Reasons for Judgment

Court File No.: CV-22-00681131
Date: 2025-02-24
Ontario Superior Court of Justice

Between:
G. Scott Paterson, Plaintiff
– and –
The Royal Bank of Canada, RBC Dominion Securities Inc., Anthony S. Fell, Bryce W. Douglas, Neil Selfe, R. Jamie Anderson, John Doe and Jane Doe, Defendants

Appearances:
M. Philip Tunley, for the Plaintiff
Will McDowell, David Salter, Evan Linn, for the Defendants

Heard: November 21, 2024

Contents

• Overview
• I. Background Facts
• II. Analysis
  • A. The Test on a Motion to Strike
  • B. Collateral Attack
  • C. Abuse of Process
  • D. Limitation Period
  • E. Rules of Pleading
• III. Conclusion and Costs

Overview

[1] The defendants move to strike out the Amended Statement of Claim (the “Statement of Claim”) in this proceeding as disclosing no reasonable cause of action because: (i) it amounts to a collateral attack on a proceeding of the Ontario Securities Commission (the “OSC”) that culminated in an OSC Order and Settlement Agreement in September 2000; (ii) it is an abuse of process because it seeks to relitigate the issues addressed in the OSC Order and Settlement Agreement; (iii) it violates the ultimate 15 year limitation period contained in the Limitations Act; and (iv) because it is drafted in a way so as to violate the rules of pleading with respect to several of the causes of action which it pleads.

[2] As set out in greater detail below, I grant the motion and strike out the Statement of Claim with leave to amend.

[3] In my view, the Statement of Claim does not amount to a collateral attack on the OSC Order or Settlement Agreement because it does not actually seek to set those aside. It does, however, amount to an abuse of process because it implicitly challenges the factual findings on which the OSC Order is based and which are contained in the Settlement Agreement.

[4] The Statement of Claim also violates the 15 year ultimate limitation period contained in the Limitations Act. The Statement of Claim pleads no facts that occurred after 2002. The plaintiff argues that documents came to his attention in May 2020 that created a cause of action. I do not accept that submission. The Statement of Claim pleads many facts of which the plaintiff was aware at the time they occurred which gave him a cause of action. Moreover, the 15 year ultimate limitation period can only be avoided if the defendants wilfully concealed facts from or misrepresented facts to the plaintiff so as to mislead him about the existence of a cause of action. Case law has required active conduct on the part of a defendant for courts to find wilful concealment or misrepresentation. Apart from a bald allegation to that effect, the plaintiff has not pleaded any material facts to support the allegation of wilful concealment or misrepresentation.

[5] In light of my findings about abuse of process and the limitations period which dispose of the Statement of Claim in its entirety, I do not find it necessary to address the arguments about the way in which particular causes of action are pleaded.

I. Background Facts

[6] The plaintiff G. Scott Paterson (“Paterson”) was a highly successful individual in the Canadian investment banking industry during the 1980s and 1990s. Between 1985 and 1987 Paterson worked at Dominion Securities Pitfield. During that time he became one of its top-ranked advisors.

[7] The Defendant Royal Bank of Canada (“RBC”), is a Canadian chartered bank that acquired Dominion Securities Pitfield in 1987 at which time the latter was continued as RBC Dominion Securities Inc. (“RBC DS”). The personal defendants Anthony S. Fell, Bryce W. Douglas, Neil Selfe, R. Jamie Anderson, and the two “Doe” Defendants were directors, senior officers and employees of RBC and/or RBC DS during the time in which the acts that this action is based on occurred.

[8] Paterson left Dominion Securities Pitfield in 1987 at about the time RBC acquired it because he perceived that it had reneged on a commitment to him. After leaving Dominion Securities, Paterson became a leading advisor at Richardson Greenshields. In 1988 he joined that firm’s investment banking group. After moving to Midland Walwyn, he was recruited by Yorkton Securities Inc. as Executive Vice President in 1995. By 1998 he was the Chair and Chief Executive Officer of Yorkton.

[9] Paterson became a prominent individual in the Canadian investment banking industry. He transformed Yorkton from a small mining focused boutique brokerage to become one of Canada’s leading investment banks. He served on numerous boards and agencies in the securities industry including as Governor of the Investment Dealer’s Association, Director of the Investor Protection Fund, a director of the Canadian Securities Institute, the Canadian Security Advisor Council, and the Canadian Venture Exchange (“CDNX”) as well as a Vice Chair of the Toronto Stock Exchange.

[10] In September, 2000 the OSC began an investigation and commenced an enforcement proceeding relating to Paterson and Yorkton. The OSC alleged that Paterson and Yorkton acted in conflict of interest, failed to disclose material information, and engaged in conduct contrary to the public interest with respect to four transactions.

[11] On December 17, 2001, the OSC entered an Order, which found that Paterson’s conduct was contrary to the public interest, pursuant to sections 127(1) and 127.1 of the Securities Act. On December 19, 2001, Paterson entered into a Settlement Agreement with the OSC in relation to the enforcement proceeding. Pursuant to the Order and the Settlement Agreement, Paterson agreed to:

• a detailed set of facts relating to his conduct,
• waive his rights to a judicial review or appeal,
• not make any public statement inconsistent with the Settlement Agreement,
• sell his interest in Yorkton at book value,
• be suspended as an officer or director of a registrant under the Securities Act for two years,
• pay $1,000,000 to the OSC,
• be prohibited from trading in securities for six months (with the exception of the sale of his 15.5% ownership in Yorkton),
• be reprimanded, and
• pay the OSC costs of $100,000.

[12] Yorkton also executed a settlement agreement approved by an OSC order.

[13] Almost 21 years later, on May 13, 2022 Paterson commenced this action. The action claims damages for civil conspiracy, defamation, injurious falsehood, and interference with economic relations based on allegedly secret conduct that he says the defendants engaged in between 1995 and 2002. The overall nub of the claim is that the defendants engaged in a campaign to defame Paterson. As part of that campaign, Anthony Fell, the then Chair of RBC DS and other defendants pressured the then Chair of the OSC and other OSC members, executives and staff to investigate Paterson to which pressure the OSC succumbed. Paterson further alleges that the defendants encouraged OSC investigators to disclose information obtained in their investigations or leak it to journalists.

[14] Paterson says that the impetus to the claim at this relatively late stage was a note that he received from an anonymous whistleblower on May 14, 2020. The note read as follows:

Scott,

I thought you might find this interesting. I was cleaning out my desk the other day and found this memo. I am sure this only confirms what you already knew - there was a concerted and focused effort at DS to make your life difficult. I recall many discussions led by the most senior executives of the firm on how to stop Paterson. Many other antics went on to make your life difficult that I am sure you wondered where it was coming from.

[15] Attached to the note was a memo dated November 20, 1998 from the defendant Bryce Douglas who was Vice-Chair of RBC DS at the time. The memo attached an article from Canadian Business about Paterson. In the memo, Douglas says, among other things:

I have met Paterson on a couple occasions and found him to be obnoxious. However, I didn’t realize just how obnoxious.

I’m not sure that you want to spend a lot of time reading this article it comes across as portraying Mr. Paterson as being crass, egotistical and unpleasant. They come and they go. Hopefully that is the case in this instance. I don’t think I can ever recall anyone, that was as full of himself as Mr. Paterson, that didn’t eventually blow himself up. I know you have better things to do than get overly fussed about Mr. Paterson. But if you can give him a push to help him over the edge it might be energy well spent.

The memo is printed on RBC DS letterhead and signed “Bryce W. Douglas Deputy Chairman”.

[16] The plaintiff moves to strike the Statement of Claim on the grounds that it amounts to a collateral attack on the OSC Order and Settlement Agreement, is an abuse of process, is time-barred as being beyond the 15 year ultimate limitation period under the Limitations Act as well as for more particular defects about the way certain causes of action are pleaded.

II. Analysis

A. The Test on a Motion to Strike

[17] The defendants move to strike the Statement of Claim on four bases, namely that it: (i) is a collateral attack on the OSC Order and Settlement Agreement; (ii) amounts to an abuse of process; (iii) is time-barred; and (iv) discloses no reasonable cause of action due to defects in the way it pleads a variety of causes of action.

[18] Striking for abuse of process is governed by two provisions, Rule 21.01(3)(d) and Rule 25.11. The former provides that a defendant may move to have an action stayed or dismissed on the ground that

(d) the action is frivolous or vexatious or is otherwise an abuse of the process of the court,

[19] Rule 25.11 provides:

The court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,

(a) may prejudice or delay the fair trial of the action;

(b) is scandalous, frivolous, or vexatious; or

(c) is an abuse of the process of the court.

[20] In addition, the defendants move to strike the Statement of Claim as disclosing no reasonable cause of action under Rule 21.01(1)(b). This Rule applies to the challenges in relation to the ultimate limitations period and the challenges to the way in which particular causes of action are pleaded.

[21] The principles to be applied to a motion to strike under Rule 21.01(1)(b) are not in dispute and may be summarized as follows:

• (i) A statement of claim will be struck out under Rule 21.01(1)(b) when it is “plain and obvious” that the claim has no chance of success.
• (ii) The test is stringent and imposes a high threshold. Only claims that are certain to fail should be struck at the pleadings stage. Motions to strike are reserved for pleadings that contain a “radical defect” or are “so obviously at odds with precedent, underlying principle, and desirable social consequence that regardless of the evidence adduced at trial, the court can say with confidence that it cannot succeed.”
• (iii) The facts pleaded are to be taken as true and read generously.
• (iv) The court should err on the side of permitting an arguable claim, even if novel, to proceed to trial.
• (v) No evidence is admissible on a motion to strike under r. 21.01(1)(b); however, the court can rely upon documents referred to in the claim.

B. Collateral Attack

[22] The defendants first submit that the Statement of Claim should be struck out because it is a collateral attack on the OSC Order.

[23] Collateral attack is a subset of abuse of process. Courts have defined it narrowly as “an attack against an order in proceedings other than the proceeding in which the order was made with the object of reversing, varying or nullifying the order.” The challenge cannot be one to the order more generally but must be specifically aimed at reversing, varying, or nullifying the order in a technical sense.

[24] The Supreme Court of Canada’s decision in Toronto (City) v. C.U.P.E., Local 79 provides a good example of the distinction between collateral attack and abuse of process more generally. In that case, a person employed as a recreation instructor for the City had been convicted of sexually assaulting a boy under his supervision. After his conviction, the City terminated his employment. The employee grieved his dismissal in a labour arbitration in the course of which he contested the correctness of his conviction. The labour arbitrator accepted his version of events and ordered that he be reinstated. On judicial review up to the Supreme Court of Canada, the courts reversed the arbitrator’s decision. In the Supreme Court of Canada, Arbour J., writing for the majority, declined to treat this as a case of collateral attack because

…the union does not seek to overturn the sexual abuse conviction itself, but simply contest, for the purposes of a different claim with different legal consequences, whether the conviction was correct. It is an implicit attack on the correctness of the factual basis of the decision, not a contest about whether that decision has legal force, as clearly it does. Prohibited “collateral attacks” are abuses of the court’s process. However, in light of the focus of the collateral attack rule on attacking the order itself and its legal effect, I believe that the better approach here is to go directly to the doctrine of abuse of process.

[25] Similarly here, the defendants’ complaints about the Statement of Claim are not that it contests the legal force of the OSC Order and Settlement Agreement but rather that the Statement of Claim amounts to an implicit attack on the correctness of the factual basis of the OSC Order and Settlement Agreement. As the Supreme Court of Canada did in C.U.P.E. Local 79, I believe the better approach is to go directly to the doctrine of abuse of process.

C. Abuse of Process

[26] Abuse of process is a discretionary principle. It is used to bar proceedings that are inconsistent with the objectives of public policy. It engages the inherent power of the court to prevent a misuse of its procedure in a way that is manifestly unfair or brings the administration of justice into disrepute. The doctrine applies to prevent violations of the principles of judicial economy, consistency, finality, and the integrity of the administration of justice. There is a degree of overlap between the terms frivolous, vexatious and abuse of process.

[27] In my view, the claim amounts to an abuse of process in three principal ways:

(a) It seeks to transfer the financial consequences of the Settlement Agreement from Paterson to the defendants.
(b) It impugns the integrity of the OSC process.
(c) It re-litigates the facts underlying the settlement agreement.

a. Transfer of Financial Consequences

[28] Paterson claims damages of $275 million from the defendants which he says arise because he lost his position as Chair and CEO of Yorkton; was forced to sell his interest in Yorkton at book value and thereby lost a “favourable rate of return on his equity ownership capital”; and suffered an “immediate decline in his income” following the Order, from which he “was never able to recover”.

[29] These are all losses directly attributable to the Settlement Agreement. By claiming those damages from the defendants he is seeking to set aside the financial consequences that he agreed to in the Settlement. As part of the Settlement, Paterson agreed to resign as Chair and CEO of Yorkton, agreed not to be an officer or director of a registrant for two years, and agreed to sell his equity in Yorkton at book value.

[30] Paterson submits that his damage claim does not arise out of the Order because he is claiming damages that arose after the two years during which he agreed not to be an officer or director of a registrant.

[31] I am unable to accept that submission. Neither the Settlement Agreement nor the Order speak to their consequences or the duration of those consequences. They merely record Paterson’s agreement to accede to certain terms.

[32] Paterson states in paragraph 91 of the Claim that:

… it was not intended, and in the ordinary course it would not be expected, that the OSC Settlement and the OSC Order would have had long-term, material or detrimental effects on his career or reputation beyond those created by their express terms.

[33] The fact that the OSC order may have had effects that were longer term or more detrimental than Paterson subjectively believed when he agreed to it, is, in effect, an admission that the long term consequences flowed from the OSC Settlement. He is now seeking to transfer those long-term consequences to the defendants. Paterson’s subjective belief about what the consequences of the Settlement would be when he agreed to it does not give him a cause of action if the actual consequences turn out to be more serious.

b. Claim Impugns the Integrity of the OSC Process

[34] The overall thrust of the claim is to undermine the integrity of the OSC process. Paragraph 79 of the claim alleges that after a CDNX investigation had exculpated Paterson, the defendants took “improper steps to encourage and to pressure the OSC” to investigate and take proceedings against Paterson. Those improper steps included the defendant Anthony Fell, the then Chair of RBC DS, communicating personally with the Chair of the OSC and other senior OSC members executives and staff to “personally apply pressure to them to proceed with their own investigation of Paterson; the OSC eventually succumbed to this pressure from the defendants” and began an investigation.

[35] Paragraph 80 of the claim alleges that “the defendants caused the OSC to conduct an exhaustive investigation.” At paragraph 81, the Statement of Claim alleges that as a result of the defendants’ improper pressure on senior OSC executives the defendants:

… prevailed upon them, contrary to the OSC’s normal procedures and policies respecting confidentiality of its informal investigations, to require that Yorkton disclose the existence of their investigation to issuers who were using Yorkton as their underwriter, and even to require those issuers to make that disclosure in their prospectuses and other public filings.”

[36] Paragraph 82 of the claim says that after 14 months of investigation, the OSC was not able to show that Paterson had breached any securities laws, rules or policies and then goes on to state in paragraph 83:

Nevertheless, as a result of the undue pressure applied to it by the defendants, the OSC advised Paterson and Yorkton that it was prepared to take a small number of the concerns raised beyond the investigative stage, and to launch an administrative proceeding against them. Out of all the regulators to whom these matters had been raised by the defendants, the only one that took this unprecedented step was the OSC.

[37] The overall thrust of the claim is to suggest that the OSC was the pawn of the defendants. It alleges that only the defendants’ improper pressure led to an investigation and a proceeding against Paterson. This attacks the integrity of the OSC process. It would require the court to investigate the OSC process to determine whether the OSC made decisions on its own or whether it was subject to improper pressure from the defendants. Although a complaint of that nature is not prohibited as such, it is a complaint that would usually be presented as part of an appeal, judicial review or other process to which the OSC is a party and has a right to make submissions. That is not the case here.

c. Re-Litigation of Facts Underlying the Settlement Agreement

[38] Paragraphs 84 to 86 of the claim implicitly try to re-litigate the facts underlying the Settlement Agreement. Paragraph 84 tries to understate the significance of the issues that the OSC pursued by stating that they raised “novel questions of suggested conflicts of interest or nondisclosure in relation to Paterson’s or Yorkton’s involvement as equity investors at the early stages of events…” The Statement of Claim then further undermines the integrity of the OSC process by stating that:

The events relating to those transactions, and the involvement of Paterson and Yorkton, were not different in kind to the involvement of the Bank and its subsidiaries, including RBC-DS, routinely had and still have in financing transactions for their own borrower-clients.

[39] This would require the court to compare Paterson’s conduct to that of RBC and RBC DS and determine whether the conduct was sufficiently similar to render unfair the exercise of the OSC’s public interest jurisdiction against Paterson but not against RBC or RBC DS.

[40] Paragraph 85 of the claim goes on to try to resituate each of the four transactions that the OSC investigated by adding facts to diminish Paterson’s responsibility. By way of example, paragraph 85(b) refers to a transaction in respect of which the claim points the finger at Yorkton’s head securities trader and states that “the only concern involving Paterson was supervision of the head trader.” Subparagraph (c) speaks of a transaction in which the OSC noted that Paterson had made a profit of $400,000 calculated on a last in first out basis

“despite the fact that there had been a public filing of a Book 4 Golf prospectus disclosing that KPMG had completed an audit of Paterson’s trading confirming that, in fact, Paterson had lost $1,050,000 on his Book 4 Golf investment overall;”

[41] Paterson's position that he had in fact lost $1 million on the transaction was recorded as his position in paragraph 66 of the Settlement Agreement. Regardless of Paterson’s position, the OSC found that his conduct warranted the exercise of its public interest jurisdiction; presumably because the impugned transaction reduced Paterson’s overall loss by $400,000. Once again, this requires the court to determine whether the exercise of the OSC’s public interest jurisdiction in these circumstances was somehow improper.

[42] In paragraph 85(d) of the Claim, Paterson challenges a fourth transaction for which he was sanctioned by describing the issue as:

whether Paterson was required to disclose to Yorkton and to its clients certain negative views he personally had formed about the management of a company called Storage One Inc. which acquired certain assets of a computer storage hardware business, despite the fact that Yorkton had put in place specific measures to protect the new Storage One investors’ interests, similar to those used by banks and other financial institutions in connection with loan covenants, which required Yorkton executives to sign off on management budgetary decisions.

[43] This requires the court to determine what measures Yorkton had put in place, compare Yorkton’s measures to those of other banks and financial institutions at the time and then determine whether the exercise of the OSC’s public interest jurisdiction was somehow unfair in light of that comparison.

[44] Paterson may argue that his Statement of Claim does not, strictly speaking, require re-litigation of any of these issues. That position would only make the Claim even more abusive. It would oblige the court to accept what are in effect defences to the complaints that the OSC raised against him and impugn the OSC process without examining the correctness of Paterson’s allegations.

[45] The decision of Justice Doherty in the Court of Appeal in Toronto (City of) v. Canadian Union of Public Employees is particularly relevant to the case at hand because it explains how courts should determine whether a subsequent proceeding amounts to an abuse of process. In CUPE, Doherty J.A. described abuse of process as relating to “the adjudicative process in its various manifestations” including administrative tribunals. The concept therefore applies to the OSC.

[46] Justice Doherty went on to explain that the abuse of process analysis is a balancing exercise that weighs the interests of the party who seeks to re-visit an issue with the competing interests of the previously successful litigant, the institutions responsible for the adjudicative process, those collaterally affected by the re-litigation such as witnesses and the community at large.

[47] The interests of the litigants and the institution responsible for the adjudicative process are perhaps easier to discern. The interests of the community at large include the broader perception that the process as a whole achieves results which are consistent, fair and accurate; and the interest in finality which re-litigation uproots.

[48] There is no doubt that revisiting the Settlement Agreement and the OSC Order would cast significant doubt on the perception that the OSC process achieves results that are consistent, fair and accurate.

[49] There is also no doubt that revisiting the Settlement Agreement and the OSC Order would uproot finality. Both the parties and public at large have a legitimate interest in finality. The litigants need to get on with their lives. They need a certain level of comfort that they no longer have to retain records about certain events and a sense of closure that certain issues have been dealt with and will not be reopened.

[50] In addition, re-litigation drains both individuals and institutions of their resources. As Doherty J.A. explained:

Neither individuals, nor the community as a whole, have the resources or the lifespan required to permit the continual re-litigation of decided issues.

[51] At the same time, Doherty J.A. recognized that giving excessive weight to finality can also lead to injustice. As a result, when deciding whether to permit re-litigation the adjudicator must decide “whether finality concerns should outweigh an individual litigant’s claim that the justice of the specific case warrants re-litigation.” He described that exercise as intensely fact specific.

[52] Applying these principles to the Statement of Claim strengthens my view that it amounts to an abuse of process. In balancing society’s need for finality against the justice of a particular case requiring re-litigation, it is significant to bear in mind that the OSC proceeding culminated in an agreement that Paterson voluntarily entered into. In the year before the settlement, Paterson earned $16 million. In the years leading up to that he can also be assumed to have been a high income earner from the description of his position and role set out in the Statement of Claim. That meant Paterson had the economic resources to afford first rate legal counsel and to defend himself in a formal hearing at the OSC had he wanted to do so. Had he failed at the OSC, he also had the means to pursue appeals or judicial review as far as the law permitted. He chose to avoid a hearing entirely and chose to settle.

[53] Assessing Paterson’s allegations about the OSC process requires an assessment of conduct that occurred 24 years ago and a determination of whether that conduct justified the OSC’s exercise of its public interest jurisdiction. Implicit in that exercise is an evaluation of the reasons for which particular decisions were made 24 years ago. Many of the defendants are now in their mid-80s or older. Witnesses have moved on or died. Documents will no doubt have been destroyed or will have gone missing. All of that means that any litigation would require large scale reconstruction of events and reasons for doing things. The results of that process today will be expensive, time-consuming and, in all likelihood, less reliable than the inquiry was 24 years ago.

[54] The only new evidence that Paterson has to justify that inquiry is the whistleblower note and the Douglas memorandum. Neither of those documents suggest that the Chair or other senior officers of RBC DS applied pressure to the Chair of the OSC or other OSC staff. There is nothing in Paterson’s Statement of Claim or motion materials to explain what material facts the allegations of improper pressure are based on. Nor is there anything to explain why those allegations could not have been brought forward at an earlier stage. All we have are bald allegations of impropriety.

[55] If someone seeks to attack the propriety of an adjudicative process 24 years after the fact, they should be required to provide some level of particularity in pleading beyond bald allegations. If it were otherwise, anyone could attack any proceeding at any time by issuing a statement of claim with salacious allegations of injustice or corruption. I note in this regard that Rule 25.06(8) requires that allegations of fraud, misrepresentation, malice or intent be pleaded with full particulars.

[56] On the present constitution of the action, the court would be required to embark on this inquiry without giving the OSC the chance to defend itself because it is not a party. All, at the end of the day, to impugn the validity of a Settlement Agreement that Paterson consented to and in respect of which he agreed not to make any inconsistent public statement.

[57] In the foregoing circumstances, balancing the interests of finality against the interests of justice in the individual case comes down decidedly in favour of finality.

D. Limitation Period

[58] The defendants’ second fundamental challenge to the Statement of Claim arises out of the Limitations Act s. 15(2) of which provides:

(2) No proceeding shall be commenced in respect of any claim after the 15th anniversary of the day on which the act or omission on which the claim is based took place.

[59] This is frequently referred to as the “ultimate” limitation period because it imposes a strict prohibition on proceedings commencing more than 15 years after the act or omission in question occurred. The 15 year period begins on the day the act occurred, not on the day the plaintiff knew or ought to have known of the act.

[60] The Statement of Claim contains no allegations of conduct by the defendants after 2002. The ultimate limitation period therefore expired in 2017. The Statement of Claim was not issued until 5 years later on May 13, 2022.

[61] The purpose of the ultimate limitation period has been described as reflecting the need to “balance the concern for plaintiffs with undiscovered causes of action with the need to prevent the indefinite postponement of a limitation period.”

[62] Paterson tries to avoid the ultimate limitation period by seeking to further amend the Statement of Claim to take advantage of an exception to the ultimate limitation period that is found in section 15(4)(c) of the Limitations Act and which provides:

(4) The [ultimate] limitation period established by subsection (2) does not run during any time in which,

(c) the person against whom the claim is made,

(i) wilfully conceals from the person with the claim the fact that injury, loss or damage has occurred, that it was caused by or contributed to by an act or omission or that the act or omission was that of the person against whom the claim is made, or

(ii) wilfully misleads the person with the claim as to the appropriateness of a proceeding as a means of remedying the injury, loss or damage.

[63] Paterson proposes to further amend his Statement of Claim to bring himself within this provision by adding paragraph 107A which alleges that the defendants:

(a) “wilfully concealed from Paterson that any injury, loss and damage he was suffering at the material times was being caused or contributed to by the defendants’ own wrongful conduct against him, and
(b) wilfully misled both Paterson and the business community in which he worked to believe that Paterson would have no legal claim against the defendants, because any injury, loss and damage he was suffering would appear to be the result of independent journalists, regulators, and other third persons.”

[64] On the facts of this case, I am persuaded that the 15 year limitation period should apply to preclude the claim. The general thrust of the Statement of Claim is that the defendants mounted a campaign against Paterson both before and after the OSC settlement to detrimentally affect his career. Regardless of the proposed amendment in paragraph 107A, the Statement of Claim makes clear that Paterson knew or ought to have known about the defendants’ conduct in this regard at the time the events occurred. While there may be details of which Paterson was not aware, Paterson was aware of a sufficient number of instances before 2002 of statements by the defendants that were designed and intended to harm his career that it would not be inequitable to apply the 15 year limitation period to him.

[65] By way of example, the Statement of Claim contains the following allegations:

• (i) Paterson states explicitly that the first indication that something was amiss took place in 1996 when RBC DS tried to exclude Yorkton from a transaction involving Open Text by arguing unsuccessfully that Yorkton was not eligible to participate because it had earned incentive securities in a 1995 private financing.
• (ii) After the publication of a favourable article about Paterson and Yorkton in Canadian Business in late 1998, Paterson and his colleagues heard repeatedly from clients and prospective clients that RBC DS had told them that Paterson was unethical and that Yorkton was misrepresenting its position as Canada’s top technology underwriter.
• (iii) In the spring of 1999, David Allen, a senior Yorkton colleague, told Paterson that, during a recent gathering at the Rosedale Golf Club, the defendant Douglas, had told those present that Paterson, was “unethical” and had given the impression that he knew Paterson well and had done business with him which was untrue.
• (iv) After Yorkton won a bid to lead a new financing of Atlantis Communications, Bruce Rothney of RBC DS left a scathing voicemail for one of Paterson’s colleagues, threatening that Yorkton and Paterson would “pay a heavy price” for this success.
• (v) Paterson believed at the time that these statements showed a highly aggressive and dishonest business posture on the part of the Bank and RBC DS and lacked credibility because of the absence of any specifics.
• (vi) The claim states expressly that “Closely related to the defendants’ market campaign, the defendants also developed and implemented a plan to use their advertising budget leverage and other means to apply pressure to certain journalists, media owners, and managers, to prepare and publish negative stories about Paterson and Yorkton.”
• (vii) The defendants’ campaign against Paterson became manifest in a series of negative articles by Jacquie McNish, Richard Blackwell and/or Mark Evans in the Globe & Mail beginning on April 29, 2000 with a story entitled “Bay Street Insiders Exploit Dot-Com Dreams: Special Report.”
• (viii) While preparing a favourable article about Paterson, business journalist Amanda Lang told Paterson that the defendant Selfe had told Lang that Paterson was unethical. Shortly afterwards, the article Lang was working on was cancelled by ROB Magazine.
• (ix) Immediately following the OSC Settlement, the defendant Anderson initiated a complaint with the Rosedale Golf Club to revoke Paterson’s membership based on misrepresentations about the OSC Settlement and Order and their reflection on Paterson’s character. This resulted in a revocation-of-membership notice being sent to Paterson and required him to appeal the intended revocation. During the board of directors meeting that considered the issue, Anderson made heated remarks to the Board in Paterson’s presence. This included statements to the effect that Paterson was unethical, had breached securities laws, and that Paterson’s character made him unfit to remain a member of the Club.
• (x) Paterson goes on to plead specifically that “these comments were made knowing that they were false, and with malice, knowing that they had already injured, and intending that they would further injure Paterson’s reputation among a select and particularly significant and influential community of which Paterson had been an esteemed member for several years.”
• (xi) In 2004, Peter C. Newman devoted approximately 4 pages to Paterson and his career difficulties in his book Here Be Dragons. When pressed in private conversation, Newman explained that confidential sources, that he could not name, had told Newman that the Bank and many of its senior executives hated Paterson, that they had encouraged the Canadian business press to attack Paterson, and that they had caused the OSC to investigate him.

[66] As a result of the foregoing, Paterson had formed the view no later than 2004 that the defendants had caused the OSC to investigate him. He knew before 2004 that the defendants had defamed him to members of the press and members of a “select and particularly significant and influential community”.

[67] In my view, the amendment that Paterson proposes to the Statement of Claim does not assist him in avoiding the ultimate limitation period.

[68] Paterson submits that the defendants wilfully wronged him, safe in the knowledge that their wrongdoing would not be uncovered for some time due to the way in which they acted. As a result, he submits that it is not plain and obvious that fraudulent concealment could not delay the running of the ultimate limitation period in relation to Paterson’s Claim, and that the determination of such a matter ought to be decided by a trial judge rather than at the pleadings stage.

[69] Paterson, however, has the burden of proving that section 15(4) applies. The Statement of Claim contains nothing but a bald allegation of concealment and misrepresentation. There are no material facts about what was concealed, how the defendants went about concealing it or how the defendants misrepresented their conduct to Paterson. Moreover, the concept of the defendants having concealed information from Paterson or having misled Paterson would seem to contradict many of the paragraphs that Paterson expressly pleads in his Statement of Claim.

[70] The exception to the ultimate limitation period requires that the person against whom the claim is made “wilfully conceal” from the plaintiff that injury, loss, or damage has occurred, that it was caused by or contributed to by the defendant or that the defendant “wilfully mislead” the plaintiff about the appropriateness of a proceeding as the means of remedying the injury, loss or damage. Both require active conduct by defendants. Passive nondisclosure does not suffice.

[71] In Johnson v. Studley, 2014 ONSC 1732, the plaintiffs argued that the absolute limitation period did not apply because the defendants had fraudulently concealed information. In response Perell J explained:

[83] To conceal something is to cover it up. To conceal misconduct or one’s identity is to hide, secret, cloak, camouflage, disguise, or mask the conduct or identity. There was no hiding or cover-up in the case at bar. Where there is no duty to disclose, concealment is something more than mere non-disclosure and there was no obligation on Mr. Studley to invite the Johnsons to sue him because six other investors had sued him. Mr. Studley has never admitted that he did anything wrong and the fact that he was sued by some Olympus investors imposed no legal obligation on him to invite more litigation. Mr. Studley may have been a trusted advisor and in a fiduciary relationship with the Johnsons, but he did not abuse that trust nor take advantage of it. Mr. Studley’s not disclosing that he could no longer obtain E&O insurance or that the Johnsons did not appreciate that Mr. Rosanova was replacing and not partnering with Mr. Studley to service their account does not amount to a fraudulent concealment.

[72] Other cases have come to a similar conclusion holding that mere nondisclosure is not sufficient to fall within section 15(4) of the Limitations Act.

[73] Courts have interpreted the meaning of “wilfully conceals” in s. 15(4)(c)(i) with reference to the doctrine of fraudulent concealment. The doctrine of fraudulent concealment is “not a rule of construction”, but “an equitable principle aimed at preventing a limitation period from operating as an instrument of injustice.” As a result, the Supreme Court of Canada has noted that it requires the court to consider “whether it would be, for any reason, unconscionable for the defendants to rely on the advantage gained by having concealed the existence of a cause of action.”

[74] When considering this, however, courts must also be alive to the purposes of limitation periods. As the majority of the Supreme Court of Canada noted in Pioneer Corp v. Godfrey, 2019 SCC 42:

The first is that limitation periods foster certainty in that “[t]here comes a time … when a potential defendant should be secure in his reasonable expectation that he will not be held to account for ancient obligations”…The second rationale is evidentiary: limitation periods are intended to help prevent evidence from going stale, to the detriment of the plaintiff or the defendant…Finally, limitation periods serve to encourage diligence on the part of plaintiffs in pursuing their claims… [Emphasis in original. Citations omitted]

[75] All three purposes militate against Paterson here. I would be inclined to uphold the value of certainty in the absence of any material facts that suggest wilful concealment or misrepresentation by the defendants. Indeed, as noted earlier, the Statement of Claim as pleaded suggests Paterson was aware of the essential facts to make out a claim for defamation no later than 2004 and probably earlier. Paterson had enough information at an earlier stage to have been able to bring an action had he acted with diligence. I am not persuaded that there is sufficient new information that could not have been discovered earlier that justifies bringing the action only after more than 15 years of past. As noted earlier, the only such new information is the whistleblower memo, the Douglas memo and the allegation that the Chair of RBC DS pressured the Chair of the OSC. The information contained in the Douglas memo and the whistleblower note is not materially different than what Paterson admits he knew between 1995 and 2002. With respect to the allegation that the Chair of RBC DS pressured the Chair of the OSC, Peter C. Newman had already told Paterson that RBC had caused the OSC to investigate him. The new element in the Statement of Claim is that the Chair of RBC DS was allegedly among those who did the pressuring. The Statement of Claim does not, however, explain the source of that information, when it was acquired, or how it was acquired, all of which are material facts relevant to determine whether the claim discloses a reasonable cause of action despite its late date.

[76] Turning back to the principles relating to striking a pleading under rule 21.01(1)(b): Bringing this action now based on a bald allegation of concealment when the Statement of Claim itself reveals that Paterson knew, before 2002, almost all of what he now alleges and does so without pleading any material facts about concealment or misrepresentation, would make this claim “so obviously at odds with precedent, underlying principle and desirable social consequences” that the court can say with confidence that it cannot succeed.

E. Rules of Pleading

[77] Given that my findings on abuse of process and the limitation period dispose of the entire Statement of Claim, I do not find it necessary to address the more specific pleadings issues that the plaintiff has raised with respect to particular causes of action.

III. Conclusion and Costs

[78] For the reasons set out above, I strike the Statement of Claim in its entirety as an abuse of process and as being time-barred by s. 15(2) of the Limitations Act. Although I do not believe that those flaws can be corrected by an amendment, the strong inclination of courts is to grant leave to amend when striking a Statement of Claim even if the court is doubtful about the ability of amendments to remediate the defects. I therefore strike out the Statement of Claim with leave to amend.

[79] Each side sought its costs in the event they were successful on the motion. Both sides’ costs struck me as reasonable given the different cost structures of their respective firms. In my view, however, the appropriate award here is to require each side to bear its own costs. Although I have found that the Statement of Claim amounts to an abuse of process with respect to the OSC proceeding and have found that Paterson knew he had a cause of action in the early 2000s, at the same time, the Douglas memo suggests that there was a level of animus towards Paterson that should not be rewarded with costs.

Mark L. Koehnen

Released: February 24, 2025