



COURT OF APPEAL FOR ONTARIO

CITATION: Rooney v. ArcelorMittal S.A., 2016 ONCA 630

DATE: 20160817

DOCKET: C60949

Simmons, Gillese and Hourigan JJ.A.

BETWEEN

Peter Rooney and Archie Leach

Plaintiffs (Appellants)

and

A
rcelorMittal


S.A.,

Lakshmi

N.

Mittal,

Aditya

Mittal,

1843208

Ontario
    Inc.,

Philippus

F.

Du

Toit,

Nunavut

Iron

Ore

Acquisition

Inc.,

Iron

Ore Holdings,

LP,

NGP

Midstream

&

Resources,

L.P.,

NGP

M&R

Offshore
    Holdings,

L.P.,

Jowdat Waheed,

Bruce

Walter,

John

T.

Raymond,

John Calvert,

Baffinland

Iron

Mines

Corporation,

Richard

D.

McCloskey, John

L
ydall

and

Da
n
i
ella

Dimitrov

Defendants (Respondents)

Proceeding

under

the

Class Proceedings Act
,

1992

Michael G. Robb, Douglas M. Worndl and Emilie Maxwell,
    for the appellants Peter Rooney and Archie Leach

Steve Tenai and Saeed Teebi, for the respondents ArcelorMittal
    S.A., Lakshmi N. Mittal, Aditya Mittal, 1843208 Ontario Inc., Philippus F. Du
    Toit, and Baffinland Iron Mines Corporation

Andrea Burke and Michael Finley, for the respondents
    Nunavut Iron Ore Acquisition Inc., Iron Ore Holdings, LP, NGP Midstream &
    Resources, L.P., NGP M&R Offshore Holdings L.P., Jowdat Waheed, Bruce
    Walter, John T. Raymond and John Calvert

Alan L. W. DSilva, for the respondents Richard D.
    McCloskey, John Lydall, and Danielle Dimitrov

Heard:  May 4, 2016

On appeal from the order of Justice Helen A. Rady of the
    Superior Court of Justice, dated July 20, 2015.

Hourigan J.A.:

Overview

[1]

This appeal is about the interpretation of s.
    131(1) of the
Securities Act
, R.S.O. 1990, c. S.5. That subsection
    provides that, in the context of a misrepresentation in a take-over bid
    circular, the security holders of the offeree issuer may sue on account of that
    misrepresentation. Two issues arise. The first is whether the security holder
    must choose between suing the offeror and suing the offerors directors and
    other individuals who signed or approved the take-over bid circular.  The second
    is whether security holders who sold their shares in the secondary market can
    rely on s. 131(1) to assert a claim based on a misrepresentation in a take-over
    bid circular. Both issues are questions of first impression before this court.

[2]

With respect to the first issue, the motion
    judge found that a plaintiff who wants to bring an action under s. 131(1) must
    make an election as to whom it will sue. As I will explain below, in my view,
    the motion judge focused too narrowly on the plain meaning of s. 131(1). The
    modern principle of statutory interpretation requires the court to look not only
    to the plain meaning of a particular provision but to the surrounding context
    in which the words of that provision are found. Here, once you pan the
    analytical lens out to view s. 131(1) as part of a larger scheme of civil
    liability for misrepresentation in securities markets, the motion judges
    interpretation cannot be sustained.

[3]

With respect to the second issue, the motion
    judge found that security holders who transacted in the secondary market cannot
    rely on s. 131(1) to assert a claim. In my view, the motion judge was correct
    in her analysis on this point. The argument that secondary market participants
    have a cause of action under s. 131(1) ignores the legislative scheme and
    history of the
Securities Act
.

[4]

In these reasons, I consider first the
    background facts to put the legal analysis in context. In the analysis section,
    I first review the modern principle of statutory interpretation. I then
    consider the two issues identified above in light of that principle.

Background

[5]

The appellants were security holders of the
    respondent, Baffinland Iron Mines Corporation (Baffinland).  On September 22,
    2010, Baffinland was the target of a hostile take-over bid by a group headed by
    the respondent, Jowdat Waheed. Mr. Waheed had previously been hired by
    Baffinland to provide strategic advice to its board.  The respondent,
    ArcelorMittal S.A., first made a friendly bid for Baffinland on its own behalf
    and then ultimately submitted a joint take-over bid with Mr. Waheeds group.
    That joint take-over bid expired in February 2011.

[6]

As required by the
Securities Act
, the
    joint take-over bid included a take-over bid circular, which was sent to all of
    Baffinlands security holders and filed with the Ontario Securities Commission
    (the OSC). Pursuant to their obligations under the Act, the directors and
    officers of Baffinland considered the bid and prepared a directors circular.
    This document was also provided to all of Baffinlands security holders and was
    filed with the OSC.

[7]

The appellants commenced a class action alleging
    that the circulars failed to disclose material information and that the
    information that was disclosed in the circulars was materially misleading and
    replete with misrepresentations about the business and affairs of Baffinland.
    They sued the persons and companies who signed and filed the circulars,
    alleging that, as a consequence of the defendants conduct, they received less
    for their Baffinland securities than they otherwise would have.

[8]

The appellants rely on s. 131(1) of the
Securities
Act
, which provides as follows:

131. (1)

Where a take-over bid circular sent to
    the security holders of an offeree issuer as required by the regulations
    related to Part XX, or any notice of change or variation in respect of the
    circular, contains a misrepresentation,
a security holder
    may
, without regard to whether the security holder relied on the
    misrepresentation,
elect to exercise a right of action
    for rescission or damages against the offeror or a right of action for damages
    against
,

(a) every person who at the time the circular or notice, as
    the case may be, was signed was a director of the offeror;

(b) every person or company whose consent in respect of the
    circular or notice, as the case may be, has been filed pursuant to a
    requirement of the regulations but only with respect to reports, opinions or
    statements that have been made by the person or company; and

(c) each person who signed a certificate in the circular or
    notice, as the case may be, other than the persons included in clause
    (a). [Emphasis added.]

[9]

The respondents brought various motions to
    strike the appellants statement of claim. Those motions were largely
    unsuccessful. However, there are two rulings on the motions to strike that the
    appellants appeal to this court. First, the ruling that the appellants are
    required under s. 131(1) to elect whether to sue the offerors under the joint
    bid or their respective directors and signatories. Second, the ruling that security
    holders who transacted in the secondary market may not assert a claim pursuant
    to s. 131(1) of the Act.

Analysis

(1)      Modern Principle of Statutory Interpretation

[10]

The starting point in a review of the modern
    principle of statutory interpretation is

Rizzo & Rizzo Shoes Ltd
.
    (Re),
[1998] 1 S.C.R. 27. That case provides both general guidance on the
    proper approach to statutory interpretation and specific guidance on how to
    apply that approach where the plain meaning of a provision appears to conflict
    with its underlying statutory purpose.

[11]

Rizzo Shoes
is
    the best known authority for how to approach the task of statutory
    interpretation and has been cited more than 3,000 times by courts at all levels.
    Iacobucci J., writing for the court, endorsed Driedgers modern principle of
    statutory interpretation, at para. 21, quoting the following passage from Elmer
    Driedger,
Construction of Statutes
, 2nd ed. (Toronto: Butterworths,
    1983), at p. 87:

Today there is only one principle or approach, namely, the
    words of an Act are to be read in their entire context and in their grammatical
    and ordinary sense harmoniously with the scheme of the Act, the object of the
    Act, and the intention of Parliament.

With these words, the Supreme Court
    fully embraced Elmer Driedgers modern principle of statutory interpretation.
    But to fully appreciate the significance of this statement, we have to ask:
    modern compared to what?

[12]

Ruth Sullivan explains that, in the nineteenth
    and for much of the twentieth centuries, statutory interpretation was dominated
    by the plain meaning rule. That rule held that where the words of a statute
    were clear and unambiguous, the courts applied them as they were written  even
    if legislative intention or practical considerations pointed in another
    direction. At times, courts relied instead on the so-called golden rule, which
    allowed courts to depart from the plain meaning of a statute but only when that
    meaning lead to absurd results.: Ruth Sullivan,
Sullivan on the
    Construction of Statutes
, 6th ed. (Markham: LexisNexis Canada Inc., 2014),
    at §2.13-2.17.

[13]

The modern principle takes a more holistic view.
    As Iacobucci J. explained in
Rizzo Shoes
, at para. 21, the modern
    principle recognizes that statutory interpretation cannot be founded on the
    wording of the legislation alone. Sullivan expands on this idea, at §2.18:
    Today, as the modern principle indicates, legislative intent, textual meaning
    and legal norms are all legitimate concerns of interpreters and each has a role
    to play in
every
interpretive effort (emphasis
    added).

[14]

That is the general guidance that
Rizzo
    Shoes
provides in all cases involving statutory interpretation. Equally
    important for present purposes is the guidance the case provides in
    circumstances where the plain meaning of a provision appears to conflict with
    its underlying statutory purpose. The issue in
Rizzo Shoes
was whether
    employees who lost their jobs when their employer went bankrupt were entitled
    to termination and severance pay under the
Employment Standards Act
,
1981
, S.O. 1981, c. 22 (the 
ESA
). That statute provided
    that such benefits were payable when a claimants employment was terminated by
    an employer: see ss. 40 and 40
a
. The question was whether bankruptcy
    acted as a termination for purposes of the Act.

[15]

The judge at first instance held that it did. He
    reasoned that the object and intent of the
Employment Standards Act
was to provide minimum employment standards and to benefit and protect
    employees interests. As remedial legislation, the Act should be given a fair,
    large, and liberal interpretation to advance its goals.

[16]

The Court of Appeal for Ontario disagreed. It
    focused on the plain meaning of the impugned provisions and concluded that the
    rights to termination and severance pay were limited to situations where the
    employer actively terminates the employee  not when the termination results by
    operation of law, as in a bankruptcy.

[17]

Iacobucci J. identified the fundamental tension
    as follows, at para. 20:

At the heart of this conflict is an issue of statutory
    interpretation. Consistent with the findings of the Court of Appeal, the plain
    meaning of the words of the provisions here in question appears to restrict the
    obligation to pay termination and severance pay to those employers who have
    actively terminated the employment of their employees. At first blush,
    bankruptcy does not fit comfortably into this interpretation.

[18]

It was in this context that Iacobucci J. repudiated
    the view that statutory interpretation could be founded on the wording of the
    legislation alone.  Instead, the words of the statute had to be read in their
    entire context, having regard not just to their ordinary and grammatical
    meaning but also to the scheme and object of the Act and to the legislatures intention.

[19]

Iacobucci J. examined
    the Court of Appeals reasoning in light of this standard and found it
    incomplete. He explained his conclusion, at para. 23:

Although the Court of Appeal looked to the plain meaning of the
    specific provisions in question in the present case, with respect, I believe
    that the court did not pay sufficient attention to the scheme of the ESA, its
    object or the intention of the legislature; nor was the context of the words in
    issue appropriately recognized.

[20]

Applying the modern principle to the case before
    him, Iacobucci J. concluded that the impugned provisions of the
Employment
    Standards Act
should be interpreted to include the employees whose jobs
    were terminated as a result of their employers bankruptcy. He held the
    following with respect to the Court of Appeals restrictive interpretation of
    the word termination:

·

It
    was incompatible with the object of the Act, which was to protect employees;

·

It
    was incompatible with the object of the termination and severance pay
    provisions themselves, which was to provide employees with a cushion against
    the adverse economic effects of termination without notice; and

·

It
    would lead to absurd results because it would distinguish between employees
    entitlement to benefits based on whether they were dismissed the day before or
    the day after their employers bankruptcy became final.

[21]

In considering the arguments advanced on this
    appeal, this court must take the modern approach described by Iacobucci J. It
    is not permissible or helpful to look at the words of s. 131(1) in isolation and
    without regard to the scheme and object of the Act and to the legislatures
    intention.

(2)      Election of Potential Defendants

(a)      Nature of the Issue

[22]

The parties agree that s. 131(1) requires a
    security holder to choose between suing the offeror for rescission and suing
    the offeror for damages, since the Act treats these as mutually exclusive
    causes of action. The controversy lies in determining whether the provision
    also requires a security holder to choose between suing the offeror and suing
    the offerors directors and the other individuals listed in clauses (a) to (c).

[23]

The appellants were able to point to one
    previous case where the Superior Court certified a class action under s. 131(1)
    against both offerors and their directors and signatories, but the question
    whether the security holders in that case should instead have been put to an
    election does not appear to have been raised: see
Allen v. Aspen Group
    Resources Corp
. (2009), 81 C.P.C. (6th) 298 (Ont. S.C.).

[24]

That said, in
Allen
, Strathy J. (as he
    then was) described s. 131(1) in
obiter
as giving an offerees
    security holders a right of action against an offeror
and
its directors and signatories, at para. 8:

The teeth of the take-over bid provisions are found in s. 131,
    which give the shareholders of the target company a civil remedy in damages, as
    well as a claim against the offeror for rescission, in the event of
    misrepresentation or non-disclosure in the take-over bid circular.
The remedy can be exercised not only against the offeror
    corporation, but also against the directors or officers of the offeror who
    signed the circular, experts whose reports appeared (with their consent) in the
    circular, and those  such as auditors  who signed a certificate in the
    circular.
[Emphasis added.]

[25]

While Strathy J.s comments are not
    determinative of the issue, they lend weight to the appellants preferred
    interpretation of s. 131(1).

[26]

The motion judge acknowledged, at para. 132, that
    s. 131(1) is not as clearly expressed as it could be. She also found it
    unlikely, at para. 131, that the very experienced counsel and judge in
Allen

would have overlooked the election issue.

[27]

Despite these reservations, the motion judge
    accepted the respondents interpretation. She gave four reasons, at para. 132:

·

The
    plain and grammatical meaning of the operative words in the section appear
    to require an election as between a right of action against the offeror and a
    right of action against its directors.

·

The
    combined use of the word elect and the word or in s. 131(1) seems to
    demonstrate that the right of action against an offeror and against the
    persons listed in cls. (a) to (c) are mutually exclusive.

·

The
    statutory context of s. 131(1) supports the conclusion that the legislature
    intended to create mutually exclusive rights of action against an offeror on the
    one hand and the offerors directors on the other.

·

The
    legislative history of s. 131(1) suggests that the legislature deliberately
    avoided creating concurrent statutory rights of action against an offeror and
    the persons listed in cls. (a) to (c).

(b)      Positions of the Parties

[28]

The appellants submit that the
Securities
    Act

is remedial legislation aimed at protecting investors and must
    be interpreted consistent with that purpose. They argue that the only election
    required under s. 131(1) is for a security holder to decide whether to sue the
    offeror for rescission or for damages; a security holder electing to sue the
    offeror for damages may also sue the offerors directors and signatories for
    damages.

[29]

The appellants note that, in its first
    iteration, s. 131(1) (then s. 127) clearly contemplated concurrent causes of
    action against the offeror and the offerors directors and signatories. At the
    time of first reading, the section provided a right of action for rescission
    or damages against the offeror,
and
a right of
    action for damages (emphasis added) against the individual directors and
    signatories: Bill 7,
An Act to revise the Securities Act
, 2nd Sess.,
    31st Leg., Ontario, 1978, cl. 127(1). The draft bill went to committee and
    returned for a second reading with what the appellants say was a clarification
    that the security holder had to elect between rescission and damages, by virtue
    of the and preceding the words a right of action for damages being replaced
    by an or. Ultimately, the bill passed with that altered language:




First reading

Second
          reading/final version



127(1) Where a take-over bid circular sent to the offerees
          of an offeree company as required by Part XIX contains a misrepresentation,
          every such offeree
has a right of action for rescission or damages
          against the offeror, and a right of action for damages against [the offerors
          directors and signatories to the take-over bid circular]
. [Emphasis
          added.]

127(1) Where a take-over bid circular sent to the offerees
          of an offeree company as required by Part XIX contains a misrepresentation,
          every such offeree
may elect to exercise a right of action for
          rescission or damages against the offeror or a right of action for damages against
          [the offerors directors and signatories to the take-over bid circular]
. [Emphasis
          added.]



[30]

The appellants submit that this change was
    intended to clarify that a plaintiff has a cause of action for rescission or
    for damages but not for both. The originally-drafted wording suggested that a
    plaintiff could sue the offeror for rescission and the offerors directors and
    signatories for damages, an outcome precluded by the use of the words may
    elect and or in the final version.

[31]

The appellants agree with the motion judges
    observation that s. 131(1) is not as clearly expressed as it could be. But
    they argue that this ambiguity favours a large and liberal interpretation that
    would advance the purposes of the
Securities Act
. Those purposes, set
    out in s. 1.1 of the Act, are as follows:

(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.

[32]

Instead, the appellants submit, the motion judge
    focused on the plain meaning of s. 131(1) without an appreciation of its
    surrounding context. The result is an unduly narrow interpretation that frustrates
    rather than furthers the legislatures purposes.

[33]

The respondents submit that the motion judge
    interpreted s. 131(1) correctly. In support of their argument that s. 131(1)
    requires a security holder to choose whom to sue, the respondents compared the
    wording of the Ontario legislation with other provincial securities statutes
    that clearly permit or preclude concurrent causes of action against both the
    offeror and its directors and signatories. For example, s. 132(1) of British Columbias
Securities Act
, R.S.B.C. 1996, c. 418, provides that if a take-over
    bid circular contains a misrepresentation, a person who received the circular
    has a right of action for:

(a) rescission against the offeror,
or

(b) damages against

(i) each person who signed the
    certificate in the circular or notice,

(ii) every director of the offeror at
    the time the circular or notice was signed,

(iii) every person whose consent has
    been filed as prescribed,
and

(iv)
the offeror
.
    [Emphasis added.]

[34]

In other words, security holders have to elect
    between an action for rescission or for damages but, if they opt to sue for
    damages, they may sue both the offeror and the offerors directors and
    signatories.

[35]

Subsection 205(1) of Albertas
Securities
    Act
, R.S.A. 2000, c. S-4, uses the same wording as the Ontario legislation
    but is formatted in a way that  according to the respondents  underscores
    that the security holder has to elect whom to sue. That subsection provides
    that, if a take-over bid circular contains a misrepresentation, a security
    holder may elect to exercise a right of action:

(a) for rescission or damages against the offeror,
or

(b) for
damages
against

(i) every person who, at the time the circular or notice was
    signed, was a director of the offeror,

(ii) every person or company whose consent has been filed,
    but only with respect to reports, opinions or statements that have been made by
    them, and

(iii) each person who signed a certificate in the circular
    or notice. [Emphasis added.]

[36]

Like the appellant, the respondents also rely on
    the changes made to the wording of the subsection between the first and second
    reading of the bill. They argue that the change shows that the legislature made
    a conscious decision to require plaintiffs to elect to sue either the offeror
    or the offerors directors and signatories.

[37]

The main point that the respondents make is that,
    if the legislature intended to permit a plaintiff to sue both the offeror and
    its directors and signatories for damages, it could have easily done so by using
    clear language. However, when pressed in oral argument, they could not offer an
    explanation for how their interpretation advances the purposes of the
Securities
    Act

or the scheme for statutory liability for misrepresentation in
    take-over bid circulars.

(c)      Application of the Modern Principle

[38]

A proper interpretive approach to s. 131(1) requires
    the court to consider this provision in its entire context, with regard to its
    ordinary and grammatical meaning, and in harmony with the scheme of the Act,
    the object of the Act, and the intention of the legislature.

[39]

The first part of the analysis is a
    consideration of s. 131(1) in its entire context. Subsection 131(1) is found in
    Part XXIII of the
Securities Act
, titled Civil Liability. Part XXIII
    creates civil liability for misrepresentation in a prospectus (s. 130), an
    offering memorandum (s. 130.1), and a take-over bid circular (s. 131). A
    contextual approach means that the language of each of these provisions informs
    the interpretation of the others. The distinguishing feature of ss. 130 and
    130.1 for purposes of this appeal is that those sections explicitly create
    mutually exclusive causes of action: a plaintiff can sue for rescission or for
    damages, but not both.

[40]

Subsection 130(1) provides as follows:

130. (1)
Where a prospectus, together
    with any amendment to the prospectus, contains a misrepresentation, a purchaser
    who purchases a security offered by the prospectus during the period of
    distribution or during distribution to the public has, without regard to
    whether the purchaser relied on the misrepresentation, a right of action for
    damages against,

(a) the issuer or a selling security holder on whose behalf
    the distribution is made;

(b) each underwriter of the securities who is required to
    sign the certificate required by section 59;

(c) every director of the issuer at the time the prospectus
    or the amendment to the prospectus was filed;

(d) every person or company whose consent to disclosure of
    information in the prospectus has been filed pursuant to a requirement of the
    regulations but only with respect to reports, opinions or statements that have
    been made by them; and

(e) every person or company who signed the prospectus or the
    amendment to the prospectus other than the persons or companies included in
    clauses (a) to (d),

or, where the purchaser purchased the
    security from a person or company referred to in clause (a) or (b) or from
    another underwriter of the securities, the purchaser may elect to exercise a
    right of rescission against such person, company or underwriter, in which case
    the purchaser shall have no right of action for damages against such person,
    company or underwriter
. [Emphasis added.]

[41]

Similarly, s. 130.1 provides as follows:

130.1 (1)
Where an offering memorandum
    contains a misrepresentation, a purchaser who purchases a security offered by
    the offering memorandum during the period of distribution has, without regard
    to whether the purchaser relied on the misrepresentation, the following rights:

1. The purchaser has a right of action for damages against
    the issuer and a selling security holder on whose behalf the distribution is
    made.

2.
If the purchaser purchased the
    security from a person or company referred to in paragraph 1, the purchaser may
    elect to exercise a right of rescission against the person or company.  If
    the purchaser exercises this right, the purchaser ceases to have a right of
    action for damages against the person or company
. [Emphasis added.]

[42]

Then comes s. 131(1), which provides that a
    security holder may elect to exercise a right of action for rescission or
    damages against the offeror or a right of action for damages against the
    individuals listed in clauses (a) to (c).

[43]

When s. 131(1) is read in this context, it is my
    view that the legislature intended to underscore that, just as in ss. 130 and
    130.1, a plaintiff can pursue a right of action for rescission or a right of
    action for damages against the offeror, but not both.

[44]

Analyzing the sections adjacent to s. 131(1)
    reveals another clue about its proper interpretation: the Act allows a
    plaintiff to sue
both
the issuer
and
the issuers directors and underwriters (under s.
    130) and both the issuer
and
the selling security
    holder (under s. 130.1) for damages. Why would s. 131(1) require a plaintiff
    suing for misrepresentation in a take-over bid circular to choose his or her
    adversary when a plaintiff suing for misrepresentation in a prospectus or an
    offering memorandum is not required to make such a choice?

[45]

The next part of the analysis is a consideration
    of the words of s. 131(1) in their ordinary and grammatical meaning. As
    explained above, the motion judge principally based her interpretation of s.
    131(1) on the plain meaning of the word or, which she interpreted as an
    exclusive or  i.e. one that indicates mutually exclusive options. I
    disagree.

[46]

As Ruth Sullivan explains, in ordinary usage,
    or can be either inclusive (A or B or both) or exclusive (A or B, but not
    both), and it is up to the reader to decide which one the writer intended:
    Sullivan, at §4.97. In other words, the default plain meaning of or is not exclusive.

[47]

In
Garners Modern American Usage
, 3d
    ed. (New York: Oxford University Press, 2009), Bryan Garner goes further,
    arguing that the default plain meaning of or is actually inclusive. In
    lamenting the popularity of what he regards as the unnecessary legal phrase
    and/or, Garner explains, at pp. 45-46: If you are offered a coffee or tea,
    you may pick either (or in this case, neither), or you may for whatever reason
    order both. This is the ordinary sense of the word, understood by everyone and
    universally accommodated by the simple
or
.
 Garner advises that,
    if a writer intends to use the exclusive or, he or she should make this
    intention explicit.

[48]

In my view, the first or in s. 131(1) (elect
    to exercise a right of action for rescission or damages against the offeror)
    should be read exclusively, since rescission and damages are treated as
    alternative causes of action in Part XXIII of the Act. The second or (or a right
    of action for damages against) should be read inclusively  a plaintiff electing
    to sue for damages can sue the offeror, the offerors directors and
    signatories, or both.

[49]

In her reasons, the motion judge held as follows,
    at para. 134: it seems very unlikely that the word or be [read] both
    exclusively and inclusively within the span of a few words. I disagree. As I
    have just explained, the plain meaning of or can be either inclusive or
    exclusive. Or is not a term of art that must be given a consistent
    interpretation throughout a legislative text.

[50]

Next, s. 131(1) must be read harmoniously with
    the scheme of the Act, the object of the Act, and the intention of the
    legislature. As noted above, the legislative purposes of the
Securities Act
are outlined in s. 1.1: to protect investors from unfair, improper or
    fraudulent practices and to foster fair and efficient capital markets and
    confidence in those markets.

[51]

There is nothing in the public record that
    explains why the wording of the subsection was changed between first and second
    reading. As noted above, both the appellants and the respondents argue that the
    change favours their interpretation. I am not able to discern the legislatures
    intention from this change and thus it is of limited assistance in conducting
    this part of the statutory interpretation analysis.

[52]

The appellants point to the following features
    of the statutory scheme for misrepresentation in a take-over bid circular,
    which they say demonstrate that the motion judges interpretation is incorrect:

·

OSC
    Form 62-504F1, which prescribes the contents of a take-over bid circular,
    states that offerors must disclose any material facts concerning the
    securities of the offeree issuer and any other matter known to the offeror
    that would reasonably be expected to affect the decision of the security
    holders of the offeree issuer to accept or reject the offer.

·

A
    take-over bid circular must be accompanied by a certificate stating: The
    foregoing contains no untrue statement of a material fact and does not omit 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.

·

Section
    99 of the Act, repealed in 2015, provided that a take-over bid circular shall
    contain a certificate of the offeror and must be signed, if the offeror is a
    person or company other than an individual, by each of the following: the CEO,
    the CFO, and two directors.

[53]

I agree. If the motion judges interpretation is
    correct, this scheme falls apart. What point is there in requiring the
    offerors directors and officers to sign a certificate affirming the integrity
    of the take-over bid circular if s. 131(1) forces a plaintiff into an election
    that could let those people off the hook? And what statutory purpose is served
    by forcing an innocent investor to choose which allegedly bad actor to sue?  Why
    should a wrongdoer get a free pass?

[54]

To interpret s. 131(1) as requiring this kind of
    election puts the security holder in an untenable position: if the security
    holder elects to sue the offeror, there is a risk that the offeror might go
    bankrupt before the security holder can recover. If the security holder elects
    to sue the offerors directors and signatories, there is a risk that the individual
    defendants might make themselves judgment-proof. Neither scenario advances the
    cause of investor protection.

[55]

In applying the modern principle of statutory
    interpretation to s. 131(1), I conclude that the motion judge erred in holding
    that the subsection requires a plaintiff to choose between suing the offeror
    and suing the offerors directors and signatories. A plaintiff electing to sue
    for damages rather than rescission may sue both the offeror and the offerors
    directors and signatories.

(3)      Secondary Market

(a)      Nature of the Issue

[56]

The appellants submit that security holders who
    sold their securities in the secondary market during the currency of, and in
    connection with, the take-over bid, rather than tendering their securities to
    the take-over bid, can also assert a claim pursuant to s. 131(1).

[57]

The motion judge did not accept that argument,
    holding that non-tendering sellers could not advance a s. 131(1) right of
    action for the following reasons:

·

Subsection
    131(1) allows for a right of rescission and shareholders who sold in the
    secondary market could not exercise that right. Thus, by necessary implication,
    the language of the subsection excludes secondary market transactions.

·

Part
    XXIII.1 of the
Securities
    Act
extends a remedy to secondary market sellers.

·

The
    aim of s. 131(1) is to assist sellers in making an informed choice about
    whether to tender an offer to a bid, not to make an informed decision about the
    sale of shares on the secondary market.

(b)      Positions of the Parties

[58]

The appellants note that s. 131(1) refers to
    security holders and is not qualified by any other condition. They argue that,
    had the legislature intended to restrict the s. 131 right of action, it would
    have been a straightforward task to add appropriate limiting language. In their
    view, there is no basis for treating class members who tendered in the
    take-over bid and those whose shares were compulsorily acquired differently
    from those who sold in the secondary market.

[59]

The appellants further submit that the Act
    requires that accurate and complete information related to a take-over bid be provided
    to security holders. This disclosure requirement is consistent with the
    issuers on-going disclosure obligations and is not directed solely to security
    holders who are determining whether to tender to a bid. It is the appellants
    position that all sellers who are the victims of misrepresentations in
    circulars should have the right to sue because any distortion of the sale price
    caused by the misrepresentations affects all sellers.

[60]

The respondents submit that the order striking
    out the s. 131 secondary market claims is consistent with the liability scheme
    under the
Securities Act
, the content of the forms required by s. 131,
    and the availability of rescission as a remedy.

[61]

The respondents position is that Part XXIII.1
    is designed to provide a remedy to security holders who trade in the secondary
    market, whereas s. 131 is restricted to target security holders who tender and
    sell their shares pursuant to a take-over bid. In their submission, the
    appellants attempted reliance on s. 131 in the context of trades in the
    secondary market is nothing more than an attempt to bypass the leave
    requirements, liability caps, and other elements of Part XXIII.1 included by
    the legislature as part of the balance struck in creating statutory secondary
    market liability for misrepresentations.

(c)      Application of the Modern Principle

[62]

Again, a proper interpretive approach to the
    issue requires the court to consider the words of s. 131(1) in their entire
    context, with regard to their ordinary and grammatical meaning, and in harmony
    with the scheme of the Act, the object of the Act, and the intention of the legislature.

[63]

The term security holder must be read in the
    context of the surrounding words in the subsection. As the motion judge noted,
    it is significant that rescission is an available remedy under the subsection.
    Obviously, rescission is not available to a security holder who sold in the
    secondary market and is only available to a security holder who transacted
    directly with the offeror by tendering to the take-over bid.

[64]

The appellants submit that the availability of a
    rescission option under s. 131(1) is not determinative. They point out
    that, while rescission is not an available remedy for secondary market
    participants, that does not by necessary implication preclude the other
    available remedy of damages.  The appellants also observe that there is no
    right of rescission in s. 131(2), which provides for a right of action with
    respect to misrepresentation in a directors circular.

[65]

I would reject these arguments.  I agree with
    Perell J.s reasoning in
Tucci v. Smart Technologies Inc
.
, 2013
    ONSC 802, 114 O.R. (3d) 294, at para. 42, that it would be an anomalous result if
    s. 131(1) provided different remedies depending on whether a security holder
    tendered into the bid or sold into the secondary market. The availability of
    rescission as a remedy is an indication that the legislature designed the
    subsection for the benefit of security holders who could use all of the
    available remedies.

[66]

Furthermore, the absence of the remedy of
    rescission in s. 131(2) simply reflects the fact that, unlike offerors,
    directors of a take-over bid target have no ability to return shares tendered
    to and taken up pursuant to a bid.

[67]

Also significant for this part of the analysis is
    the content of the forms required by s. 131. The prescribed forms for the
    take-over bid circular (Form 62-504F1), the issuer bid circular (Form 62-504F2),
    and the directors circular (Form 62-504F3) each impose a catch-all obligation
    to disclose matters that would reasonably be expected to affect the decision
    of the security holders of the offeree issuer to accept or reject the offer.
    This language is consistent with the notion that the focus of s. 131 is a
    security holders decision whether to tender to a bid, not a security holders
    decision whether to trade on the secondary market.  Further support can be
    found in
Allen
, at para. 5, where Strathy J. states that take-over bid
    rules are designed to provide security holders of the target company with
    sufficient information to make an informed decision about whether to tender to
    a bid.

[68]

Turning now to the ordinary and grammatical
    meaning of the term security holder, I agree with the appellants submission
    that there are no restrictions or qualifiers on the term. I also agree that it
    would have been an easy task for the legislature to add appropriate limiting
    language.

[69]

The critical part of the analysis regarding the scheme
    of the Act, the object of the Act, and the intention of the legislature is the
    interplay between s. 131(1) and Part XXIII.1 of the Act, which provides a
    statutory cause of action for secondary market participants. The parties do not
    agree on whether that cause of action is available in the context of a
    take-over bid.

[70]

The appellants submit that they do not have a
    right of action under that part of the Act. They note that, under s. 138.2(c),
    the Part XXIII.1 civil liability regime does not apply to, among other things,
    the acquisition or disposition of an issuers security in connection with or
    pursuant to a take-over bid, except as prescribed by regulation. According to
    the appellants, in connection with would include sellers who sold Baffinland
    securities in the secondary market in the context of a take-over bid.

[71]

In any event, the appellants argue that, even if
    the sellers in the secondary market could avail themselves of the Part XXIII.1
    right of action, s. 138.13 explicitly provides that the remedy does not
    derogate from any other rights of action a claimant may have. Their position is
    that there is no reason why a plaintiff who sold in the secondary market could
    not have rights of action under s. 131 and Part XXIII.1 in different
    circumstances. In the case of Part XXIII.1, limited by the words in connection
    with in s. 138.2(c), the appellants suggest that a plaintiff might sue under
    Part XXIII.1 after a take-over bid has come to an end.  The appellants suggest
    no such limitations on the application of s. 131.

[72]

The respondents submit that the definition of a core
    document in Part XXIII.1 specifically includes 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. Thus, they argue that the right of action would be available to
    secondary market traders in this case.

[73]

In my view, the respondents make a compelling
    argument on the availability of Part XXIII.1 in the context of a take-over bid
    and their position should be preferred.  Why would the legislature include circulars
    within the definition of core documents if the intention was not to grant a right
    to sue with respect to those documents? And why would the legislature include
    such a statutory right of action if it already existed under s. 131(1)?  The
    legislature must be presumed to have a created a coherent and consistent
    legislative scheme. It is highly unlikely that the legislature would enact a
    redundant right of action.

[74]

I am also not persuaded by the appellants
    suggestion that those who sell their securities on the secondary market are
    able to avail themselves of both remedies. The availability of s. 131 to these
    sellers would render Part XXIII.1 nugatory. If s. 131 provides an unfettered
    right to sue, why would a plaintiff ever chose to sue under Part XXIII.1 and thus
    to be subject to the leave requirement and liability caps imposed by that Part?

[75]

What is perhaps most troubling about the
    appellants submission on this issue is that it ignores the history of the
    development of the law regarding secondary market liability in this country.
    That history was recently and succinctly recounted by
Abella J. in
Theratechnologies
    inc. v. 121851 Canada inc
.
, 2015 SCC 18,
    [2015] 2 S.C.R. 106. She explained, at para. 27, that legislation aimed at
    secondary market liability grew out of Canada-wide efforts to develop a more
    meaningful and accessible form of recourse for investors. She continued as
    follows, at paras. 27, 29-30:

Historically, Canadian investors in the secondary trading
    market did not have access to a statutory cause of action when they suffered
    losses as a result of breaches of legislated continuous disclosure obligations.
    In common law jurisdictions, investors had to rely on the tort of negligent
    misrepresentation, which required, among other things, that investors prove
    that they had relied on the misinformation or omission of information to their
    detriment. Because it was extremely difficult to prove such reliance when securities
    were purchased in the secondary market, this requirement put meaningful redress
    out of reach for many who were harmed by dubious disclosure practices.

During the 1990s, following a series of high profile
    misrepresentations and incidents of questionable disclosure practices among
    publicly traded companies in Canada, the Toronto Stock Exchange created the
    Allen Committee to re-examine the regime governing disclosure in the secondary
    market. The Allen Committee concluded that the current sanctions and funding
    available to regulators... are inadequate and the remedies available to
    investors in secondary trading markets who are injured by misleading disclosure
    are so difficult to pursue that they are, as a practical matter, largely
    hypothetical. It recommended the creation of a statutory civil liability
    regime that would help investors sue issuers, directors, and officers who
    violated their statutory disclosure obligations.

The Canadian Securities Administrators, an umbrella
    organization of Canada's provincial and territorial securities regulators,
    adopted most of the Committee's recommendations and began developing proposals
    to implement them across Canada. Despite the fact that the Allen Committee had
    not recommended it, and in order to discourage the kind of strike suits that
    had become common in the United States under more investor-friendly regimes,
    the Canadian Securities Administrators recommended that in addition to reducing
    the burden of proof on investors, the new liability regime should include a
    screening mechanism to ensure that only claims with a reasonable chance of
    success would be brought. [Citations omitted.]

[76]

In 2002, the Ontario Legislature introduced Bill
    198, which included a proposed amendment to the
Securities Act
to add
    civil liability for secondary market disclosure. That Bill was never proclaimed
    in force. Following further rounds of consultations, in late 2004, Bill 149 was
    introduced. That Bill contained the amendments that added Part XXIII.1 to the
Securities
    Act
. Bill 149 came into force on December 31, 2005: see
Abdula v.
    Canadian Solar Inc
., 2012 ONCA 211, 110 O.R. (3d) 256, leave to appeal
    refused, [2012] S.C.C.A. No. 246.

[77]

Clearly there was a gap in the legislative
    scheme with respect to secondary market participants. The legislature filled
    that gap. They did so on the basis that there was no statutory right of action
    for secondary market participants. In providing that right of action, the
    legislature headed the advice of Cardozo J. in
Ultramares Corporation v.
    Touche
, 174 N.E. 441 (N.Y. App. Ct. 1931)

that the law should not admit "to a
    liability in an indeterminate amount for an indeterminate time to an
    indeterminate class." It was for this reason that the legislature included
    a leave requirement and capped liability.  I agree with the submission of the
    respondents that the appellants attempted reliance on s. 131(1) for
    secondary market participants is an impermissible attempt to avoid the
    restrictions placed on the operation of the statutory cause of action found in
    Part XXIII.1.

[78]

In my view, applying the modern principle of
    statutory interpretation to this issue, the appellants cannot succeed. While
    the plain meaning of the term security holder might support the broad
    interpretation they urge upon us, that interpretation is not supported by the
    context in which it appears and is inconsistent with the scheme of the Act, the
    object of the Act, and the intention of the legislature.

Disposition

[79]

I would grant the appeal in part and order that paragraph 6 of the Order be set aside, the reference in paragraph 8 of the Order to an election be set aside, and the s. 131 claims be permitted to proceed. Given the divided success on the appeal, I would make no order as to costs.

Released: August 17, 2016 CWH

C.W.
    Hourigan J.A.

I
    agree Janet Simmons J.A.

I
    agree E.E. Gillese J.A.


