



COURT OF APPEAL FOR ONTARIO

CITATION: Mask v. Silvercorp Metals Inc., 2016 ONCA 641

DATE: 20160824

DOCKET: C61313

Strathy C.J.O., Brown and Huscroft JJ.A.

BETWEEN

John Mask

Plaintiffs (Appellant)

and

Silvercorp Metals Inc., Rui Feng and Meng Tang

Defendants (Respondents)

Joseph Groia and Matthew M.A. Stroh, for the appellant

Dana M. Peebles, Miranda Lam and Paul Davis, for the
    respondents

Heard: June 28 and 29, 2016

On appeal from the order of Justice Edward P. Belobaba of
    the Superior Court of Justice, dated October 22, 2015, with reasons reported at
    2015 ONSC 5348.

Strathy C.J.O.:

A.

introduction

[1]

In
    August and September 2011, Silvercorp Metals Inc. (Silvercorp) was targeted
    by investors who shorted its shares, expecting to profit when the price fell.

[2]

To
    make sure of this, one of the short sellers anonymously released false reports
    on the internet. The share price fell and he made a quick profit of $2.8
    million. Silvercorps shareholders, on the other hand, lost $288 million in
    equity.

[3]

Twenty
    months later, the appellant commenced this proposed class action against the
    company, two executives and a mining engineering firm.
[1]
He claimed that Silvercorps share price was inflated by misrepresentations in
    its public disclosures in 2010 and 2011 and that he and other shareholders lost
    money when the price fell after corrective disclosures in September 2011.

[4]

The
    class action judge dismissed the appellants motion for leave to bring a class
    action for secondary market misrepresentation under s. 138.3 of the
Securities
    Act
, R.S.O. 1990, c. S.5. He also dismissed a motion to certify the action
    under the
Class Proceedings Act, 1992
, S.O. 1992, c. 6. The appellant says
    the motion judge erred in applying the leave test and misapprehended the
    evidence.

[5]

For
    the reasons that follow, I would dismiss the appeal.

B.

facts

[6]

Silvercorp
    is a Canadian company that owns and operates mining properties in China. Its shares
    trade on the Toronto and New York stock exchanges. The respondent Feng is the
    CEO and the respondent Tang is the former CFO.

[7]

During
    the proposed class period  March 1, 2010 to September 12, 2011
[2]
 Silvercorp released periodic public reports about its Ying Mining Project in
    China, including a technical report in each of 2010 and 2011, prepared by BK
    Exploration Associates (BK). Those reports set out the companys estimates of
    the silver, lead and zinc resources and reserves at the Ying Mining Project (the
    BK 2010 Report) and, in particular, at the SGX Mine, one of the four mines in
    the Ying Mining Project (the BK 2011 Report).

[8]

The
    first anonymous internet posting, on September 2, 2011, questioned Silvercorps
    accounting and its mineral estimates, production numbers and mineral grade
    levels. The share price fell about 10 percent. The second posting, on September
    13, caused the share price to fall a further 20 percent. Among other things,
    the posting alleged that Silvercorp had overstated the quantity and quality of
    its mineral resources and reserves at the project.

[9]

The next
    day Silvercorp issued a press release attempting to refute these allegations
    and to show that its revenues and production numbers were correct. Schedule 4
    to the press release reconciled production to revenue, as reported in the
    companys financial statements for the Ying Mining Project for the calendar
    years 2006 to mid-2011.

[10]

The internet postings
    and the decline in share price caused the B.C. Securities Commission to investigate
    Silvercorps disclosures related to the Ying Mining Project. Among other
    things, the commission asked Silvercorp to retain an internationally recognized
    consulting firm to prepare new technical reports.

[11]

Silvercorp retained
    AMC Mining Consultants (Canada) Ltd. (AMC), one of the worlds largest
    independent mining consultancy firms. In June 2012, Silvercorp released AMCs
    updated technical report (the AMC 2012 Report). This report summarized Silvercorps
    reported ore production (over the period 2005 to 2011) and updated the
    estimates of future ore production, based on exploration and development work
    that had been completed by Silvercorp since the release of the BK 2011 Report.

[12]

The B.C. Securities
    Commission did not pursue its investigation of Silvercorp after the delivery of
    the AMC 2012 Report. Nor did it require Silvercorp to restate its financial
    statements. It did, however, pursue the shareholder responsible for the
    anonymous internet postings, ultimately concluding that while his conduct was unsavory
    and morally unsupportable, he had not committed a prohibited act.
[3]


C.

the
    PLEADING

[13]

In his second fresh as
    amended statement of claim, filed on August 15, 2014, the appellant advanced
    three claims: (1) a statutory and a common law claim for misrepresentation; (2)
    a statutory claim for failure to make timely disclosure; and (3) a common law
    claim in negligence alleging that Silvercorp co-authored and published the BK
    2010 and 2011 Reports that it knew or should have known had not been prepared
    in accordance with industry standards or properly audited.

[14]

The statement of claim
    in a class action under s. 138.3 of the
Securities Act
serves two
    important purposes. First, it identifies the misrepresentations on which the
    statutory claim is based and gives particulars of the alleged correction of
    those misrepresentations. Second, it defines the scope of the class action. It
    thus provides the framework for the application of the leave test under s. 138.8
    and of the test for certification under s. 5(1) of the
Class Proceedings
    Act, 1992.

[15]

A statement of claim
    asserting the statutory cause of action under s. 138.3(1) of the
Securities
    Act
should set out, with particularity: (a) the specific misrepresentation(s)
    on which the claim is based; (b) the document(s) or statement(s) containing the
    representation(s); (c) the date(s) of the representation(s); (d) the date(s) on
    which the misrepresentation(s) was (were) publicly corrected; and (e) the document(s)
    or statement(s) containing the corrections. Further particulars may be required
    depending on the nature of the documents containing the representations and the
    parties sought to be joined as defendants.

[16]

The appellants statement
    of claim lacked focus and particularity. First, it did not identify which words
    or figures, in which documents and on which dates, were untrue and therefore, constitute
    misrepresentations. Instead, it referred to about a dozen corporate disclosures
    over 18 months.

[17]

Nevertheless, the
    motion judge exercised his discretion and granted the appellants request, made
    during final argument, for an order under s. 138.3(6) of the
Securities Act
to treat the multiple misrepresentations as a single misrepresentation.
    The motion judge did so on the basis that the alleged misrepresentations had a
    common subject matter dealing with mining resource estimates, production
    numbers or grade levels.

[18]

Second, the pleading
    failed to link the alleged misrepresentation to any corrective disclosure, or
    identify what correction was made, and when. This issue was, to some extent,
    addressed when the motion judge granted the appellants motion to file
    evidence, after the hearing, of the September 13 anonymous internet posting,
    concluding that a document of this nature could qualify as corrective
    disclosure and further, that it defined the end of the class period.

[19]

What emerges from the
    statement of claim, however, is that the appellant alleged that Silvercorp had misrepresented
    the quality and quantity of its mineral resources and reserves in its public
    disclosures, understating the quantity of ore it was milling, and overstating
    the quality of the minerals it was producing. Put another way, it was alleged
    that Silvercorp was artificially keeping its production levels up by mining
    more, lower quality ore, than it was disclosing.

D.

the expert
    evidence

[20]

The plaintiffs key
    expert witness was Mohan Srivastava, a professional geologist. His first
    report, dated June 12, 2013, criticized the quality of BKs work and claimed that
    it resulted in Silvercorp underreporting the amount of material delivered to
    the mill from the SGX Mine and overestimating the grade of the ore being
    produced. He described this as high grading, namely scrambling to get extra
    tonnage through the mill in order to maintain metal production targets when
    grades turn out to be lower than expected. He stated that the 2010 and 2011 BK
    Reports should have commented on the discrepancies between previous predictions
    and actual production. Nowhere in his first report, however, did Mr. Srivastava
    identify misrepresentations in Silvercorps disclosures forming the basis of
    the statutory claim.

[21]

Silvercorp filed a
    report by Eugene Puritch, P.Eng., a mining geologist, who opined that Mr.
    Srivastavas criticisms of BK were irrelevant, inaccurate and unsupported. He
    also expressed the opinion that Silvercorp was not high grading.

[22]

However, the core of
    the plaintiffs case, and the defendants rebuttal of it, came in subsequent
    reports, the first prepared by Silvercorps expert, Patrick Stephenson, dated
    April 17, 2014, and the second, a further report, prepared on behalf of the
    appellant, by Mr. Srivastava, dated August 20, 2014.

[23]

Mr. Stephenson was AMCs
    principal geologist and had been personally involved in the preparation of the
    AMC 2012 Report. His affidavit responded to the appellants pleading concerning
    that report. He deposed that AMC had
not
concluded
    that Silvercorp had overstated the quantity or quality of its mineral production
    at the Ying Mining Project for the years 2009 to 2011. He stated that there was
    no material discrepancy between the production figures reported in the AMC
    2012 Report and the figures contained in Silvercorps public disclosures for
    2010 and 2011. He explained the reasons for the apparent differences between
    the figures, including the use of different periods (calendar year versus fiscal
    year), the use of different measurement units (dry tonnes versus the inclusion
    of moisture) and the use of different mine areas and different mines. Further,
    as the motion judge noted, AMC was asked to take into account
updated
exploration and production information developed
    since the preparation of the BK 2011 Report.

[24]

Mr. Stephenson concluded
    that when the figures were adjusted to take these differences into account,
    there were no material differences between the production numbers (by tonnage
    and grade) reported by Silvercorp in its contemporaneous public disclosures,
    and the production numbers in the AMC 2012 Report.

[25]

Mr. Srivastavas second
    report was delivered four months after Mr. Stephensons. It purported to
    address the differences between Silvercorps disclosures during the class
    period, as summarized in Schedule 4, and those contained in the AMC 2012
    Report. He stated that the mine production data reported in the two documents
    did not match, and that the differences were material. He concluded that this
    supported the allegation that Silvercorp had been overstating the grades of
    silver and the revenues at the Ying Mining Project.

[26]

However, nowhere in
    Mr. Srivastavas second report or affidavit did he address Mr. Stephensons
    evidence that purported to explain and reconcile the figures contained in the
    two documents.

E.

the motion
    judges reasons

[27]

In first addressing
    the leave requirements under s. 138.8, the motion judge referred to the
    decision of the Supreme Court of Canada in
Theratechnologies Inc. v. 121851
    Canada Inc.
, 2015 SCC 18, and the decision of this court in
Green v.
    Canadian Imperial Bank of Commerce
, 2014 ONCA 90,
[4]
expressing the question before him as follows:

after considering all of the evidence presented by the
    parties, does any part of the plaintiffs case have a reasonable or realistic
    chance of success at trial. Or is the plaintiffs case so weak or has it been
    so successfully rebutted by the defendants that it has no reasonable
    possibility of success?

[28]

The motion judge then
    identified as the primary focus of the appellants claim, that the AMC 2012 Report
    showed that the representations about mineral production and grade levels set
    out in the BK 2010 and 2011 Reports, and as further documented in Schedule 4,
    were overstated and untrue. Specifically, the appellant alleged that the
    earlier figures inflated the share price, causing damage to shareholders when
    the truth was allegedly revealed.

[29]

The motion judge found
    that Mr. Srivastavas evidence


that
    the AMC 2012 Report showed that the mineral production and grade levels set out
    in the BK 2010 and 2011 Reports were over-stated and untrue


was completely undermined by Mr. Stephensons evidence. Mr. Stephensons
    evidence was that, properly understood, the figures used in the AMC 2012 Report
    and the BK 2010 and 2011 Reports were substantially the same. The motion judge
    noted that Mr. Stephenson was not cross-examined on this aspect of his
    evidence. Nor was he contradicted by Mr. Srivastava in his second report.

[30]

The motion judge
    concluded that Mr. Srivastava had failed to make necessary adjustments to the
    figures to compare them  he was comparing apples to oranges. He stated, at
    para. 52:

Given that the detailed evidence of Mr. Stephenson, who was
    directly involved in the preparation of the 2012 AMC Report, stands completely
    uncontroverted I am obliged to find on the allegation of misrepresentation that
    the plaintiff has not cleared the OSA leave standard. This is not a case of
    battling experts. We have a participant expert (Stephenson) who was responsible
    for the AMC 2012 Report and who explains how and why the report is about
    oranges and another expert (Srivastava) who ignores the AMC explanation
    altogether and continues to assume that he is dealing with apples.

[31]

The motion judge found
    that the appellants misrepresentation claim was so weak or has been so
    successfully rebutted by the defendants that it has no reasonable possibility
    of success.

[32]

The motion judge also
    found that there was no support, either in the pleadings or in the evidence,
    for the claim that Silvercorp had failed to make timely disclosure of material
    changes in its production figures.

[33]

Based on this courts
    decision in
Musicians Pension Fund of Canada (Trustee of) v. Kinross Gold
    Corp.
, 2014 ONCA 901, the motion judge found that the common law
    misrepresentation claim was destined to fail and should not be certified. He also
    found that the plaintiffs negligence pleading was essentially a pleading of
    negligent misrepresentation, which was duplicative and should not proceed.

F.

analysis

[34]

In its appeal, the
    appellant argues that the motion judge erred, in respect of his leave ruling,
    by:

(a)

misapplying the test for leave
    under s. 138.8 of the
OSA
and misapprehending the evidence on the motion;

(b)

mischaracterizing the nature of
    the appellants claim as a comparison between Schedule 4 and the AMC 2012
    Report and, consequently, failed to consider other relevant evidence, including
    the shortcomings in the BK 2010 and 2011 Reports and the appellants claim that
    Silvercorp knew or should have known that the reports were negligently prepared;

(c)

refusing the appellants request
    for leave to amend the pleadings to plead negligence
simpliciter
;

and

(d)

excluding a draft affidavit of
    Mr. Stephenson and certain email communications.

(1)

Did the motion judge err in applying the leave test?

[35]

Under s. 138.8(1) of
    the
Securities Act
, leave of the court is required to proceed with a
    statutory misrepresentation claim. Leave will only be granted if the court is
    satisfied that (a) the action is brought in good faith and (b) there is a
    reasonable possibility that the action will be resolved at trial in favour of
    the plaintiff.

[36]

The appellants
    central argument is that the motion judge applied a higher leave standard than
    that set out by the Supreme Court of Canada, which requires only that the
    plaintiff show a plausible analysis of the applicable legislative provisions,
    and
some credible evidence in support of the claim

    [emphasis added]:
Theratechnologies Inc. v. 121851 Canada Inc
., 2015
    SCC 18, at para. 39;
Canadian Imperial Bank of Commerce v. Green
, 2015
    SCC 60, at para. 121. The appellant argues that the motion judge misapplied the
    test set out in
Theratechnologies
by weighing the evidence on a
    balance of probabilities, turning the leave application into a mini-trial, contrary
    to the Supreme Courts direction at para. 39 in
Theratechnologies
.

[37]

I begin with the standard of review. The standard on pure questions
    of law is correctness:
Housen v. Nikolaisen
,
2002 SCC 33
,
    [2002] 2 S.C.R. 235, at para. 8. Questions of mixed fact and law lie along a
    spectrum.
Where an error can be attributed to the application of an
    incorrect standard, a mischaracterization of a legal test, or a similar error
    in principle, such an error can be characterized as an error in law, subject to
    a correctness standard of review:
Housen v. Nikolaisen
, at paras. 33,
    36.

[38]

In this case, the application of the leave test to a body of facts
    is a question of mixed fact and law. The issue, as framed, raises questions
    about the motion judges characterization of the legal test and asserts that he
    applied an overly onerous test. As such, it attracts a correctness standard of
    review.

[39]

The appellant argues
    that once the plaintiff establishes both a plausible analysis of the
    legislation and some credible evidence, the test is satisfied and leave should
    be granted. The appellant further argues that the motion judge acknowledged that
    he had raised some credible evidence when, after summarizing the appellants
    evidence, and in particular the evidence of Mr. Srivastava, he said, at para.
    44:

If this was the entirety of the evidence, I would have granted
    leave under s. 138.8 of the OSA. The plaintiff would have established a
    reasonable possibility of success at trial. But for this: Mr. Srivastava did
    not respond to or even mention the earlier AMC [Stephenson] affidavit filed by
    the defendants.

[40]

The appellant submits
    the motion judge should have stopped there. He argues that by analyzing Silvercorps
    evidence and weighing it against that proffered by the appellant, the motion
    judge, in effect, imposed an obligation on the appellant to fully respond to
    the affidavit evidence presented by Silvercorp. This approach, the appellant
    argues, is inconsistent with the purpose and spirit of the legislation to
    screen out only plainly unmeritorious claims.

[41]

I do not accept the
    appellants submission that scrutiny of the evidence on a leave application
    should be so limited. In my view, the reasonable possibility requirement of
    the leave test requires scrutiny of the merits of the action based on all the
    evidence proffered by the parties. Far from undermining the objective of the
    legislation, such scrutiny of the entire body of evidence is necessary to give
    effect to the purpose of the screening mechanism.

[42]

As noted in several
    decisions of this court, s. 138.8(1) was enacted to address concerns that
    existing safeguards were not sufficient to prevent unmeritorious claims:
Goldsmith
    v. National Bank of Canada,
2016 ONCA 22, at paras. 26-28;
Green v.
    Canadian Imperial Bank of Commerce
, 2014 ONCA 90;
Kinross
. Abella
    J. noted in
Theratechnologies Inc.
, at para. 38,

that in
    response to this concern s. 138.8 was meant to create a robust deterrent screening
    mechanism so that cases without merit are prevented from proceeding and further,
    that the assessment requires a 
reasoned consideration of
    the evidence
to ensure that the action has some merit [emphasis added].

[43]

It follows from these
    comments that a reasoned consideration of the evidence must include scrutiny
    of the evidence proffered by both sides, and some weighing of the defence
    evidence against that adduced by the plaintiff. To suspend the analysis when
    the plaintiff has presented a case that could satisfy the reasonable
    possibility test is inconsistent with the leave test acting as a robust deterrent
    screening mechanism. Abella J.s endorsement of Belobaba J.s comments in
Ironworkers
    Ontario Pension Fund (Trustee of) v. Manulife Financial Corp
., 2013 ONSC
    4083, that s. 138.8 should operate as more than just a speed bump, is a clear
    indicator that the motion judge must do more than simply ascertain whether the
    plaintiff has presented evidence of a triable issue. Instead, the motion judge
    must review all the evidence adduced by both parties to ascertain whether there
    is a reasonable or realistic chance that the action will succeed:
Theratechnologies
,
    at paras. 38 and 39.

[44]

Moreover, as this
    court noted in
Kinross
, at para. 56
,
and
Goldsmith,
at
    para. 33, the statute itself confirms that some weighing of the evidence is anticipated
    by the express provisions of the
Securities Act
. Subsection 138.8(2)
    contemplates that both parties shall file affidavit evidence setting out the
    material facts on which each intends to rely on the leave application. Further,
    s. 138.8(3) explicitly provides for the right to cross-examine the deponents of
    the affidavits filed. These mechanisms would be meaningless if, as the
    appellant suggests, leave must be granted where the plaintiffs evidence,
    viewed in isolation, could satisfy the reasonable possibility of success at
    trial test. I agree with Cronk J.A.s comments at para. 56 of
Kinross
,
    adopted by Pardu J.A. in
Goldsmith
at para. 33, that such a
    restrictive treatment of the evidence would render the leave requirement
    hollow.

[45]

The judge was not
    limited to a consideration of the plaintiffs evidence. He was required to
    consider the evidence of both parties, keeping in mind the relatively low
    merits-based threshold, and the limitations of the record before him. He was
    entitled, indeed required, to undertake a critical evaluation of all the
    evidence and this necessarily required some weighing of the evidence, drawing
    of appropriate inferences and the finding of facts established by the record:
    see
Theratechnologies
at paras. 38-39;
Kinross
at paras. 52,
    54-55, 59.

[46]

Apart from the issue
    of weighing the evidence, the appellant argues that the motion judge, in
    concluding that the appellant had failed to satisfy the leave requirement, made
    erroneous findings which led him to conclude that the appellant had no chance
    of success at trial. First, the appellant argues the motion judge erred in
    concluding that the plaintiff had not challenged Mr. Stephensons affidavit
    evidence, finding that his evidence was uncontroverted. Second, the appellant
    argues that there was no basis for the motion judge to conclude that Mr.
    Stephensons affidavit so successfully rebutted Mr. Srivastavas affidavit
    because Mr. Stephenson was not retained as an expert on the issues before the
    court, but rather, only to address factual matters and address erroneous claims
    about the AMC 2012 Report.

[47]

I do not accept either
    submission. The motion judge concluded that Mr. Stephenson, although
    cross-examined at length, had not been cross-examined on the factual
    corrections and clarifications he made in his affidavit, corrections and
    clarifications which went to the factual heart of Mr. Srivistavas opinion.
    Specifically, Mr. Stephenson, the very person responsible for the AMC 2012
    Report, stated that the plaintiff had mischaracterized and misunderstood a number
    of statements made by or attributed to AMC and that the production numbers,
    when properly understood, revealed no discrepancy between the AMC 2012 Report
    and the production numbers in Silvercorps MD&As for 2010 and 2011
    (summarized in Schedule 4).

[48]

It was open to the
    motion judge to examine the factual underpinnings of Mr. Srivistavas opinion
    and conclude, based on the evidence before him, that the opinion had been
    completely undermined by flawed factual assumptions.

[49]

In sum, the motion
    judge did what he was required to do. He drilled down to the foundation of the appellants
    statutory claim  that the AMC 2012 Report showed that Silvercorps statutory
    disclosures, as reflected in Schedule 4, overstated Silvercorps production and
    grade levels. When he considered all the evidence, he concluded that the
    foundation had been demolished by the defendants evidence and had not been
    repaired by the plaintiffs.

(2)

Did the motion judge mischaracterize the claim or ignore relevant
    evidence?

[50]

The appellants second
    argument is that the motion judge misapprehended the nature of the claim and
    treated it as a comparison of Schedule 4 and the AMC 2012 Report. The appellant
    argues this characterization ignored other relevant evidence about the flaws in
    the BK 2010 and 2011 Reports and, specifically, the argument that Silvercorp
    knew or should have known that those reports, used to promote the SGX Mine,
    were negligently prepared. In support of this argument, the appellant relies on
    Mr. Srivastavas first report, which was critical of BKs methodology, and on
    the fact that the B.C. Securities Commission began an investigation into
    Silvercorp based, in part, on its concerns about BKs compliance with mining
    reporting standards.
[5]

[51]

Issues involving a
    judges interpretation of the evidence are questions of mixed fact and law and
    should not be overturned absent palpable and overriding error:
Housen v.
    Nikolaisen
, at paras. 36-37;
St. Jean v. Mercier
, 2002 SCC 15, at
    paras. 48-49. Similarly, findings of fact and inferences of fact may be
    interfered with on appeal only where there is a palpable and overriding error:
Housen
    v. Nikolaisen
, at paras. 10, 25;
H.L. v. Canada
, 2005 SCC 25,
    [2005] 1 S.C.R. 401, at para. 76.

[52]

Applying this
    standard, I do not accept the appellants submission that the motion judge
    mischaracterized his claim. The motion judge said, at para 12 of his reasons:

[T]he gist of the plaintiffs complaint is that the AMC 2012
    Report shows that the earlier representations about mineral production and
    grade levels as set out in the BK 2010 and 2011 Reports and as further
    documented in Schedule 4, were over-stated and, in a word, untrue. The
    allegation of misrepresentation arises, in essence, from a comparison of the
    AMC 2012 Report with Schedule 4.

[53]

I agree. The focus of
    the appellants negligent misrepresentation claim was indeed the alleged
    discrepancies between Schedule 4 (which set out Silvercorps disclosures of
    tonnage, production and grades, for the years 2006 to June 2011, as contained
    in its financial statements) and the AMC 2012 Report.

[54]

I do not accept the
    appellants submission that the motion judge, in focusing his analysis on the
    key documents, ignored other evidence relevant to the appellants argument that
    the BK 2010 and 2011 Reports were negligently prepared. First, the motion judge
    was aware of the allegations, specifically mentioning the reports at paras. 42
    and 53 of his reasons.  He mentioned them again in his reasons denying
    certification of the negligence claim, finding, at para. 66:

Put simply, the negligence pleading  that [Silvercorp]
    co-authored and published technical reports that overstated the quantity and
    quality of mineralized ore that in turn resulted in shareholder losses when
    these alleged misrepresentations were corrected  is in substance a pleading of
    negligent misrepresentation.

[55]

Second, the motion
    judge specifically considered the exchange of letters between Silvercorp and
    the B.C. Securities Commission (which referenced possible negligence in the
    preparation of the BK 2010 and 2011 Reports) as another possible source of
    evidence of misrepresentation, but concluded that the discrepancies noted by
    the B.C. Securities Commission were not enough to clear the leave hurdle.

[56]

Finally, Mr. Srivastavas first report did not speak to any
    specific misrepresentations and was of no significance to the statutory
    misrepresentation claim.

[57]

Based on the evidence
    before him, or the lack of evidence, the motion judge concluded that the
    allegations of negligence in the preparation of BKs reports were not
    sufficient to clear the leave hurdle. The appellant has failed to demonstrate
    any palpable and overriding error in his assessment of the evidence.

[58]

To conclude, the motion
    judge did not mischaracterize the claim or fail to consider relevant evidence.
    He dealt with the case presented by the appellant and the evidence presented by
    the appellant and he found it wanting. The appellants attempt on appeal to
    refocus the pleading and the evidence does not succeed.

(3)

Did the motion judge err in refusing the appellants request for leave
    to amend the pleadings to plead negligence
simplicter
?

[59]

The motion judge
    dismissed the appellants motion to amend the statement of claim to plead
    negligence
simpliciter
with greater clarity. He found that an
    amendment at that late stage would be unfair to the respondent and, in any
    event, the claim was subsumed by the negligent misrepresentation pleading. The
    appellant now contends that the negligence
simpliciter
claim is an
    allegation that the BK Technical Reports were prepared negligently and cannot
    be relied upon. The allegation that the reports were negligently prepared does
    not give rise to a separate cause of action against the respondents. I find no
    error in the motion judges ruling.

(4)

Evidentiary rulings

[60]

The appellant
    challenges two evidentiary rulings. First, the motion judge struck from the
    record three emails sent by Mr. Klohn, one of the principals of BK, to
    Silvercorp. They were attached to an affidavit of one of the appellants
    lawyers. The motion judge ruled that the emails were hearsay, their author was
    available to give evidence and the emails did not meet the necessity
    requirement. I see no error in this conclusion. The emails were, in any event,
    of marginal probative value.

[61]

The appellant also
    takes issue with the motion judges refusal to admit an earlier draft of Mr.
    Stephensons affidavit on the ground that he was a participant expert. In so
    doing, he referred to the decisions of this court in
Westerhof v. Gee
    Estate
, 2015 ONCA 206, at paras. 6, 61-64, 70 and 81-82; and
Moore v.
    Getahun
, 2015 ONCA 55, at para. 70.

[62]

I see no error in the
    motion judges ruling. As this court held at para. 60 of
Westerhof:

a witness with special skill, knowledge, training, or
    experience who has not been engaged by or on behalf of a party to the
    litigation may give opinion evidence for the truth of its contents without
    complying with rule 53.03 where:

·

The opinion to be given is based on the witnesss observations of
    or participation in the events at issue; and

·

The witness formed the opinion to be given as part of the
    ordinary exercise of his skill, knowledge, training and experience while
    observing or participating in such events.

[63]


As discussed
    above, Mr. Stephensons affidavit addressed certain mischaracterizations of a
    report he prepared, in his capacity as principal geologist for AMC. His
    observations were derived from [his] observation of or involvement in the
    underlying facts.:
Westerhof,
at para. 61.  He was not retained as an
    expert witness for Silvercorp. In any event, the motion judge also noted that the
    earlier draft was not necessary for the purpose for which the appellant was
    advancing it, namely to show that Silvercorp had retained AMC as a direct
    response to the concerns raised by the B.C. Securities Commission, a fact that
    had already been acknowledged by Silvercorp.

G.

ancillary issues

[64]

I turn to two
    ancillary issues.

(1)

Certification

[65]

Relying on this
    courts decision in
Kinross
, the motion judge dismissed the
    certification motion, concluding that the common law misrepresentation claim
    was bound to fail, because it rested on the same evidentiary foundation as the
    statutory claim. There were no oral submissions on this issue and I agree with
    the motion judges conclusion, for the reasons he gave.

(2)

Costs appeal

[66]

The appellant appeals
    the motion judges costs award of $500,000. He says the amount is excessive and
    that the motion judge erred in principle in not giving effect to access to
    justice considerations and the objectives of Part XXIII.1 of the
Securities
    Act.

[67]

The motion judge
    considered this argument and concluded that access to justice considerations
    that may prevail on a certification motion are less applicable to a leave motion
    under Part XXIII.1, which involves a significant merit-based analysis.

[68]

I see no error in
    principle in this conclusion. Nor can I say it is plainly wrong. See:
Hamilton
    v. Open Window Bakery Ltd.
, 2004 SCC 9, at para. 27. The motion judges
    decision on costs reflected his experience with class actions in general and
    with securities class actions in particular. It also reflected his familiarity
    with this proceeding, having case managed it from the outset. The costs awarded
    were in line with decisions in other cases: see
Silver v. Imax Corp.
,
    2010 ONSC 4017 ($385,000);
Dugal v. Manulife Financial Corp.
, 2013
    ONSC 6354 ($467,234 payable forthwith and a further $100,000 payable in the
    cause).  I would therefore defer to the exercise of the motion judges discretion
    on costs.

H.

conclusion
    and order

[69]

For the foregoing
    reasons, I would dismiss the appeal. It is therefore unnecessary to address the
    cross-appeal. I would award costs of the appeal to the respondents in the
    amount of $75,000.00, inclusive of disbursements and all applicable taxes.

G.R. Strathy C.J.O.

I agree David Brown
    J.A.

I agree Grant
    Huscroft J.A.

Released: August 24, 2016

GRS





[1]

The plaintiff released the engineering firm, BK Exploration Associates,
    from the action in 2014, in exchange for its agreement to cooperate with the
    plaintiff, but without monetary compensation.



[2]
The proposed class period begins with the publication of a press
    release announcing the results of the BK 2010 Report and ends the day before
    the September 13 negative internet posting that caused the 20 percent drop in
    the company share price.



[3]
The primary short-seller and author of the negative internet
    postings made $2.8 million the day after the September 13 share price collapse.
    Acting on a detailed complaint by Silvercorp in February 2013, the B.C.
    Securities Commission charged him with fraud and conduct contrary to the public
    interest. These charges were dismissed in May 2015 after a lengthy hearing. The
    Commission acknowledged that the internet postings had been carefully crafted
    to drive down the price of Silvercorp shares.



[4]
The Supreme Courts decision in
Green
had not been released at the time
    of the hearing in the court below.



[5]
Referred to as National Instrument 43-101.


