law Regarding Summary Judgment

[24] The parties agree that the determination of whether summary judgment is appropriate is governed by the law set out in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87.

[25] There is no dispute, and I find, that the question raised on the summary judgment motion is discrete and appropriate for determination having regard to the principles set out in Hryniak.

Approach to the Interpretation of the Orders

[26] It is apparent that to determine whether the 2022 actions against BMO and National Bank require leave due to the operation of the certification orders in the 2018 actions against those defendants, it is necessary to interpret those orders.

[27] The parties agree that, when interpreting an order, the court applies principles of statutory and contractual interpretation: Canadian National Railway Company v. Holmes, 2015 ONSC 3038, at para. 18.

[28] The interpretation of judicial orders requires a contextual approach to determine the judge’s intent. The determination includes a consideration of text, context, and purpose, based on: (i) the express language of the order itself; (ii) the purpose of the terms of the order; (iii) the authority to make the order, including the statutory context and procedural rules, (iv) the broader context within which the order was granted, including the pleadings and the litigation events leading to the order; and (v) resolving apparent inconsistencies between different terms by reaching an interpretation which can reasonably give meaning to each of the terms in question: Kuang v. Young, 2023 ONSC 2429, at para. 7.

[29] In Kuang, the court cited with approval from the Saskatchewan Court of Appeal in Koroluk v. KPMG Inc., 2022 SKCA 57, at para. 43:

However, the interpretation of a court order, or for that matter a document approved by a court order or which a court order directs be implemented, involves more than simply reading its words in isolation. Like other law-making instruments, court orders are to be interpreted wholistically and purposively. The interpretation of specific provisions must take into account other parts of the order. A court interpreting an order should consider the authority to render it, since it should be assumed that a court would not grant an order it had no power to make. Finally, consideration must also be given to the broader context in which the order was made, including the pleadings and litigation events leading to the order.

[30] With these principles in mind, I turn to the interpretation of the orders at issue.

The Interpretation of the Orders

[31] The orders must be interpreted in the context of the Class Proceedings Act, 1992, S.O. 1992, c. 6 (the “CPA”). The CPA is a procedural statute that prescribes how multiple claims that would or could otherwise be individually prosecuted may be aggregated into a single proceeding to advance the objectives of (i) access to justice for the class; (ii) behaviour modification of defendants; and (iii) judicial economy.

[32] To proceed as a class action, a proceeding must be certified. Certification is the most significant procedural step in a proposed class action. The test for certification, set out in s. 5 of the CPA, is oriented around the class.

[33] There cannot be two or more certified class actions in the same jurisdiction representing the same class in relation to the same claim: Mancinelli v. Barrick Gold Corporation, 2016 ONCA 571, at para. 11. Competing putative class proceedings must be resolved by carriage motions.

[34] By the time an action is certified, carriage motions are usually a distant memory. However, sometimes a certification order includes a provision requiring leave to bring a proceeding relating to the subject matter of the action. I note that neither the CPA, in s. 8 (contents of a certification order), nor the model certification order require such a term in a certification order.

[35] BMO and National Bank argue that a leave provision in a certification order is sensible, because it enables the court to ensure that judicial economy is maintained. Actions that engage the same subject matter may give rise to complexities that ought to be managed by the case management judge. Moreover, BMO and National Bank argue, it does not prejudice any plaintiff seeking to represent a different class; all the plaintiff need do is seek leave.

[36] The plaintiffs argue that a leave provision in a certification order is designed to ensure that there is no competing class action in the same jurisdiction representing the same class in relation to the same claim. They disagree that case management has anything to do with it, and argue that case management concerns arising out of a proceeding related to the same factual matrix against the same defendants but brought by a different class will come to the court’s attention in other ways, as was the case in these actions. If nothing else, the defendant is aware they are being sued by two different classes with respect to the same events.

[37] What, then, is the purpose of a leave provision in a certification order?

[38] Context for the purpose of a certification order generally is informed by s. 8 of the CPA. It provides that a certification order must: (i) describe the class; (ii) name the parties who will represent the class; (iii) state the nature of the claims or defences asserted on behalf of the class; (iv) state the relief sought; (v) set out the issues common to the class; and (vi) specify how and by when class members may opt out of the class proceeding.

[39] A certification order is thus designed to define the parameters of the class proceeding that will proceed.

[40] In the orders at issue on this motion, the stay and leave provisions immediately follow the paragraphs in the order that respond to most of the requirements of s. 8: the definition of the class, the identification of the common issues, the identification of the representative plaintiff for the class; the identification of the relief sought by the class; the claims asserted on behalf of the class; and (this one not contained in s. 8), the approval of the litigation plan.

[41] In this context, the plaintiffs argue that the “subject matter of the action” is linked to the description of the action that precedes it in the order.

[42] On the plaintiffs’ argument, one includes a leave provision in a certification order because there can only be one certified class proceeding advanced on behalf of all or some of the same class members, against the same defendant, arising out of the same factual matrix. I agree that this is the purpose of the leave requirements at issue.

[43] The fact that the order carves out the Frayce and Michaud actions highlights this point. Those actions were brought on behalf of the same class members as the 2018 actions against BMO and National Bank, that is, investors who purchased through a discount broker. Without the carve-out, those actions would have been stayed.

[44] BMO and National Bank argue that s. 1.1 of the CPA runs counter to this argument. Section 1.1 provides that “a determination under this Act as to whether two or more proceedings involve the same or similar subject matter shall include consideration of whether the proceedings involve the same or similar causes of action and the same or affiliated defendants.”

[45] BMO and National Bank elsewhere in their argument point out that s. 13.1, regarding carriage orders, and relied upon by the plaintiffs, “was enacted in 2020 and has therefore never applied to [the 2018 actions against BMO and National Bank].” Section 1.1 was similarly enacted in 2020 and has never applied to the 2018 actions either. It cannot be used to interpret orders to which it does not apply.

[46] The defendant is correct that a proceeding against the same defendant based on the same factual matrix may well raise case management issues. Leave is not required, however, to bring those issues to the attention of the court. As I have noted, the defendant itself may do so directly. It will have been served with both actions. It can take appropriate steps to ensure that the case management issues are addressed by the case management judge, just as occurred with the 2022 and the 2018 actions, all without any 2022 plaintiff having ever sought leave.

[47] I note that the reasons underlying the certification orders do not analyze the need for a non-class member to seek leave to commence an action arising out of the same factual matrix. There is no reason in the statutory scheme, or the language or context of the orders, to conclude that the leave provision was meant to extend to a non-class member.

[48] BMO and National Bank argue that a plain reading of the order, when coupled with my repeated description in various endorsements of the 2022 actions and the 2018 actions as involving the same subject matter, means that leave must be required.

[49] This argument is superficially attractive, but on closer examination, reveals itself to be simplistic. The words “relating to the same subject matter” in the orders have to be interpreted in their context, and in the context of the statutory scheme. The applicability of the leave requirement is not a matching game, to see whether the orders use the same phrase that I have used in my endorsements to express an idea. In any event, in my endorsements, I describe the “same subject matter” of all of the 2018 and 2022 actions: the alleged wrongful payment of trailing commissions to discount brokers. If that phrase were enough to call bingo, the plaintiff would be correct that any action brought by anyone against anyone relating to the payment of trailing commissions to a discount broker would be captured. Plainly, that is an absurd interpretation of the orders.

[50] I thus conclude that leave is not required for the 2022 plaintiffs to have commenced their claims against BMO and National Bank. It is not necessary to consider whether the actions are a nullity or an abuse of process.

[51] The motions for summary judgment brought by BMO and National Bank based on the leave clause are dismissed.

Costs

[52] The parties shall attempt to agree on costs. If they are unable to do so, they shall write to me to propose a timetable for the exchange of brief written submissions for me to determine the issue.

J.T. Akbarali J. Date: November 5, 2024