



COURT OF APPEAL FOR ONTARIO

CITATION: Goldsmith v. National Bank of Canada, 2016 ONCA 22

DATE: 20160113

DOCKET: C60615

Weiler, Pardu and Benotto JJ.A.

BETWEEN

Joanna Goldsmith

Applicant (Appellant)

and

National Bank of Canada

Respondent (Respondent)

Paul J. Bates, Daniel E.H. Bach and S. Sajjad
    Nematollahi, for the appellant

R. Paul Steep, Eric S. Block, Byron Shaw and Jessica
    Laham, for the respondent

Heard: December 8, 2015

On appeal from the order of Justice Edward P. Belobaba of
    the Superior Court of Justice, dated May 20, 2015, with reasons reported at 2015
    ONSC 2746, 126 O.R. (3d) 191.

Pardu J.A.:

A.

Introduction

[1]

Part XXIII.1 of Ontarios
Securities Act
,

R.S.O. 1990,
    c. S-5 (
OSA
), provides a right of action against an influential
    person who knowingly influenced the release of a document containing a
    misrepresentation. Should the appellant be permitted to commence such an action
    against the respondent, National Bank of Canada (NBC)? The motion judge
    concluded that she should not. For the reasons that follow, I agree and would
    dismiss the appeal.

B.

background

[2]

Poseidon Concepts Corp. (Poseidon) was created in 2011 through a
    reorganization of Open Range Energy Corp. (Open Range). Before the
    reorganization, Open Range had two separate business segments: a tank rental
    business, and an oil and natural gas exploration and production business.

[3]

In the second quarter of 2011, Open Ranges board of directors concluded
    that the trading price of their companys shares did not reflect the aggregate
    value of the two business lines. They also concluded that separating the two
    business segments would enhance shareholder value.

[4]

With the assistance of professional advisors, Open Range developed a
    plan of arrangement under which the companys two business lines would be
    separated into two publicly-traded corporations. That proposal was considered
    by a special committee, and implemented in the fall of 2011 after being
    approved by the board of directors, Open Ranges shareholders, and the Alberta
    Court of Queens Bench. The oil and natural gas business and assets were spun
    off into a new company, and Poseidon carried on the tank rental business.

[5]

Poseidon then completed a successful public offering. The receipt for
    the final prospectus was issued on January 26, 2012. On February 2, 2012,
    Poseidon issued a press release announcing that it had sold common shares for
    gross proceeds of just over $82.5 million dollars.

[6]

The companys success was short-lived. In a series of corrective disclosures
    made between November 2012 and February 2013, Poseidon revealed that
it had materially overstated revenues and accounts
    receivable.
In April 2013, it filed for protection under the
Companies
    Creditors Arrangement Act
,
R.S.C. 1985, c. C-36
. Poseidon
    was delisted in May 2013 and its shares are now worthless.

[7]

Since Poseidons collapse, 13 separate class actions alleging
    misrepresentations
in Poseidons financial
    statements and corporate disclosure documents have been initiated. In the
    present action, the appellant alleges that Poseidons revenue was materially
    overstated in two documents released by the company: a Circular (issued in
    connection with Open Ranges reorganization) and a Prospectus (issued in
    connection with the public offering). The appellant argues that NBC is liable
    for those misrepresentations because it was a promoter (and, consequently, an
    influential person) that knowingly influenced the release of those two
    documents.

C.

Statutory framework

[8]

Part XXIII.1 of the
OSA
provides a carefully calibrated head of
    liability for secondary market misrepresentations:
Canadian Imperial Bank
    of Commerce v. Green
, 2015 SCC 60, at para. 63.

Section 138.3
    creates a statutory cause of action for the benefit of those who acquired or
    disposed of a responsible issuers securities between the time a document
    containing a misrepresentation is released by the responsible issuer and the
    time of its correction.

[9]

In addition to allowing suit against the responsible issuer (in this
    case Poseidon) and each director and officer who authorized, permitted or
    acquiesced in the release of the document containing the misrepresentation, s. 138.3(1)
    provides a cause of action against

(d) each influential personwho knowingly influenced,

(i) the responsible issuer or any person or
    company acting on behalf of the responsible issuer to release the document, or

(ii) a director or officer of the responsible issuer
    to authorize, permit or acquiesce in the release of the document

[10]

Influential
    person is defined in s. 138.1 to mean

(a) a control person;

(b) a promoter;

(c) an insider who is not a director or officer of
    the responsible issuer; or

(d) an investment fund manager, if the responsible
    issuer is an investment fund

[11]

Promoter
    is defined in s. 1(1) as including:

a person or company who, acting alone or in
    conjunction with one or more other persons, companies or a combination thereof,
    directly or indirectly, takes the initiative in founding, organizing or
    substantially reorganizing the business of an issuer

[12]

Anyone
    who wants to commence an action under s. 138.3 must first obtain leave. Section
    138.8(1) provides that:

No action may be commenced under section 138.3
    without leave of the court granted upon motion with notice to each defendant. The
    court shall grant leave only where it is satisfied that,

(a) the action is being brought in good faith; and

(b) there is a reasonable possibility that the
    action will be resolved at trial in favour of the plaintiff

D.

Motion judges decision

[13]

The
    appellant sought leave to commence the action against NBC. The motion judge
    accepted that the action was being brought in good faith, but he denied leave
    because the appellant had not demonstrated a reasonable possibility of success.

[14]

To
    begin with, the motion judge concluded that the appellant had not offered a
    plausible interpretation of the term promoter in the
OSA.
The motion
    judge concluded that to succeed at trial, the plaintiff will have to show that
    the defendant bank or professional adviser provided more than just conventional
    banking or advisory services  rather that it directly or indirectly took the
    initiative in founding, organizing or substantially reorganizing the business
    of the issuer.

[15]

In
    coming to that conclusion, the motion judge relied on the plain meaning of the
    term promoter. He also referred to the very specific history of the term and
    its definition in Canadian securities legislation, adopted directly from Rule
    405 of the U.S.
Securities Act of 1933
. While acknowledging that the current
    legislative context is different, the motion judge noted that the continuing
    theme as set out in the American case law remains  a Promoter is a person who
    brings about the incorporation and organization of the corporation  brings
    together the persons who become interested in the enterprise, aids in procuring
    subscriptions, and sets in motion the machinery which leads to the formation of
    the corporation itself. To the extent that the appellant argued otherwise,
    the motion judge concluded that she [was] not offering a plausible
    interpretation of the [promoter] provision.

[16]

Next
    the motion judge examined the appellants claim that even if something more
    was required, she had provided sufficient evidence for obtaining leave. The
    appellant argued that NBC was a promoter because it provided loans that were
    essential for the reorganization. The motion judge concluded that NBC was
    merely engaged in ordinary commercial banking functions and was not a promoter
    because of those actions.

[17]

The
    appellant also argued that NBC was a promoter because of the actions of National
    Bank Financial (NBF), the formers wholly-owned subsidiary. The motion judge
    concluded that the only way NBC could be liable was if NBF was acting as an
    agent of NBC. For a parent corporation to be liable for the acts of its
    subsidiary: (i) the parent must have complete control of the subsidiary such
    that the subsidiary exercises no discretion independently of the parent; and
    (ii) the subsidiary must have been incorporated for a fraudulent purpose or is
    being used as a shield for improper activity. The motion judge concluded that
    the test was not met, and therefore NBF was not an agent of NBC.

[18]

Even
    if NBF was an agent of NBC, the motion judge concluded that NBF was not a
    promoter. The motion judge concluded that the decisions to reorganize NBCs
    business and to take Poseidon public were decisions made by Open Ranges board.
    Even if NBC could be liable for the actions of NBF, none of the services
    provided by NBF amounted to taking the initiative in founding, organizing or
    substantially reorganizing the issuers business.

[19]

Finally,
    the motion judge concluded that even if NBC was a promoter, there was
    insufficient evidence that it knowingly influenced the release of the
    Information Circular or Prospectus. NBC did not knowingly influence the release
    of the impugned documents by providing loans to the issuer, and NBF did not
    knowingly influence the release by acting as a financial advisor, providing a
    fairness opinion, or acting as an underwriter. The fact that NBF had signed the
    Prospectus as underwriter, as it was obliged to under the
OSA
, did not
    amount to evidence that it knowingly influenced its release.

E.

Grounds of appeal

[20]

While
    the appellant concedes that the motion judge correctly identified the applicable
    test, she challenges his application of that test. As an overarching point, the
    appellant submits that the degree of scrutiny applied by the motion judge was
    inappropriately high. She also makes a number of more specific submissions.

[21]

First,
    the appellant argues that the motion judge erred in concluding that the
    promoter provisions cannot capture the ordinary functions discharged by banks
    or financial advisors. She submits that the definition of the term promoter
    is an elastic one, and that the motion judge adopted too narrow a view of
    plausible interpretations of the applicable sections of the
OSA
.

[22]

Second,
    the appellant maintains her position that even if something more is required the
    evidence proffered on the motion below established a reasonable possibility of
    success. The appellant submits that there was a sufficient relationship between
    NBC and NBF on the one hand and the relevant decision makers at Open Range on
    the other to characterize the former as promoters. The appellant emphasizes
    that even the motion judge accepted that NBF played an undeniably important
    role in the reorganization. She also emphasizes that NBC provided a line of
    credit and consented to Open Range spinning off assets subject to security
    interests in favour of NBC, and that both of these were necessary for the
    reorganization.

[23]

Third,
    the appellant submits that the motion judge erred by rejecting the possibility
    that NBC and NBF knowingly influenced the release of the Circular and the
    Prospectus because he concluded that they were released under the direction of Open
    Ranges board.

F.

Analysis

(1)

Test for Granting Leave to Commence Action

[24]

The
    parties agree that the Supreme Courts decision in
Theratechnologies Inc.
    v. 121851 Canada Inc.,
2015 SCC 18, [2015] 2 S.C.R. 106, provides the
    threshold the appellant must meet in order to obtain leave. At para. 39, Abella
    J. explains that:

A case with a reasonable possibility of success
requires the claimant to offer both a plausible analysis of the
    applicable legislative provisions, and some credible evidence in support of the
    claim
. This approach, in my view, best realizes the legislative intent
    of the screening mechanism: to ensure that cases with little chance of success
     and the time and expense they impose  are avoided. I agree with the Court of
    Appeal, however, that the authorization stage under s. 225.4 should not be
    treated as a mini-trial. A full analysis of the evidence is unnecessary. If the
    goal of the screening mechanism is to prevent costly strike suits and litigation
    with little chance of success, it follows that the evidentiary requirements
    should not be so onerous as to essentially replicate the demands of a trial. To
    impose such a requirement would undermine the objective of the screening
    mechanism, which is to protect reporting issuers from unsubstantiated strike
    suits and costly unmeritorious litigation.
What
is
required is
    sufficient evidence to persuade the court that there is a reasonable
    possibility that the action will be resolved in the claimants favour
.
    [Emphasis added.]

[25]

The
    Supreme Court recently confirmed that the same threshold applies on a motion
    seeking leave under s. 138.8 of the
OSA
:
Green,
at paras.
    122, 147, & 212.

[26]

The
    appellant argues that the motion judge misinterpreted the applicable standard
    and turned the motion for leave into an unnecessarily onerous hurdle. Instead
    of resolving inconsistencies in the evidence or determining facts, the
    appellant submits that the motion judge should have applied the familiar test
    for interlocutory factual review: is there evidence which would permit a trial
    judge who properly instructs him/herself on the applicable law to find in
    favour of the plaintiff?

[27]

In
    my opinion, the standard suggested by the appellant is inappropriately low. In
    Proposal for a Statutory Civil Remedy for Investors in the Secondary Market
    and Response to the Proposed Change to the Definitions of Material Fact and
    Material Change, CSA Notice 53-302, reproduced in (2000), 23 OSCB 7383, at
    p. 5, the Canadian Securities Administrator (CSA) noted that there was
    widespread concern that the proposed reforms, that culminated in Part XXIII.1,
    might expose issuers and their long term shareholders to frivolous, coercive,
    and costly litigation (strike suits). There was a clear concern that
    existing safeguards were not sufficient for preventing such unmeritorious
    claims, and that such suits would expose corporate defendants to proceedings
    that cause real harm to long-term shareholders and resulting damage to our
    capital markets.

[28]

The
    CSA proposed a screening mechanism, eventually enacted in s. 138.8, with
    those concerns in mind. At p. 6, the CSA provided the following rationale for the
    proposed screening mechanism:

This screening mechanism is designed not only to minimize the
    prospects of an adverse court award in the absence of a meritorious claim
but, more importantly, to try to ensure that unmeritorious
    litigation, and the time and expense it imposes on defendants, is avoided or
    brought to an end early in the litigation process
. [Emphasis added.]

[29]

Those
    concerns have been adopted in the applicable jurisprudence. In
Theratechnologies
,
    at para. 38, Abella J. explained that:

[The] courts must undertake a reasoned consideration of the
    evidence to ensure that the action has some merit. In other words, to promote
    the legislative objective of a robust deterrent screening mechanism so that
    cases without merit are prevented from proceeding, the threshold requires that
    there be a reasonable or realistic chance that the action will succeed.

[30]

Abella
    J. also endorsed the views of Belobaba J. in
Ironworkers Ontario Pension
    Fund (Trustee of) v. Manulife Financial Corp.
, 2013 ONSC 4083, 44 C.P.C.
    (7th) 80. In
Ironworkers
, at para. 41, Belobaba J. indicated that the
    standard applied on a motion seeking leave under s. 138.8 should be more
    stringent than that applied on a motion to strike.

[31]

In
Theratechnologies
, at para. 36, Abella J. also held that the screening
    mechanism was intended to be a higher standard than the threshold for the authorizing
    a class action. And in
Green
, at para. 76, Côté J. noted that the
    screening mechanism in Part XXIII.1 was introduced, in part, because the certification
    process under the
Class Proceedings Act,
S.O. 1992, c. 6, did not
    provide sufficient safeguards.

[32]

Therefore,
    the threshold applied on a motion seeking leave under s. 138.8 is more
    stringent than that generally applied on interlocutory review, consistent with
    the objective of screening out unmeritorious claims at an early stage.

[33]

Furthermore,
    the motion judge did not err by scrutinizing the evidence proffered by the
    appellant. Applying that scrutiny is necessary to give effect to the purpose of
    the screening mechanism. Moreover, given that s. 138.8 provides for the filing
    of competing affidavit evidence and for cross-examination on that evidence, it
    clearly anticipates such scrutiny. As noted by Cronk J.A. in
Bayens v. Kinross
    Gold Corporation
, 2014 ONCA 901, 61 C.P.C. (7th) 1, at para. 56, if motion
    judges were prevented from scrutinizing the evidence proffered by an applicant,
    the leave requirement would be hollow indeed.

[34]

To
    conclude, in order to obtain leave under s. 138.8, a claimant must offer both a
    plausible interpretation of the applicable legislative provisions and credible
    evidence sufficient to convince the court that there is a reasonable
    possibility that the action will be resolved at trial in the claimants favour.

(2)

Has the Appellant Offered a Plausible Interpretation of the term Promoter?

[35]

As
    noted, the appellant argues that the motion judge adopted an overly narrow view
    of the promoter provisions and, consequently, erred in concluding that her
    preferred interpretation is not plausible. The appellant submits that the
    legislature used elastic terms when drafting the relevant provisions, and
    that the legislature intended to capture a spectrum or orbit of actors who
    work behind the scene and who influenced the decision makers actions. She
    submits that taking the initiative only requires that someone influenced the
    decision maker or indirectly participated in the initiative, alone or in
    conjunction with others and that the initiative functionality is met by
    influencing or participating with the decision makers.

[36]

The
    appellants proposed interpretation must be rejected. When considered in light
    of the relevant text, context, and legislative purpose, the appellants
    interpretation is clearly implausible. That conclusion is supported by the
    jurisprudence from other jurisdictions defining the term promoter, and by
    considering the objectives of both Part XXIII.1 and the
OSA
as a
    whole.

(a)

Text, Context, and Purpose of Promoter Provisions

[37]

A
    court engaged in statutory interpretation must read the words of an act in
    their grammatical and ordinary sense harmoniously with the scheme of the act,
    the object of the act, and the intention of the enacting legislature:
Bell
    ExpressVu Limited Partnership v. Rex
, 2002 SCC 42, [2002] 2 S.C.R. 559, at
    para. 26;
Wilson v. British Columbia (Superintendent of Motor Vehicles)
,
    2015 SCC 47, 476 N.R. 60, at para. 18. In other words, to determine the
    plausibility of the appellants interpretation, it must be measured against the
    text, context, and purpose of the relevant provisions.

[38]

First,
    to reiterate, the
OSA
provides that a person or company is a promoter
    if they, acting alone or in conjunction with others, [take] the initiative in
    founding, organizing or substantially reorganizing the business of an issuer.

[39]

When
    one considers the ordinary meaning of [taking] the initiative it is clear
    that the appellants interpretation is not plausible. That phrase requires a
    form of active and autonomous involvement in the organization or reorganization
    of a company. For instance, the
Canadian Oxford Dictionary,
2d ed., provides
    a number of definitions for the term initiative, including the ability to
    initiate things; enterprise, self-motivation and [the] power or right to
    begin something. To initiate something is defined as to cause something to begin.

[40]

In
    contrast, the appellant submits that the initiative functionality can be met simply
    by influencing or participating with the decision makers. That interpretation
    accepts a level of passive involvement that is simply incompatible with
    [taking] the initiative.

[41]

Second,
    the relevant legislative context undermines the appellants interpretation. Part
    XXIII.1 provides that a promoter may be liable as an influential person. In
    addition to promoters, the definition of an influential person includes the
    following:

·

A control person, meaning a person or company, or combination
    thereof, which holds voting securities sufficient to to affect materially the
    control of the issuer.

·

An insider which includes a person or company that holds more
    than ten percent of the voting rights of a reporting issuer.

·

An investment fund manager which means a person or company that
    directs the business, operations or affairs of an investment fund.

[42]

Section
    58(1) obliges the chief executive officer, the chief financial officer, two
    directors of the issuer, and any person or company who is a promoter of the
    issuer to sign a certificate contained in a prospectus. Section 61(2) provides
    that a receipt for a prospectus may be refused based on the financial condition
    or past conduct of any of the issuers officers, directors, promoters, or
    control persons.

[43]

In
    all of these provisions, promoters are listed alongside people and companies
    who exercise meaningful control over a reporting issuers business, such as
    officers, directors, and control persons. It suggests that a promoter is
    someone who plays a comparable role in a companys business. It does not
    support the appellants claim that the provisions should capture people and
    companies who merely exercise some influence over the actual decision makers.

[44]

Finally,
    the legislative purpose, demonstrated through the legislative history, supports
    the same conclusion. The Allen Committee, appointed by the Toronto Stock
    Exchange to study a possible statutory remedy for secondary market
    misrepresentations, created a draft legislation that included a cause of action
    against promoters. In its interim report,
Toward Improved Disclosure: A
    Search for Balance in Corporate Disclosure
(Toronto: The Toronto Stock
    Exchange Committee on Corporate Disclosure, 1995), at p. 64, the Allen Committee
    provided the following rationale for that cause of action:

[We] are concerned that there are many cases where a promoter
    deliberately declines to accept the responsibility that flows from holding
    office or acting as a director, and yet continues to exert a significant
    influence over the conduct of the corporation through economic leverage or
    force of personality. Such persons should not be immune from the consequences
    of the conduct they induce in others or their responsibility for misleading
    statement they make themselves.

[45]

A
    promoter is not someone who is casually connected with the issuer. It is a
    person or company that played a driving role in founding an issuer, and who
    consequently wields influence comparable to that of an officer or director.
    However, the appellants interpretation can capture people who are far removed
    from that level of influence. It could render liable as a promoter a lawyer who
    gave general advice about corporate restructuring to a board like Open Ranges
    or a tax advisor who provides generic advice on restructuring choices. The
    legislature could not have intended such an outcome when enacting Part XXIII.1.

[46]

The
    text, context, and purpose of the promoter provisions all support the
    conclusion that a person or company that merely provides advice for or assists
    during an issuers organization or reorganization cannot be a promoter.
    Therefore, because the appellants interpretation explicitly provides for that
    possibility it is simply implausible.

(b)

Jurisprudence about Promoters

[47]

As
    noted, the motion judge referred to the historical origins of the term promoter
    in securities legislation, and relied on case law restricting the meaning of
    that term. The appellant criticizes that choice, and argues that these
    decisions, arising in radically different contexts, cannot provide meaningful
    guidance in this case.

[48]

The
    jurisprudence at issue can provide useful guidance. The term promoter and its
    definition predate Part XXIII.1. Part XXIII.1 provides new causes of actions
    against promoters, but leaves the meaning of the term unchanged. Given that the
    jurisprudence considered the corresponding terms in other securities
    legislation that provide similar definitions, it provides useful guidance in
    this case.

[49]

The
    respondent has provided many decisions defining the term promoter in securities
    legislation in Alberta, British Columbia, and the United States. I do not
    intend to discuss every single decision, but a review of a few representative
    examples is beneficial.

[50]

In
Re Gordian Financial Group Inc.
, 1995 LNABASC 250, the Alberta
    Securities Commission had to determine whether a respondent, Peter Santin, was
    a promoter and, consequently, entitled to certain exemptions provided by
    securities legislation in Alberta. The commission concluded that Santin was not
    a promoter. In coming to that conclusion, the commission made the following
    observations:

[P]romoters are intended to be the people who are at the very
    heart of the issuer and the organization or reorganization of the company.
It is not contemplated that persons who are casually connected
    to the company or who are advisers would be promoters
.



It is clear that Mr. Santin was indirectly involved with the
    reorganization as was suggested by counsel for the respondent; however, being
    indirectly involved is not enough. The promoters are those who are central to
    the reorganization, and as the Act says, they must take initiative in the
    reorganizationthey are the ones who are the very heart of the reorganization.

Taking the initiative in finding target companies for the
    reorganization is not enough.
Those are just methods of
    doing the reorganization
. Gordian Financial was Mr. Bucci's
    company, and
he was the one who would make the decisions
    as to what would happen by way of reorganization, and he was the one who was
    taking the initiative within the meaning of the Act
.

Furthermore, merely coming up with the idea that there should
    be a reorganization does not make one a promoter.
The
    Board notes that if the definition was that wide, many lawyers and tax accountants
    would become promoters within the meaning of the Act, and that is clearly not
    what was intended
. [Emphasis added.]

[51]

In
Ingenito v. Bermec Corp.
, 441 F. Supp. 525 (S.D.N.Y. 1977), the
    plaintiffs had commenced an action seeking damages for alleged violations of
    United States securities legislation. One of the questions before the court was
    whether the defendant, State Mutual Life Assurance Company of America, was a
    promoter and liable for failing to disclose that fact. The court noted that,
    among other things, the plaintiffs relied on State Mutuals status as a lender.
    The court rejected the proposition that State Mutual was a promoter and, in
    coming to that conclusion, made the following observations:

Once again, plaintiffs counsel has confused the colloquial
    meaning of promoter with its statutory import. As a matter of law, State Mutual's
    loan to Black Watch does not constitute taking "initiative in founding and
    organizing the business or enterprise" of Black Watch. To be found a
    promoter within the meaning of that subsection, one must either be active in
    the issuer's business, or actively engaged in the formation of the issuer. The
    latter form of promoter activity invariably involves more than a general loan
    to an issuer (which is all that plaintiffs have offered in support of this branch
    of their promoter claim); to be an active participant in formation, one must be
    involved either in the transactions by which the issuer acquires the properties
    essential to the conduct of its business, or in the mechanics of the
    underwriting and registration processes. [Citations omitted.]

[52]

In
Re Cartaway Resources Corp.
, 2000 LNBCSC 156, the British Columbia
    Securities Commission had to decide, among other things, whether the
    respondents Robert Hartvikson and Blayne Johnson were promoters and in a
    conflict of interest. In contrast to
Gordian Financial
and
Ingenito
,
    in this case the commission concluded that the respondents were promoters. In
    rendering its decision, the commission relied on the following:

We find that Hartvikson and Johnson were
the
    driving force behind Cartaway's reorganization
as soon as they were
    offered the Koguluk claims on April 4, 1995. From then on to at least July 4,
    1995, all of their actions were to effect the control group's common purpose to
    change Cartaway's business direction by vending in some new business venture
    and finance it going forward through First Marathon.
In
    short they found Cartaway's new business, new management and most of its new
    capital.
Consequently Hartvikson and Johnson were promoters of Cartaway
    within the meaning of "promoter" in section 1(1) of the Act and ought
    to have been disclosed as such in the offering memorandum of June 23, 1995 and
    in the prospectus of November 3, 1995. [Emphasis added.]

[53]

There
    is a clear theme running through the applicable jurisprudence: a promoter is
    someone who plays a vital or leading role in the organization or reorganization
    of an issuers business. Anything less is insufficient. Merely being involved
    in organizing or reorganizing a business is not sufficient, even if that
    involvement involves important services or support. Rather, one must be an
    active participant, a driving force behind the reorganization, or at the
    very heart of the issuer and the organization.

(c)

Objectives of Part XXIII.1 and the
OSA

[54]

The
    conclusion that the appellants proposed interpretation is implausible is
    supported by the objectives of Part XXIII.1 and the
OSA
as a whole.

[55]

Section
    1.1 of the
OSA
provides that the legislation has two purposes: (a) to
    provide protection to investors from unfair, improper or fraudulent practices;
    and (b) to foster fair and efficient capital markets and confidence in capital
    markets. As noted in
Drywall Acoustic Lathing and Insulation, Local 675 v.
    SNC-Lavalin Group Inc.
, 2015 ONCA 718, at para. 46, the statutory scheme
    in Part XXIII.1 also has two purposes: (a) facilitating and enhancing access to
    justice for investors; and (b) deterring corporate misconduct and negligence.

[56]

The
    appellants interpretation is completely unconnected from the goals of protecting
    investors and deterring corporate misconduct. That interpretation imposes
    liability solely on the basis of proximity to decision makers, without any
    regard for the actual role played by the party in question. The only effect of
    adopting such an expansive definition, as opposed to a carefully tailored one,
    would be to capture people and companies who have little or no control over a
    corporations governance and its disclosure practices. Logically, such an
    expansive definition would not promote greater protection for investors or
    deter corporate misconduct.

[57]

Significantly,
    the appellants interpretation undermines the goal of fostering fair and
    efficient capital markets. The appellant admits that her interpretation will
    capture (and impose the risk of liability on) ordinary, everyday activities of
    many capital market participants. Particularly if that increased liability
    comes without any improvement in the disclosure practices of reporting issuers,
    the interpretation risks doing significant harm to the capital markets in this
    province.

[58]

Arguably,
    the appellants interpretation would promote the goal of facilitating access to
    justice for investors, if that purpose is understood only as providing
    investors an avenue for securing damages. Even if that is the case, as noted by
    Hoy A.C.J.O. in
Drywall
, at para. 49, Part XXIII.1 includes various
    defences and other important limitations that temper its goals of providing
    access to justice for aggrieved secondary market investors and [the]
    objectives of Part XXIII.1 must be considered in light of these countervailing
    limitations.

[59]

Finally,
    the appellants interpretation conflicts with the general approach taken by
    Part XXIII.1. As noted by Côté  J. in
Green
, at paras. 63 and
    67-69, Part XXIII.1 was enacted after a long period of study and is a carefully
    calibrated enactment that strikes a delicate balance between various market
    participants. That balance finds expression in the many limits built into the
    scheme itself, and is a central element of the legislative purpose animating
    Part XXIII.1.

[60]

The
    appellants proposed interpretation is out of step with that carefully
    calibrated scheme. In oral argument, the appellant submitted that the
    applicability of the promoter provisions should depend on the degree of proximity
    between the decision makers and the person in question. The closer a person is
    to the decision makers, the more likely that they are a promoter. Simply put,
    such a nebulous, indeterminate, and far-reaching basis for liability does not
    respect the careful balance struck in Part XXIII.1.

(d)

Conclusion on Interpretation

[61]

The
    interpretation advanced by the appellant is not plausible. That interpretation
    is undermined by the text, interpretation and purpose of the promoter
    provisions. The objectives of Part XXIII.1 and the
OSA
as a whole, and
    the jurisprudence interpreting the term promoter in comparable securities
    legislation in other jurisdictions support that conclusion as well.

[62]

I
    agree with the motion judge that something more is required before NBC can be
    found to be a promoter. The motion judge suggested that a plausible
    interpretation would require a plaintiff to show that a defendant 
took steps, directly or indirectly, to (actually)
    found or organize the business in question  for example, by funding the
    required incorporations, organizing the board of directors, actively managing
    the company or making the key business decisions.

[63]

Of course determining whether a plaintiff has offered
    a plausible interpretation is something that will have to be analyzed on a
    case-by-case basis. However, the motion judges reasons provide a useful guide.
    It is with this guide in mind that I now turn to an examination of the evidence
    offered by the appellant.

(3)

Does the Appellant have a Reasonable Possibility of Proving that NBC was
    a Promoter?

[64]

The
    appellant submits that even if her proposed interpretation is implausible and
    something more is required for NBC to be a promoter, she has provided
    evidence sufficient to demonstrate a reasonable possibility of success.

[65]

In
    support of that submission, the appellant relies on evidence about the
    relationship between Open Range and both NBC and NBF. The motion judge
    concluded that NBFs actions could not be attributed to NBC unless the former
    was an agent. The appellant challenges that conclusion. However, it is not
    necessary to address that argument. Even if NBFs actions could be attributed
    to NBC, the appellant has not established a reasonable possibility of success.

(a)

Evidence Proffered by Appellant

[66]

The
    evidence provided by the appellant falls into three categories.

[67]

First,
    the appellant relies on the role played by NBC in the reorganization. NBC, as a
    creditor, had security interests over a number of assets involved in the
    reorganization, and provided its consent to Open Range spinning off some of
    these assets into another company. NBC also agreed to provide a credit facility
    for up to $75 million to Poseidon during the reorganization process.

[68]

Second,
    the appellant relies on NBFs role as the exclusive financial advisor to Open
    Range in the reorganization process. In particular, she relies on evidence that
    NBF provided assistance in evaluating various options, and then in implementing
    the spin-out transaction. The appellant also relies on the fact that NBF provided
    a fairness opinion, which was included in the Circular.

[69]

Third,
    the appellant relies on a number of emails that, she submits, demonstrate
    significant and long standing relationships between people working at NBF and
    Open Range. In particular, she focuses on one Sandy Edmonstone, an employee of
    NBF. The appellant argues that the record discloses that he had close
    relationships with and exercised influence over a number of people at Open
    Range and Poseidon. She points to emails which suggest that Edmonstone was
    Poseidons lead banker, that he may have had a personal stake in the companys
    success (and a resulting conflict of interest), and that other people saw him
    as wielding undue influence.

(b)

The Appellant has not Demonstrated a Reasonable Possibility of Success

[70]

The
    evidence provided by the appellant is insufficient to justify granting leave. Interpreted
    generously and taken at its highest, the evidence establishes that NBF played an
    important role by assisting Open Range during the reorganization. It may be
    credible evidence for long-standing and close relationships. It does not
    provide a basis for concluding that NBC or NBF took the initiative in the
    creation of Poseidon.

[71]

I
    agree with the motion judges conclusion that NBC did not become a promoter by providing
    a credit facility, even if it was essential for Poseidons liquidity during the
    reorganization. Moreover, subsequent developments show that Poseidon was not
    dependant on NBC for obtaining credit. In late 2011, Poseidon became
    dissatisfied with the credit facility provided by NBC and began looking for
    other lenders. Eventually it negotiated a
$100
    million credit facility with a syndicate of banks. NBCs contribution to this
    second facility was smaller than that of every other member of the syndicate.

[72]

Equally,
    the fact that NBC acquiesced to certain assets being spun-off does not amount
    to taking the initiative. NBCs consent did not amount to active involvement in
    the reorganization, but was merely passive agreement to something conceived and
    implemented by others.

[73]

Furthermore,
    the evidence supports the motion judges conclusion that NBF was not a
    promoter. Open Range engaged NBF as financial advisor to assist the board in
    its review of alternatives while it was considering a reorganization of Open
    Ranges business. As one would expect with any complex transaction, Open Range
    relied on professional advisors when developing and implementing the
    reorganization. None of that displaces the conclusion that the relevant
    decisions were made by the board of Open Range.

[74]

The
    Information Curricular states that, in the second quarter of 2011, the board concluded
    that the trading price of Open Ranges shares did not reflect the full value of
    the companys business, and that separating the companys two business lines
    would enhance shareholder value. That predates NBFs involvement in the matter,
    including the earliest emails provided by the appellant.

[75]

The
    appellant refers to the fact that NBFs fairness opinion was mentioned in the
    Circular, and was provided to shareholders along with the Circular. However, the
    fairness opinion was provided for a specific purpose. NBF provided its opinion
    that the consideration provided to Open Ranges shareholders in the
    reorganization was fair. Open Ranges board relied on it to recommend to the
    shareholders that they vote in favour of the proposed plan of arrangement. At
    its highest, the evidence shows that NBF provided an opinion that the board of
    Open Range relied on when making a decision about one aspect of the
    reorganization.

[76]

NBFs
    role was that of a professional advisor. It provided services that the board of
    Open Range needed in exchange for consideration paid to it. At the end of the
    day, NBFs role was to assist the board of Open Range realize their objectives;
    nothing in the evidence provided suggests that NBF took a central or controlling
    role in the reorganization.

[77]

Finally,
    the emails tendered by the appellant do not assist her case either. As noted by
    the motion judge, many of them are colourful but they are not evidence that
    NBC or NBF were promoters. For instance, the fact that Edmonstone knew an
    executive at Open Range and had gone to university with him is not a nefarious
    circumstance which, standing alone, permits any inference to be drawn. Similarly,
    an email in which two independent directors of Poseidon expressed concern over
    Edmonstones influence over an officer  in December 2012  well after the
    reorganization had been completed  was not significant.

[78]

Edmonstone
    made some statements that could suggest that he personally played a vital role
    in the reorganization. However, as noted by the motion judge, these innocent
    boast[s] cannot ground a finding that NBF was a promoter.

[79]

The
    appellant seeks to put a very sinister spin on the emails, and attempts to draw
    inferences that cannot be supported. The emails and the evidence in general show
    that people at NBF, including Edmonstone, played a significant role in realizing
    the reorganization. The appellant may be correct in asserting that Edmonstone
    had a conflict of interest. None of that is evidence that NBC or NBF took a
    leading role in the reorganization.

[80]

When
    evaluating the evidence presented, it is helpful to consider what role it could
    play if introduced at the trial the appellant seeks. In my opinion, at best, it
    would be evidence that would provide some support for tangential aspects of the
    appellants case. Some of the evidence provided  for instance the description
    of NBFs role in the Circular or evidence about the deteriorating relationship
    between NBC and Poseidon over time  might actually hurt her case. However, at
    the end of the day, a trial judge hearing the case would likely consider the
    vast majority of the evidence to be irrelevant to the ultimate question.

[81]

The
    appellant has not provided evidence sufficient to demonstrate that she has a
    reasonable possibility of establishing that NBC [took] the initiative in
    founding, organizing or substantially reorganizing the business of Open Range and
    Poseidon. Therefore, the motion judge did not err by denying leave.

(4)

Does the Appellant have a Reasonable Possibility of Proving that NBC
    knowingly influenced the Release of the Impugned Documents?

[82]

In
    any event, the appellants motion could have been dismissed solely on the basis
    that she has not provided evidence showing that NBC knowingly influenced the
    release of the impugned documents.

[83]

The
    appellant alleges that NBC is liable for misrepresentations contained in
    documents released by Open Range and Poseidon. Section 138.3(1)(d) provides
    that an influential person will be responsible only if they knowingly
    influenced either the responsible issuer to release the document, or a
    director or officer of the responsible issuer to authorize, permit or acquiesce
    in the release of the document.

[84]

The
    appellant relies on the following pieces of evidence: NBFs fairness opinion
    was included in the Circular, the Prospectus mentions that NBF is a connected
    issuer because its parent (NBC) was a creditor of Poseidon, and NBF signed the
    Prospectus in its role as underwriter. The appellant argues that all of this
    demonstrates that NBC may have knowingly influenced the release of the
    documents when considered in light of the significant role NBC and NBF played
    in both the reorganization and the public offering. The appellant also relies
    on the decision in
Dobbie v. Arctic Glacier Income Fund
, 2011 ONSC 25,
    3 C.P.C. (7th) 261, in support of her position that an influential person who
    signs a document influences its release.

[85]

The
    evidence does not meet the requisite threshold. To begin with, I have already
    concluded that the evidence does not justify the appellants claim that NBC or
    NBF played a central or integral role in either the offering or the
    reorganization.

[86]

Moreover,
    the motion judge addressed all the specific pieces of evidence. The related
    issuer disclosure merely informed readers that NBC and Poseidon had a debtor-creditor
    relationship and nothing more. As noted, the fairness opinion only opined on
    one aspect of the reorganization and was subject to information and
    representations provided to NBF by Open Range. NBF signed the prospectus as an
    underwriter because it was obliged to do so under s. 59 of the
OSA
. The
    evidence provided does not support the conclusion that NBC knowingly influenced
    the release of either the Information Circular or the Prospectus.

[87]

The
    decision in
Dobbie
does not assist the appellant. In that case, after
    having determined that Arctic Glacier Inc. was a promoter of Arctic Glacier
    Income Fund,
at para. 141, the court concluded
    that:

The Income Fund has no separate business and is entirely
    dependent upon the operations of Arctic. The documents at issue are reports of
    the business of Arctic. Additionally, these reports were signed by Arctics
    officers. It follows that Arctic must have influenced the release of the
    impugned documents.

[88]

In those circumstances, a promoters signature
    supported the conclusion that the promoter knowingly influenced the release of
    the documents at issue. In this case, a signature that NBF was obliged to
    provide because of legislation does not support the conclusion that NBC, a
    commercial lender, or NBF, a financial advisor and underwriter, influenced the
    release of documents by a reporting issuer independent of them.

G.

Disposition

[89]

Accordingly,
    the appeal is dismissed with costs to the respondent fixed at $30,000, inclusive
    of disbursements and taxes.

Released: (KMW) January 13, 2016

G. Pardu J.A.

I agree K.M. Weiler
    J.A.

I agree M.L. Benotto
    J.A.


