



COURT OF APPEAL FOR ONTARIO

CITATION: Drywall Acoustic Lathing and Insulation, Local 675
    v. SNC-Lavalin Group Inc., 2015 ONCA 718

DATE: 20151028

DOCKET: C59951 (M45104)

Hoy A.C.J.O., Weiler and Huscroft JJ.A.

BETWEEN

The Trustees of the Drywall Acoustic Lathing and
    Insulation Local 675 Pension Fund and 0793094 B.C. Ltd.

Plaintiffs (Appellants)

and

SNC-Lavalin Group Inc., Ian A. Bourne, David
    Goldman, Patricia A. Hammick, Pierre H. Lessard, Edythe A. Marcoux, Lorna R.
    Marsden, Claude Mongeau, Gwyn Morgan, Michael D. Parker, Hugh D. Segal,
    Lawrence N. Stevenson, Gilles Laramée, Michael Novak, Pierre Duhaime, Riadh Ben
    Äissa and Stéphane Roy

Defendants (Respondents)

A. Dimitri Lascaris, Douglas Worndl and Anthony OBrien,
    for the appellants

Steve Tenai and Vasuda Sinha,
    for the respondents, SNC-Lavalin Group Inc., Ian A. Bourne, David Goldman,
    Patricia A. Hammick, Pierre H. Lessard, Edythe A. Marcoux, Lorna R. Marsden,
    Claude Mongeau, Gwyn Morgan, Michael D. Parker, Hugh D. Segal and Lawrence N.
    Stevenson

Clifford Lax, Q.C., for the respondent, Gilles Laramée

Rebecca Wise, for the respondent, Michael Novak

Scott Kugler and Max Muñoz, for the respondent, Pierre
    Duhaime

Laura Young, for the respondent, Stéphane Roy

Heard: July 8, 2015

On appeal from the order of Justice Paul M. Perell of the
    Superior Court of Justice dated January 13, 2015, with reasons reported at 2015
    ONSC 256.

Hoy A.C.J.O.:

OVERVIEW

[1]

Revelations of possible bribery by SNC-Lavalin Group Inc. (SNC)
    prompted the appellants to seek to commence a class action alleging statutory
    claims for misrepresentation in secondary market disclosure documents under
    Part XXIII.1 of the
Securities Act,
R.S.O. 1990, c. S.5 (the
OSA
).
    They sought to sue the respondents: SNC, certain officers of SNC, and persons
    alleged to have been directors of SNC when it released the disclosure documents
    containing the alleged misrepresentations.

[2]

Under s. 138.3(1) of Part XXIII.1, a person or company who acquires or
    disposes of an issuers security between a documents release and public
    correction of a misrepresentation in the document has a right of action for
    damages, without regard to whether the person or company relied on the
    misrepresentation. However, in order to limit meritless litigation or strike
    suits
[1]
,
    s. 138.8(1) of the
OSA
requires leave of the court to commence an
    action under s. 138.3. Section 138.14(1) also imposes a three-year limitation
    period for the commencement of the action, measured from the date the document
    containing the misrepresentation was first released.

[3]

By order dated September 19, 2012, the appellants obtained leave to
    bring the misrepresentation claims pleaded in their Fresh as Amended
    Consolidated Statement of Claim. The action was certified at the same time as a
    class proceeding, with the appellants as the representative plaintiffs. The
    class consists of all persons who acquired SNC securities between November 6,
    2009 to and including February 27, 2012 (the Class Period), subject to
    certain exceptions. The respondents did not oppose the appellants motions for
    leave and certification.

[4]

The Fresh as Amended Consolidated Statement of Claim outlining the misrepresentation
    claims the appellants were granted leave to pursue referred to various
    allegations of wrongdoing, including: (1) allegedly improper agreements between
    SNC and various agents, pursuant to which SNC made payments totalling US$56
    million, and (2) criminal activity by two former SNC employees relating to SNCs
    activities in Bangladesh (the Padma Bridge Project) that resulted in criminal
    charges being filed.

[5]

Criminal and regulatory investigations continued and information of a
    wider scale of alleged wrongdoing later became available. The appellants sought
    leave pursuant to r. 26.01 of the
Rules of Civil Procedure
, R.R.O.
    1990, Reg. 194, to amend the Third Fresh as Amended Consolidated Statement of
    Claim to add what they characterize as further particulars of the wrongful
    conduct underlying the misrepresentation claims. The respondents opposed most
    of the amendments, arguing that the appellants sought to add new allegations of
    misrepresentation and that those new allegations required fresh leave under s.
    138.8(1) of the
OSA
. The respondents also argued that the limitation
    period in s. 138.14(1) of the
OSA
barred the appellants from pursuing these
    new allegations of misrepresentation.

[6]

The motion judge  who was the class proceeding case management judge 
    agreed with the respondents, and, by order dated January 13, 2015, denied leave
    under r. 26.01 for the bulk of the proposed amendments and dismissed the causes
    of action arising from those amendments. The appellants now appeal that order.

[7]

At issue on appeal is whether the motion judge erred (1) in holding that
    the appellants could not make the amendments without bringing a new leave
    application under s. 138.8(1), and (2) in concluding that s. 138.14(1) barred
    those disallowed amendments as out of time.

[8]

I conclude that the motion judge erred only by not permitting the
    appellants to plead that SNC committed a misrepresentation by omission in
    failing to disclose the US$56 million agent payments and the criminal activity
    connected to the Padma Bridge Project in Bangladesh  to the extent they
    occurred during the Class Period  in managements discussion and analysis
    (MD&A) and annual information forms (AIFs). Because he did not permit
    this amendment, the motion judge did not consider whether it was properly
    pleaded. If the parties cannot resolve the matter, I would direct the
    appellants to draft an amended pleading incorporating this limited omission
    allegation and attend before the motion judge to determine if it is properly
    pleaded. I would not interfere with the motion judges conclusion that the
    appellants require leave under s. 138.8(1) to plead the balance of the
    amendments, and that s. 138.14(1) bars those amendments as out of time. I would
    accordingly otherwise dismiss the appeal.

[9]

Before addressing the substantive issues on appeal, I will briefly
    address the preliminary issue of this courts jurisdiction.

JURISDICTIONAL ISSUE

[10]

The
    respondents move to quash this appeal to the extent it concerns the motion
    judges order dismissing the appellants motion to make the refused amendments.

[11]

The
    appeal arises from para. 2 of the motion judges order:

THIS COURT ORDERS that the Plaintiffs motion is hereby dismissed
    with respect to the proposed amendments in paragraphs  of the Plaintiffs
    proposed Fourth Fresh as Amended Consolidated Statement of Claim  and the
    causes of action arising from such amendments are hereby dismissed.

[12]

The
    respondents argue that the order at issue is both interlocutory (to the extent
    that it dismissed the appellants motion to amend because the amendments
    require leave under s. 138.8(1)) and final (to the extent that it dismissed the
    causes of action arising from the refused amendments because they are
    statute-barred). They say that an appeal from the interlocutory portion of the
    order lies to the Divisional Court, with leave, and not to this court. They say
    the interlocutory portion of the appeal cannot be transferred to this court
    until the Divisional Court grants leave.

[13]

I
    reject the respondents argument that this court does not have jurisdiction to
    hear this appeal and I would dismiss the respondents motion to quash. The
    respondents rely on the motion judges reasons to artificially parse the order
    under appeal. Appeals lie from orders, not reasons. The motion judges single
    paragraph permanently prohibits the appellants from advancing the refused
    amendments and pursuing the underlying misrepresentation claims and therefore
    constitutes a final order. In any event, as becomes clearer below, the motion
    judges reason for refusing the amendments underlies his conclusion that they
    are statute-barred.

[14]

I
    now turn to the substantive issues on this appeal.

THE MISREPRESENTATIONS PLEADED

[15]

Because
    we are asked to determine whether the proposed amendments constitute discrete
    misrepresentations, separate from those for which leave was initially granted, I
    must review in some detail the misrepresentations already pleaded when the
    appellants brought the motion below.

[16]

Shortly
    after the appellants obtained leave under s. 138.8(1) of the
OSA
, they
    filed a Second Fresh as Amended Consolidated Statement of Claim. Then, in
    January 2014, the motion judge granted the appellants leave to deliver a Third
    Fresh as Amended Consolidated Statement of Claim. The respondents did not argue
    that the amendments in the Second or Third Fresh as Amended Consolidated
    Statement of Claim constituted discrete claims of misrepresentation, requiring
    further leave under s. 138.8(1). The paragraph references below correspond to
    the Third Fresh as Amended Consolidated Statement of Claim, the iteration of
    the appellants statement of claim when they brought the motion at issue.

[17]

At
    para. 5, the appellants provide an overview. They allege that SNC conducted its
    business in an unlawful manner during the Class Period. They say that:

In particular, in December 2009 and July 2011, SNC entered into
    agreements with agents with respect to projects on which SNC was working,
    pursuant to which SNC made payments totalling US$56 million to those agents.
    Although SNC purports not to know the purpose of such payments, their purpose
    was, in fact, to bribe foreign government officials and/or persons in Canada
    for the procurement of business by SNC. In any event, the agreements and the
    payments thereunder violated SNCs Agents Policy and Code of Ethics in numerous
    respects.

[18]

At
    paras. 9 and 58, the appellants plead that SNC made the following
    misrepresentations during the Class Period:

a)

SNC was a socially responsible company and a responsible global
    citizen;

b)

SNC had in place controls, policies and practices that were designed to
    ensure compliance with anti-bribery laws to which SNC is subject;

c)

SNC had ICFR [internal controls over financial reporting] and DC&P [disclosure
    controls and procedures] that were properly designed and/or operating
    effectively; and

d)

SNCs business was conducted in compliance with the Code of Ethics [SNCs
    Code of Ethics and Business Conduct].

[19]

These
    misrepresentations were contained in SNCs annual and interim MD&A, annual
    and interim financial statements, management proxy circulars and AIFs.

[20]

At
    para. 10, the appellants plead why these statements were false:

Such statements were materially false and/or misleading
    because, during the Class Period, SNC was paying bribes to the agents, or
    others with whom the agents contracted on behalf of SNC,
in contravention of
the Code of Ethics and
applicable anti-bribery laws
and, in any event the agency
    agreements and the payments to the agents thereunder violated the Agents
    Policy [SNCs Policy on Commercial Agents/Representatives] and the Code of
    Ethics. Further, SNCs ICFR and DC&P were not effective during the Class
    Period as a result of material weaknesses in the design and operating
    effectiveness of the ICFR relating to non-compliance with, and ineffective
    controls over compliance with, the Code of Ethics and the Agents Policy. [Emphasis
    added.]

[21]

After
    describing the Audit Committees findings and recommendations, the appellants,
    at para. 57, plead that:

Although the investigation conducted by the Audit Committee
    identified problems with SNCs ICFR relating to unlawful and improper payments
    made to third parties in respect of contracts
in North
    Africa
, the bribery practices extended to SNCs operations
in Asia and Canada. These practices and activities were
    systemic at SNC
and were carried out with the full knowledge of senior
    management, including members of the Office of the President, as well as SNCs
    inside directors. The full particulars of such activities are known to the
    Defendants. [Emphasis added.]

[22]

At
    paras. 59 to 105, the appellants provide particulars of the alleged
    misrepresentations, including, at para 59:

SNC was paying bribes, whether directly
    or indirectly, to foreign government officials and/or persons in Canada
in contravention of the Code of Ethics and applicable anti-bribery laws and, in
    any event, SNC entered into agreements with, and made payments pursuant to
    those agreements to, third parties in contravention of the Agents Policy and
    the Code of Ethics. [Emphasis added.]

[23]

At
    para. 111, the appellants describe an SNC press release issued on February 28,
    2012 announcing an expected 18% reduction in net income for 2011. It disclosed,
    among other things, that expenses of approximately $35 million were documented
    to construction projects to which they did not relate and, consequently, had to
    be recorded as expenses in the quarter. It announced that the Board of
    Directors had initiated an independent investigation, led by its Audit
    Committee, of the facts and circumstances surrounding the $35 million of
    payments referred to above and certain other contracts. At paras. 6, 7, and
    112, the appellants plead that the value of SNCs shares fell significantly as
    a result of this corrective disclosure.

[24]

At
    paras. 8 and 113, the appellants allege further declines as a result of
    additional corrective disclosures, including the June 25, 2012 disclosure that
    two former employees of SNC had been charged with criminal offences under the
Corruption
    of Foreign Public Officials Act
, S.C. 1998, c. 34 (the
CFPOA
)
    relating to SNCs activities in Bangladesh.
[2]

THE FIRST OPPOSED AMENDMENT MOTION

[25]

The
    order under appeal arises out of the appellants second opposed motion to amend
    their statement of claim.

[26]

After
    more information became available about the scale of alleged wrongdoing, the
    appellants brought their first opposed motion for leave under r. 26.01 to amend
    the Second Fresh as Amended Consolidated Statement of Claim. They sought to:
    add details of further declines in the market value of SNCs securities
    following additional investigations undertaken by the RCMP and other
    authorities of SNCs activities; to allege the jurisdictions in which SNC
    engaged in bribery; and to plead misrepresentation by omission in relation to
    conduct by SNC occurring before and during the Class Period that was not
    disclosed in its Class Period MD&A and AIFs.

[27]

Because
    the appellants sought leave to make some of the same and similar amendments on
    the second opposed motion, the motion judges reasons on the first opposed
    motion are relevant.

[28]

He
    permitted the appellants to plead additional facts which he characterized as corrective
    disclosures, namely that:

1)

There was a decline in the market value of SNCs securities during
    trading on April 13, 2012 as a result of the release of information that the
    Royal Canadian Mounted Police conducted a search of SNCs headquarters in
    Montreal on April 13, 2012  ;

2)

There was a decline in the market value of SNCs securities during
    trading on November 26, 2012 as a result of the release of information that
    Swiss authorities were investigating illegal or improper payments by SNC in the
    approximate amount of $139 million and that such payments were in addition to
    the US$56 million of payments referenced [earlier in the pleading]  ; (the Swiss
    Investigation Disclosure)

3)

There was a decline in the market value of SNCs securities during
    trading on November 28 and 29, 2012 as a result of the release of information
    that [the defendant Pierre] Duhaime had been arrested and charged with fraud
    and other criminal offences related to the contract awarded to SNC with respect
    to the construction and operation of the McGill University Health Centre
    hospital project in Montreal  ; and

4)

There was a decline in the market value of SNCs securities during
    trading on July 3, 2013 as a result of the release of information that SNC had
    paid a secret $13.5 [million] commission that was linked to a major oil sands
    project in Alberta.

These particular amendments were not opposed by the
    respondents:
Drywall and Acoustic Lathing and Insulation Local 675 Pension
    Fund (Trustees of) v. SNC-Lavalin Group Inc.
, 2014 ONSC 660, at paras. 26,
    32 and 61.

[29]

At
    para. 33, the motion judge dismissed the balance of the first opposed motion to
    amend for one or more of the following reasons:

(a) [S]ome of the proposed amendments are barred by the Order
    granting leave under the Ontario
Securities Act
that foreclosed a
    common law negligence claim; (b) most if not all of the proposed amendments
    would re-open the certification motion; (c) the proposed amendments contravene
    the rules about pleadings, in particular the amendments do not meet the
    standard for pleading a case of bribery associated with a pleading of
    misrepresentation under Part XXIII.1 of the Ontario
Securities Act


[30]

At
    para. 34, on which the respondents rely, he wrote:

The Plaintiffs main argument that their proposed amendments do
    not alter the fundamental structure of the action is not true or it is no more
    true than saying that a trip to Dhaka (the capital of Bangladesh) is the same
    as a trip to Montreal simply because both are cities. But more to the point,
    this argument fails because the proposed amendments are not proper pleadings.

[31]

The
    motion judge, at para. 39, dismissed the proposed bribery-related amendments
    because the appellants had not pleaded the necessary material facts:

[T]here are no material facts pleaded as to who made the bribe,
    to whom was the bribe made, where was the bribe made, when was the bribe made,
    what was the amount of the bribe, and what was the purpos[e] of the bribe. The Plaintiffs
    proposed amendments plead that bribes were paid by a non-exclusive list of
    employees in respect of a non-inclusive list of countries.

[32]

At
    paras. 44 and 45, he dismissed the pleading of misrepresentation by omission
    because the appellants had failed to plead the material facts with respect to a
    corrective disclosure, one of the elements of the statutory cause of action
    under the
OSA
. He wrote, at para. 46, that to generalize undisclosed
    bribery as falsifying SNC-Lavalins disclosure documents [conceals] what counts
    as corrective disclosure. He concluded that the only additional alleged
    corrective disclosure the appellants pleaded regarding pre-Class Period conduct
    was the Swiss Investigation Disclosure and the appellants failed to plead the
    material facts with respect to that disclosure.

[33]

He
    concluded, at para. 47, that the proposed amendments were unfair. They did not
    provide notice to the respondents of the case they must meet, and they would
    permit the appellants to engage in a fishing expedition for more misconduct on
    discovery.

[34]

The
    Divisional Court dismissed the appellants motion for leave to appeal the
    motion judges order:
The Trustees of the Drywall Acoustic Lathing and
    Insulation Local 675 Pension Fund v. SNC-Lavalin Group Inc.
, 2014 ONSC
    3438.

[35]

The
    permitted amendments were incorporated into the Third Fresh as Amended
    Consolidated Statement of Claim.

THE AMENDMENTS AT ISSUE

[36]

About
    a year after the first opposed motion to amend, the appellants brought the
    motion below. The appellants sought to amend the Third Fresh as Amended
    Consolidated Statement of Claim. The appellants moved to plead, among other
    things:

a)

Additional Bribery Allegations:
That in addition to the
    US$56 million, SNC offered or paid bribes to foreign public officials in Libya
    and Tunisia during the Class Period. The appellants provided particulars of who
    made the bribes to whom, when and where the bribes were made or offered, and
    the amount and purpose of the bribes;

b)

Embezzlement Allegations:
That the defendant Riadh Ben Äissa,
    a former senior executive of SNC, and the non-defendant Sami Bebawi embezzled
    money from SNC through Duvel Securities Inc. and Dinova International Inc.,
    thereby violating SNCs Code of Ethics;

c)

Enrichment Allegations:
That, between January 2003 and
    December 2010, Ben Äissa was enriched through payments to his company, Tresca
    Holding Inc., from several South Korean and Malaysian companies, again in
    violation of SNCs Code of Ethics;

d)

Gaddafi Allegations:
That SNC funded a plan to extract
    Saadi Gaddafi and his family from Libya and transport them to Mexico, and paid
    fees in relation to a Toronto condominium owned by Gaddafi, both in violation
    of the
Regulations Implementing the United Nations Resolutions on Libya
,
    SOR/2011-51 (the Regulations);
[3]


e)

Agent Agreements Allegations:
That the quantum of fees
    paid under two agent agreements connected to a project in Angola breached SNCs
    Agents Policy and Code of Ethics;

f)

Violation of Laws Allegations:
That SNC violated laws
    applicable to its business, including the Regulations and the
Criminal Code
,
    R.S.C. 1985, c. C-46; and

g)

Omission Allegation:
That SNCs failure to disclose
    that it was engaged in bribery in multiple jurisdictions during the Class Period
    constituted a misrepresentation by omission.
[4]


THE MOTION JUDGES DECISION

[37]

The
    motion judge granted leave to amend the pleadings related to alleged bribery in
    Bangladesh and alleged misconduct connected to Canadian projects. However, he
    concluded that the balance of the amendments advanced discrete
    misrepresentation claims and therefore required a fresh leave application under
    s. 138.8(1). He also held that it was too late to obtain leave, as per s.
    138.14(1):
Drywall Acoustic Lathing and Insulation, Local 675 Pension Fund
    (Trustees of) v. SNC-Lavalin Group Inc.
, 2015 ONSC 256, 124 O.R. (3d) 368.

[38]

He
    concluded, at paras. 5 and 7, that allowing the appellants to advance the
    discrete misrepresentation claims without running them through the safeguard of
    a fresh leave analysis would be unfair to the respondents. The respondents had
    not opposed the granting of leave for the claims as originally pleaded and, he
    wrote at para. 7, [o]btaining leave cannot be used as a procedural
    bait-and-switch tactic or a procedural bait-and-pile-on tactic.

[39]

He
    noted, at para. 18, that the only evidence led on the unopposed motion for
    leave and for class certification pertained to the Audit Committees
    investigation into the US$56 million agent payments and to the allegations of criminal
    activity connected to the Padma Bridge Project in Bangladesh. Similarly, the
    appellants expert only addressed price drops in SNC shares on February 28-29
    and June 25, 2012, dates that immediately followed disclosure of the US$56
    million in payments and the Padma Bridge Project charges.

[40]

He
    also noted, at para. 20, that only one sentence of the appellants lengthy pleading
    alleged that bribery was systemic at SNC.

[41]

At
    para. 28, he explained why identifying the misrepresentation associated with
    the disclosure document is necessary. Among other reasons, one needs a
    benchmark to determine when and whether there was a corrective disclosure and
    to determine whether leave should be granted under s. 138.8.

[42]

He
    explained, at para. 29, that to identify a misrepresentation, a plaintiff must
    specify the facts represented and why those facts are false. That is, the
    plaintiff must specify what makes the representation a misrepresentation. Each
    misrepresentation is distinct, even if the representation is the same.
    Therefore, he held at para. 34, a plaintiff applying for leave under s.
    138.8(1) must lead evidence of each discrete allegation of misrepresentation
    that she wishes to pursue. He wrote, at para. 42, that whether a plaintiff
    requires leave under s. 138.8(1) to amend a statement of claim turns on the
    nature of the misrepresentation claim that was pleaded for the purpose of
    obtaining leave.

ANALYSIS

[43]

I
    am not persuaded that the motion judge erred in principle in his approach. I
    reject the appellants argument that the motion judge failed to consider the objectives
    of the leave requirement in s. 138.8(1), Part XXIII.1 and the
OSA
as a
    whole and that his conclusion is inconsistent with those objectives. I agree
    with the motion judge that when a plaintiff seeks leave to amend a statement of
    claim under r. 26.01 after receiving leave under s. 138.8(1), and after the
    expiry of the limitation period in s. 138.14(1), the motion judge must consider
    the precise misrepresentation that was pleaded for the purpose of obtaining
    leave. I also agree with him that, in such circumstances, the motion judge must
    focus on the facts the plaintiff pleaded that make the representation a
    misrepresentation. I further agree that the plaintiff must lead sufficient
    evidence to satisfy the leave requirement for each discrete allegation of
    misrepresentation.

[44]

Nor
     with one limited exception  am I persuaded that there is any basis for the
    court to interfere with the motion judges decision that the refused amendments
    in this case constitute discrete misrepresentation claims.

Objectives of the Leave Requirement

[45]

I
    first address the appellants argument that the motion judge failed to consider
    the objectives of the leave requirement in s. 138.8(1), Part XXIII.1 and the
OSA
as a whole and that his conclusion is inconsistent with those objectives.

[46]

The
    appellants argue that the
OSA
is remedial legislation: its purposes,
    which are explicitly stated in s. 1.1 of the
OSA
are (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. They also point to the twin goals of the statutory scheme under Part
    XXIII.1: (a) facilitating and enhancing access to justice for investors, and (b)
    deterring corporate misconduct and negligence:
Green v. Canadian Imperial
    Bank of Commerce
, 2014 ONCA 90, 118 O.R. (3d) 641, at para. 36, leave to
    appeal granted, [2014] S.C.C.A. No. 137, appeal heard and reserved February 9,
    2015. They reiterate that the objective of the leave requirement in s. 138.8(1)
    is to limit meritless litigation or strike suits.

[47]

The
    appellants argue that the motion judge failed to consider these objectives and
    elevated concerns about the right of defendants to procedural fairness above
    the interests of investors. They say that once the leave test is met, and the
    court is satisfied that the proposed action is not a strike suit, a pleading
    amendment that does not alter the core or essence of the action cannot convert
    the action into a strike suit. The appellants submit that a further leave
    motion should be required only if the proposed pleading fundamentally alters
    the action for which leave was granted. In this case, they argue, the
    allegations at issue are not new misrepresentations wholly unrelated to the misrepresentation
    claims for which leave was granted. Therefore, the motion judge should have
    permitted the proposed amendments.

[48]

I
    am not persuaded that the motion judges conclusion is inconsistent with the
    objectives of the leave requirement, Part XXIII.1 or the
OSA
generally.

[49]

Part
    XXIII.1 was added to the
OSA
after a lengthy period of study and
    debate and only came into force on December 31, 2005. Its scheme includes
    various defences and other important limitations that temper its goals of
    providing access to justice for aggrieved secondary market investors and
    deterring disclosure violations. The scheme also provides various protections
    to issuers, including the three-year absolute limitation period in s.
    138.14(1), a cap on a responsible issuers liability in s. 138.7 and the leave
    requirement in s. 138.8(1), which is reproduced below. The objectives of Part
    XXIII.1 must be considered in light of these countervailing limitations.

[50]

Section
    138.8(1) provides as follows:

Leave to Proceed

138.8 (1) 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.

[51]

Section
    138.8(1) is intended to be a robust deterrent screening mechanism: see
Theratechnologies
    inc. v. 121851 Canada inc.
, 2015 SCC 18, 382 D.L.R. (4th) 600, at para.
    38. It must be remembered that an action under s. 138.3 is an action for
    misrepresentation. Thus, when a plaintiff seeks to amend its misrepresentation
    claim under r. 26.01 after receiving leave under s. 138.8(1), and after the
    expiry of the limitation period in s. 138.14(1), the analysis is necessarily
    whether the plaintiff seeks to advance a different misrepresentation claim. The
    approach that the appellants urge would permit a plaintiff which has met the
    leave test in s. 138.8(1) to significantly expand the scope of its action to
    include discrete, untested allegations of misrepresentation that are without
    merit. Permitting this would, in my view, frustrate the objective of the leave
    requirement. The threat of expanded litigation has the possibility of affecting
    the settlement dynamic  the very matter that the leave requirement sought to
    address.

Discrete Misrepresentation Claims

[52]

The
    need to assess whether each pleaded misrepresentation meets the leave test was
    identified by the motion judge in an earlier decision:
Millwright Regional
    Council of Ontario Pension Trust Fund (Trustees of) v. Celestica Inc.
,
    2014 ONSC 1057, 49 C.P.C. (7th) 12. Leave was granted with respect to an
    alleged misrepresentation about Celesticas restructuring but denied with
    respect to other alleged misrepresentations because the plaintiffs failed to
    meet the requisite evidentiary burden.

[53]

While
    the appellants argue that the motion judge erred in principle, in my view,
    their real dispute is with his conclusion that the proposed amendments
    represent discrete misrepresentation claims, and go too far to be allowed
    without being tested by a fresh leave application: at para. 5.

[54]

The
    motion judge has case-managed every aspect of this complex action. Most
    importantly, he heard and granted the appellants unopposed motion for leave
    under Part XXIII.1 of the
OSA
. The motion judge was best positioned to
    determine the nature of the claim he had granted the appellants leave to
    pursue. His conclusion that the proposed amendments constitute discrete
    misrepresentation claims is entitled to deference.

[55]

The
    motion judge emphasized that the respondents had not opposed the leave motion. In
    my view, it is significant that they did not do so, and is something to be
    encouraged. If a defendant who does not oppose leave based on one set of
    allegations and on the evidence that the plaintiffs advanced in support of
    those allegations can  in the motion judges words  be exposed to a
    procedural bait-and-pile-on tactic, defendants will be more inclined to
    oppose leave motions. This would increase the cost of litigation and be
    contrary to the goal of Part XXIII.1 of facilitating and enhancing access to
    justice for investors.

(a) Additional Bribery Allegations

[56]

In
    disallowing the Additional Bribery Allegations, the motion judge rejected the
    appellants argument that they were simply providing further particulars of
    already pleaded systemic bribery. He noted that there was only a single
    reference to systemic bribery in the lengthy pleading and that the evidence
    on the unopposed motion for leave pertained only to the US$56 million agent
    payments and the allegations connected to the Padma Bridge Project. As I have
    said, the motion judge, who heard the leave motion, was in the best position to
    determine the nature of the claim he granted the appellants leave to pursue.

[57]

I
    am not persuaded that, in permitting the amendment to the Second Fresh as
    Amended Consolidated Statement of Claim to plead the Swiss Investigation
    Disclosure (an investigation distinct from the scrutiny into the US$56 million),
    the motion judge acknowledged that the appellants claim was one of systemic
    bribery. I therefore reject the appellants argument that, in light of this
    earlier amendment, the motion judges failure to allow the Additional Bribery
    Allegations amounts to a palpable and overriding error. Nor does the
    respondents failure to object to the amendment prevent them from now objecting
    to the Additional Bribery Allegations.

[58]

The
    Swiss Investigation Disclosure amendment was proposed by the appellants, and
    permitted by the motion judge, in the absence of any pleading that the representations
    at issue were false because of the payments that were the subject of the Swiss
    investigation. In other words, the motion judge did not allow the amendment on
    the basis that the additional corrective disclosure provided further
    particulars of or refined the misrepresentation claims for which leave had
    already been granted. He allowed it because it was unopposed by the respondents.

[59]

It
    is not clear to me that the proper approach is to define (or re-define) the
    misrepresentation by alleged further corrective disclosure pleaded following
    the leave motion. This is an issue best left for another day. What constitutes corrective
    disclosure for the purposes of this action may be an important issue and one
    which the respondents may choose to address in a forum other than a pleadings
    motion.

(b) Omission Allegation

[60]

The
    motion judge did not specifically address the Omission Allegation in the
    decision at issue. However, it follows that if the appellants cannot plead the Additional
    Bribery Allegations, they cannot plead the Omission Allegation, which is
    similarly founded on SNCs failure to disclose that it was engaged in bribery
    in multiple jurisdictions. It suffers from the same defect as the allegations
    based on a reference to systemic bribery. This is perhaps why the motion
    judge did not specifically address the Omission Allegation.

[61]

The
    motion judge did not consider whether a narrower omission allegation should be
    permitted. I would permit the appellants to plead a narrower form of omission
    allegation under s. 138.3(1) of the
OSA
, limited to SNCs failure to
    disclose the US$56 million agent payments and the criminal activity connected
    to the Padma Bridge Project in Bangladesh  to the extent they occurred during
    the Class Period 
in
its
MD&A
and
AIFs
.
[5]


[62]

On
    the initial leave motion, the appellants pleaded that various representations
    made by SNC in specified core documents
[6]
,
    such as the fact that it was a socially responsible company, were false
    because SNC paid US$56 million to agents and because its former employees were
    involved in criminal activity connected to the Padma Bridge Project in
    Bangladesh. The motion judge was satisfied that sufficient material facts were
    pleaded in respect of these misrepresentation claims. He also accepted that the
    claims were made in good faith and that there is a reasonable possibility they
    will be resolved in the appellants favour. Given this, a claim that SNC
    committed a misrepresentation by omission in failing to disclose the
    already-pleaded material facts that were required to be disclosed in order to
    make the representations listed above in para. 18 not misleading would have
    obtained leave.

[63]

Denying
    the appellants leave under r. 26.01 to plead this variant without a
    difference would not enhance justice for investors or serve the purposes of s.
    138.8(1). It would constitute an overly technical approach that disregards the
    twin goals of Part XXIII.1 and the purpose of the leave requirement in s.
    138.8(1).

[64]

On
    the first opposed amendment motion, the motion judge dismissed the appellants request
    to amend their pleading to include a broad allegation that SNC failed to
    disclose bribery that occurred both prior to and during the Class Period on the
    basis that they had failed to plead the material facts with respect to the
    associated corrective disclosure. His concern appears to have related to the
    allegations regarding the pre-Class Period. On the motion at issue, the motion
    judge did not revisit this issue. He disposed of all of the proposed further
    allegations on the basis that they constituted discrete misrepresentation
    claims and therefore required a fresh leave application. The narrower Omission
    Allegation  and the portion of it that I would permit the appellants to plead
     relates only to the Class Period. If the corrective disclosures of the
    alleged misrepresentations relating to the US$56 million agent payments and the
    criminal activity connected to the Padma Bridge Project in Bangladesh are
    adequately pleaded, it follows that the corrective disclosures for the
    corresponding omission allegation are sufficiently pleaded.

[65]

The
    respondents argued, in oral submissions, that where the alleged misrepresentation
    is a misrepresentation by omission, a plaintiff must plead and prove that the
    defendants had knowledge of the omitted material fact. They say that, because the
    appellants did not plead or lead any evidence on the leave motion that the
    defendants had knowledge of the omitted material fact, they cannot now advance
    an omission allegation. I reject this argument.

[66]

Misrepresentation
    is defined in s. 1(1) of the OSA:

misrepresentation means,

(a)  an untrue statement of material fact, or

(b) an omission to state a material fact that is required to
    be stated or that is necessary to make a statement not misleading in the light
    of the circumstances in which it was made.

Material fact is in turn defined as follows:

material fact, when used in relation to securities issued or
    proposed to be issued, means a fact that would reasonably be expected to have a
    significant effect on the market price or value of the securities.

Neither the definition of misrepresentation nor the
    definition of material fact includes a knowledge requirement. A plaintiff
    who, as in this case, makes a claim under s. 138.3(1) alleging
    misrepresentations in a core document
[7]
(as opposed to a non-core document or a public oral statement) is not required
    to prove that the defendant knew of the omission: see
OSA
, s. 138.4;
Gould
    v. Western Corp.
, 2012 ONSC 5184, 7 B.L.R. (5th) 19, at para. 100.

(c) Embezzlement, Enrichment, Gaddafi and Agent Agreements
    Allegations

[67]

Like
    the motion judge, I view the Embezzlement, Enrichment, Gaddafi and Agent
    Agreements Allegations as discrete misrepresentation claims. The
    misrepresentations previously pleaded made no reference to agent agreements in
    Angola, payments for the benefit of Saadi Gaddafi in violation of the
    Regulations, or the embezzlement of funds by or for the personal enrichment of
    Ben Äissa. These allegations constitute separate reasons why the broad representations
    described in para. 18 above are false.

(d) Violation of Laws Allegations

[68]

As
    for the Violation of Laws Allegations, the appellants allege violations of
    laws applicable to SNCs business, including the
Regulations
and the
Criminal
    Code
. From the outset, the appellants pleaded that SNC was paying bribes
    in contravention of  applicable anti-bribery laws. They also pleaded that
    two former employees had been charged with criminal offences under the
CFPOA
.
    The proposed pleading retains these references. As the appellants already
    pleaded violations of applicable anti-bribery laws, I infer that the proposed
    addition alleges violations of laws other than anti-bribery laws.
[8]
SNCs possible violation of non-bribery-related laws falls outside the scope of
    the misrepresentation claim for which the appellants obtained leave. Accordingly,
    the appellants must bring a fresh leave application to allege that SNC violated
    laws other than anti-bribery laws.

LIMITATIONS ISSUE

[69]

The
    motion judge concluded that it was too late for the appellants to obtain leave
    under s. 138.8(1) to plead the denied amendments.

[70]

Section
    138.14(1) imposes a three-year limitation period. It provides, in relevant
    part:

Limitation period

No action shall be commenced under section 138.3,

(a) in the case of misrepresentation in a document, later
    than the earlier of,

(i) three years after the date
    on which the document containing the misrepresentation was first released

[71]

The
    parties agree that the documents alleged to contain the misrepresentations were
    released between November 6, 2009 and November 4, 2011.

[72]

The
    limited portion of the Omission Allegation that I would permit the appellants
    to plead is not statute-barred because it forms part of the misrepresentations
    initially pleaded.

[73]

The
    word action is not defined in the
OSA
. The appellants argue that
    since they commenced this action and pleaded the misrepresentations in the
    impugned documents within the applicable limitation period, any related
    misrepresentation claim arising out of the already-pleaded impugned documents is
    not statute-barred. In other words, if a plaintiff commences an action
    asserting misrepresentation in a disclosure document within the limitation
    period, the plaintiff can, at any time thereafter, assert any related
    misrepresentation claims arising out of the same documents.

[74]

The
    appellants were granted leave to commence a particular action, namely one
    asserting that representations in the impugned documents were false because of
    evidence that amounts had been paid to agents and that SNC was engaged in
    criminal activity with respect to the Padma Bridge Project in Bangladesh. As I
    concluded above, the appellants did not obtain leave to pursue claims founded
    on other misrepresentations, and therefore those other claims are not part of
    the action. As the impugned documents are now more than three years old, those
    claims are statute-barred.

[75]

If
    leave is required to advance further misrepresentation claims arising out of
    previously impugned documents, then those further misrepresentation claims are
    a different action, and are subject to the limitation period in s. 138.14(1).

DISPOSITION

[76]

I
    would allow the appeal only to the extent of permitting the appellants to plead
    that SNC committed a misrepresentation by omission in failing to disclose the
    US$56 million agent payments and the criminal activity connected to the Padma
    Bridge Project in Bangladesh  to the extent they occurred during the Class
    Period 
in
its
MD&A
and
AIFs
. Because
    he did not permit this amendment, the motion judge did not consider whether it
    was properly pleaded. If the parties cannot resolve the matter, I would direct
    the appellants to draft an amended pleading incorporating this limited omission
    allegation and attend before the motion judge to determine if it is properly
    pleaded. I would not interfere with the motion judges decision that the
    appellants require leave under s. 138.8(1) to plead the balance of the
    amendments, and that s. 138.14(1) bars those amendments as out of time. I would
    accordingly otherwise dismiss the appeal.

[77]

The
    parties agreed to costs of $2,000 to the successful party on the motion to
    quash and costs of $10,000 to the successful party on the appeal  in each
    case, inclusive of disbursements and HST. On the motion to quash, I would order
    the respondents to pay the appellants $2,000. As the respondents were
    substantially successful on the appeal, I would order the appellants to pay the
    respondents costs of the appeal in the amount of $10,000.

Released: AH  OCT 28
    2015

Alexandra
    Hoy A.C.J.O.

I
    agree K.M. Weiler J.A.

I
    agree Grant Huscroft J.A.





[1]

Green v. Canadian Imperial Bank of Commerce
, 2014 ONCA 90, 118 O.R.
    (3d) 641, at paras. 39-40, leave to appeal granted, [2014] S.C.C.A. No. 137,
    appeal heard and reserved February 9, 2015. At para. 39, the court describes
    strike suits, which had become prevalent in the United States in the period
    prior to enactment of Part XXIII.1: In a strike suit, a class action lawyer
    would sue on a corporate statement whenever the share price fell, in order to
    obtain a quick settlement from the corporation, regardless of the merit of the
    claim.



[2]
See para. 28 below for a description of the additional corrective disclosures
    that the motion judge permitted the appellants to plead in the Third Fresh as
    Amended Consolidated Statement of Claim. While I refer to them in these reasons
    as corrective disclosures, I make no determination as to whether or not they
    constitute corrective disclosures for purposes of this action.



[3]
The Regulations implemented a United Nations Security Council resolution passed
    in the first days of Libyas 2011 civil war. The Regulations prohibit Canadians
    or persons in Canada from supplying arms or related material to Libya or any
    person in Libya. The Regulations also prohibit Canadians or persons in Canada
    from knowingly dealing in any property in Canada owned or controlled by a
    designated person, and from knowingly making any property available to a
    designated person. The Regulations define a designated person as a person
    listed by the Security Council. The Security Council lists people with ties to
    the Muammar Gaddafi regime.



[4]
This allegation is narrower than that which the appellants sought to plead on
    the first opposed amendment motion. There, the appellants also sought to allege
    that SNC failed to disclose bribery that occurred prior to the Class Period.



[5]
The appellants allege misrepresentations by omission arising only out of SNCs
    Class Period MD&A and AIFs.



[6]
A core document is defined in s. 138.1 of the
OSA
and includes: a prospectus, a
    take-over bid circular, an issuer bid circular, a directors circular, a notice
    of change or variation in respect of a take-over bid circular, issuer bid
    circular or directors circular, a rights offering circular, MD&A, an AIF,
    an information circular, annual financial statements, an interim financial
    report and a material change report, where used in relation to a responsible
    issuer (among others). The appellants allege that SNCs AIFs, financial
    statements, management proxy circulars and MD&A contained
    misrepresentations.



[7]
See footnote 6.



[8]
I also note that the Regulations do not appear to fall under the category of
    anti-bribery laws. As explained in a footnote above, the Regulations, passed in
    the context of the Libyas 2011 civil war, aim to shrink the Libyan arms trade
    and to limit some Libyan officials dealings in property. It is not clear to me
    that such war sanctions would be characterized as anti-bribery laws.


