Law Times

Law timeS • September 5, 2011 FOCUS PAGE 11 sion to appeal against certifi ca- tion in Silver v. Imax Corp. is one of a number of recent rulings that leave the law of misrepresen- tation in a state of uncertainty. Th e ability of aggrieved inves- tors to infer reliance on a misrep- resentation without proving it in relation to a specifi c statement in actual fact has been acknowl- edged as a possible argument, but nobody knows when the courts will make a concrete decision. Michael Robb, a partner at Siskinds LLP in London, Ont., says Silver is currently at the "meat-and-potatoes" stage of a normal lawsuit: getting into discovery and giving notice to the class. "In class actions, there are so many preliminary procedural steps. It takes a while to get to the heart and soul of the matter." Robb very optimistically predicts that it may reach trial in 18 months' time. Until then, it remains an open question whether alternative forms of re- liance will be actionable. "We were successful in de- fending a motion to dismiss the theory of alternative reli- ance," Robb notes. "Under the amendments to the Securities Act, reliance is no part of the plaintiff 's case, but we have also pleaded the common law tort of negligent represen- tation. Historically, one of the elements that must be proven is reliance. We pleaded that reli- ance could be proven in a num- ber of ways other than [to say]: 'I Contradictions leave law of misrepresentation uncertain T BY JUDY VAN RHIJN For Law Times he February 2011 de- cision by the Superior Court denying permis- read this specifi c statement and made my decision to invest.' For example, you can infer reliance based on the effi cient market theory. Th e price reacts to in- formation released and impacts the price of stock in an effi cient market. Reliance is by necessity factored into the price." As Robb points out, the court hasn't yet decided if that argu- ment is valid. "Th e question that has been decided so far in the Imax case is that it is not plain and obvious on the face of the pleading that it is not valid," he says. "My own personal opinion is that it much more realistically refl ects the way in which the market operates." Robb notes that in several pieces of recent legislation, such as the Securities Act, the Com- petition Act, and the Consumer Protection Act, there's no ele- ment of reliance in relation to false and misleading representa- tions. "Th e law of tort is con- stantly changing," he says. It's not only in Silver where the courts are allowing the argu- ment to run. In Dobbie v. Arctic Glacier Income Fund, Metzler Investment GMBH v. Gildan Activewear Inc., and McCann v. CP Ships, the courts have also decided that they can't knock the argument out at the plead- ing stage. "In all these cases where the defendant moved to strike out a pleading of an alternative theory of reliance, they were refused," says Daniel Bach of Siskinds in Toronto. He pleaded the argument in the fi rst two cases. "Th e long and short of it is that the law is in a state of fl ux." Jeremy Devereux, a part- ner at Norton Rose OR LLP, STAY ON TOP OF LEGISLATIVE DEVELOPMENTS NEW EDITION ONTARIO LABOUR & EMPLOYMENT LEGISLATION 2011-2012 PREPARED IN CONSULTATION WITH THE LAW FIRM McARTHUR VERESCHAGIN & BROWN LLP Stay up-to-date on the significant changes in labour and employment law. Fully revised, Ontario Labour and Employment Legislation 2011-2012 includes important Acts and selected regulations. • Accessibility for Ontarians with Disabilities Act, 2005 • Crown Employees Collective Bargaining Act, 1993 Join Today! New OBA Class Actions Law Section The OBA invites you to join our newest section dedicated to one of the fastest growing areas of the justice system — class actions law. 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Prices subject to change without notice and subject to applicable taxes. CANADA LAW BOOK® Untitled-3 1www.lawtimesnews.com titled-6 1 11-08-31 11:02 A 11-09-01 11:03 AM believes that until there's a decision by a higher court, the matter will remain a live issue. In the meantime, he expects that the common law tort of negligence will continue to be pleaded be- cause it's not subject to the damages caps that aff ect the statutory cause of action. Devereux has himself ar- gued against the alternative reliance theory in court. "To my mind, the need to prove individual reliance is a legal requirement set down by the Supreme Court and there shouldn't be any relaxation of that, particularly just because it's a class action," he says. He refers to Supe- rior Court Justice George Strathy's reasoning in McK- enna v. Gammon Gold Inc., in which he said that reliance must be proven on an individ- ual basis. Devereux also notes the ear- 'What you have now is case law that goes both ways,' says Jeremy Devereux. in the face of the nature of a class "I think that's lier decision of Justice Peter Cumming in Mondor v. Fisher- man. "He said that you may be able to prove reliance by infer- ence, but that doesn't relax the requirement that every single person has to prove reliance," Devereux says. what Justice Strathy was wor- ried about: that it's not really a common issue. Whether you prove reliance by saying, 'Here's what I read' or by some kind of inference, the inference is still particular to that person." In addition, Devereux notes that Justice Harriet Sachs of the Divisional Court, who heard the Devereux believes this fl ies action. motion for leave to appeal in McKenna, said that she saw no reason to doubt what Stra- thy had said. "Strathy made it clear that he does not agree with Silver v. Imax Corp. and McCann v. CP Ships," De- vereux says. "Th ose judges essentially said that you may be able to prove reli- ance by inference but they have put it off for the com- mon issues judge to decide." Specifi cally, Strathy rejected the conclusion in Silver that a plaintiff doesn't have to prove direct reliance at the certifi cation stage. "What you have now is case law that goes both ways," Devereux says. Robb expects to be pre- senting the argument during the common issues trial in Sil- ver. "At that stage, the court will determine whether we need the old way of proving reliance or whether an alternative theory is suffi cient or some hybrid in be- tween. Th e court will be decid- ing what is required for reliance to be established. At present, it is an open question. It will be an interesting road to having it determined."

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