Goldsmith v. National Bank of Canada

Goldsmith v. National Bank of Canada Collection Decisions of the Court of Appeal Date 2016-01-13 Neutral citation 2016 ONCA 22 Docket numbers C60615 Judges Weiler, Karen Merle Magnuson; Pardu, Gladys I.; Benotto, Mary Lou Subject Civil Decision Content COURT OF APPEAL FOR ONTARIO CITATION: Goldsmith v. National Bank of Canada, 2016 ONCA 22 DATE: 20160113 DOCKET: C60615 Weiler, Pardu and Benotto JJ.A. BETWEEN Joanna Goldsmith Applicant (Appellant) and National Bank of Canada Respondent (Respondent) Paul J. Bates, Daniel E.H. Bach and S. Sajjad Nematollahi, for the appellant R. Paul Steep, Eric S. Block, Byron Shaw and Jessica Laham, for the respondent Heard: December 8, 2015 On appeal from the order of Justice Edward P. Belobaba of the Superior Court of Justice, dated May 20, 2015, with reasons reported at 2015 ONSC 2746, 126 O.R. (3d) 191. Pardu J.A.: A. Introduction [1] Part XXIII.1 of Ontario’s Securities Act, R.S.O. 1990, c. S-5 (“OSA“), provides a right of action against an “influential person” who “knowingly influenced” the release of a document containing a misrepresentation. Should the appellant be permitted to commence such an action against the respondent, National Bank of Canada (“NBC”)? The motion judge concluded that she should not. For the reasons that follow, I agree and would dismiss the appeal. B. background [2] Poseidon Concepts Corp. (“Poseidon”) was created in 2011 through a reorganization of Open Range Energy Corp. (“Open Range”). Before the reorganization, Open Range had two separate business segments: a tank rental business, and an oil and natural gas exploration and production business. [3] In the second quarter of 2011, Open Range’s board of directors concluded that the trading price of their company’s shares did not reflect the aggregate value of the two business lines. They also concluded that separating the two business segments would enhance shareholder value. [4] With the assistance of professional advisors, Open Range developed a plan of arrangement under which the company’s two business lines would be separated into two publicly-traded corporations. That proposal was considered by a special committee, and implemented in the fall of 2011 after being approved by the board of directors, Open Range’s shareholders, and the Alberta Court of Queen’s Bench. The oil and natural gas business and assets were spun off into a new company, and Poseidon carried on the tank rental business. [5] Poseidon then completed a successful public offering. The receipt for the final prospectus was issued on January 26, 2012. On February 2, 2012, Poseidon issued a press release announcing that it had sold common shares for gross proceeds of just over $82.5 million dollars. [6] The company’s success was short-lived. In a series of corrective disclosures made between November 2012 and February 2013, Poseidon revealed that it had materially overstated revenues and accounts receivable. In April 2013, it filed for protection under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36. Poseidon was delisted in May 2013 and its shares are now worthless. [7] Since Poseidon’s collapse, 13 separate class actions alleging misrepresentations in Poseidon’s financial statements and corporate disclosure documents have been initiated. In the present action, the appellant alleges that Poseidon’s revenue was materially overstated in two documents released by the company: a Circular (issued in connection with Open Range’s reorganization) and a Prospectus (issued in connection with the public offering). The appellant argues that NBC is liable for those misrepresentations because it was a “promoter” (and, consequently, an “influential person”) that “knowingly influenced” the release of those two documents. C. Statutory framework [8] Part XXIII.1 of the OSA provides a carefully calibrated head of liability for secondary market misrepresentations: Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60, at para. 63. Section 138.3 creates a statutory cause of action for the benefit of those who acquired or disposed of a responsible issuer’s securities between the time a document containing a misrepresentation is released by the responsible issuer and the time of its correction. [9] In addition to allowing suit against the responsible issuer (in this case Poseidon) and each director and officer who “authorized, permitted or acquiesced in the release of the document” containing the misrepresentation, s. 138.3(1) provides a cause of action against (d) each influential person…who knowingly influenced, (i) the responsible issuer or any person or company acting on behalf of the responsible issuer to release the document, or (ii) a director or officer of the responsible issuer to authorize, permit or acquiesce in the release of the document [10] Influential person is defined in s. 138.1 to mean (a) a control person; (b) a promoter; (c) an insider who is not a director or officer of the responsible issuer; or (d) an investment fund manager, if the responsible issuer is an investment fund [11] “Promoter” is defined in s. 1(1) as including: a person or company who, acting alone or in conjunction with one or more other persons, companies or a combination thereof, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of an issuer [12] Anyone who wants to commence an action under s. 138.3 must first obtain leave. Section 138.8(1) provides that: No action may be commenced under section 138.3 without leave of the court granted upon motion with notice to each defendant. The court shall grant leave only where it is satisfied that, (a) the action is being brought in good faith; and (b) there is a reasonable possibility that the action will be resolved at trial in favour of the plaintiff D. Motion judge’s decision [13] The appellant sought leave to commence the action against NBC. The motion judge accepted that the action was being brought in good faith, but he denied leave because the appellant had not demonstrated a reasonable possibility of success. [14] To begin with, the motion judge concluded that the appellant had not offered a plausible interpretation of the term “promoter” in the OSA. The motion judge concluded that to succeed at trial, “the plaintiff will have to show that the defendant bank or professional adviser provided more than just conventional banking or advisory services – rather that it directly or indirectly took the initiative in founding, organizing or substantially reorganizing the business of the issuer.” [15] In coming to that conclusion, the motion judge relied on the plain meaning of the term promoter. He also referred to the “very specific history” of the term and its definition in Canadian securities legislation, adopted directly from Rule 405 of the U.S. Securities Act of 1933. While acknowledging that the current legislative context is different, the motion judge noted that “the continuing theme as set out in the American case law remains – a Promoter is a person who ‘brings about the incorporation and organization of the corporation … brings together the persons who become interested in the enterprise, aids in procuring subscriptions, and sets in motion the machinery which leads to the formation of the corporation itself.’” To the extent that the appellant argued otherwise, the motion judge concluded that “she [was] not offering a plausible interpretation of the [promoter] provision.” [16] Next the motion judge examined the appellant’s claim that even if “something more” was required, she had provided sufficient evidence for obtaining leave. The appellant argued that NBC was a promoter because it provided loans that were essential for the reorganization. The motion judge concluded that NBC was merely engaged in ordinary commercial banking functions and was not a promoter because of those actions. [17] The appellant also argued that NBC was a promoter because of the actions of National Bank Financial (“NBF”), the former’s wholly-owned subsidiary. The motion judge concluded that the only way NBC could be liable was if NBF was acting as an agent of NBC. For a parent corporation to be liable for the acts of its subsidiary: (i) the parent must have complete control of the subsidiary such that the subsidiary exercises no discretion independently of the parent; and (ii) the subsidiary must have been incorporated for a fraudulent purpose or is being used as a shield for improper activity. The motion judge concluded that the test was not met, and therefore NBF was not an agent of NBC. [18] Even if NBF was an agent of NBC, the motion judge concluded that NBF was not a promoter. The motion judge concluded that the decisions to reorganize NBC’s business and to take Poseidon public were decisions made by Open Range’s board. Even if NBC could be liable for the actions of NBF, none of the services provided by NBF amounted to taking the initiative in “founding, organizing or substantially reorganizing the issuer’s business”. [19] Finally, the motion judge concluded that even if NBC was a promoter, there was insufficient evidence that it knowingly influenced the release of the Information Circular or Prospectus. NBC did not knowingly influence the release of the impugned documents by providing loans to the issuer, and NBF did not knowingly influence the release by acting as a financial advisor, providing a fairness opinion, or acting as an underwriter. The fact that NBF had signed the Prospectus as underwriter, as it was obliged to under the OSA, did not amount to evidence that it “knowingly influenced” its release. E. Grounds of appeal [20] While the appellant concedes that the motion judge correctly identified the applicable test, she challenges his application of that test. As an overarching point, the appellant submits that the degree of scrutiny applied by the motion judge was inappropriately high. She also makes a number of more specific submissions. [21] First, the appellant argues that the motion judge erred in concluding that the promoter provisions cannot capture the ordinary functions discharged by banks or financial advisors. She submits that the definition of the term “promoter” is an elastic one, and that the motion judge adopted too narrow a view of plausible interpretations of the applicable sections of the OSA. [22] Second, the appellant maintains her position that even if “something more” is required the evidence proffered on the motion below established a reasonable possibility of success. The appellant submits that there was a sufficient relationship between NBC and NBF on the one hand and the relevant decision makers at Open Range on the other to characterize the former as promoters. The appellant emphasizes that even the motion judge accepted that NBF played an “undeniably important role” in the reorganization. She also emphasizes that NBC provided a line of credit and consented to Open Range spinning off assets subject to security interests in favour of NBC, and that both of these were necessary for the reorganization. [23] Third, the appellant submits that the motion judge erred by rejecting the possibility that NBC and NBF knowingly influenced the release of the Circular and the Prospectus because he concluded that they were released under the direction of Open Range’s board. F. Analysis (1) Test for Granting Leave to Commence Action [24] The parties agree that the Supreme Court’s decision in Theratechnologies Inc. v. 121851 Canada Inc., 2015 SCC 18, [2015] 2 S.C.R. 106, provides the threshold the appellant must meet in order to obtain leave. At para. 39, Abella J. explains that: A case with a reasonable possibility of success requires the claimant to offer both a plausible analysis of the applicable legislative provisions, and some credible evidence in support of the claim. This approach, in my view, best realizes the legislative intent of the screening mechanism: to ensure that cases with little chance of success — and the time and expense they impose — are avoided. I agree with the Court of Appeal, however, that the authorization stage under s. 225.4 should not be treated as a mini-trial. A full analysis of the evidence is unnecessary. If the goal of the screening mechanism is to prevent costly strike suits and litigation with little chance of success, it follows that the evidentiary requirements should not be so onerous as to essentially replicate the demands of a trial. To impose such a requirement would undermine the objective of the screening mechanism, which is to protect reporting issuers from unsubstantiated strike suits and costly unmeritorious litigation. What is required is sufficient evidence to persuade the court that there is a reasonable possibility that the action will be resolved in the claimant’s favour. [Emphasis added.] [25] The Supreme Court recently confirmed that the same threshold applies on a motion seeking leave under s. 138.8 of the OSA: Green, at paras. 122, 147, & 212. [26] The appellant argues that the motion judge misinterpreted the applicable standard and turned the motion for leave into an unnecessarily onerous hurdle. Instead of resolving inconsistencies in the evidence or determining facts, the appellant submits that the motion judge should have applied “the familiar test for interlocutory factual review: is there evidence which would permit a trial judge who properly instructs him/herself on the applicable law to find in favour of the plaintiff?” [27] In my opinion, the standard suggested by the appellant is inappropriately low. In “Proposal for a Statutory Civil Remedy for Investors in the Secondary Market and Response to the Proposed Change to the Definitions of ‘Material Fact’ and ‘Material Change’”, CSA Notice 53-302, reproduced in (2000), 23 OSCB 7383, at p. 5, the Canadian Securities Administrator (CSA) noted that there was widespread concern that the proposed reforms, that culminated in Part XXIII.1, might expose “issuers and their long term shareholders to frivolous, coercive, and costly litigation (‘strike suits’).” There was a clear concern that existing safeguards were not sufficient for preventing such unmeritorious claims, and that such suits would “expose corporate defendants to proceedings that cause real harm to long-term shareholders and resulting damage to our capital markets.” [28] The CSA proposed a screening mechanism, eventually enacted in s. 138.8, with those concerns in mind. At p. 6, the CSA provided the following rationale for the proposed screening mechanism: This screening mechanism is designed not only to minimize the prospects of an adverse court award in the absence of a meritorious claim but, more importantly, to try to ensure that unmeritorious litigation, and the time and expense it imposes on defendants, is avoided or brought to an end early in the litigation process. [Emphasis added.] [29] Those concerns have been adopted in the applicable jurisprudence. In Theratechnologies, at para. 38, Abella J. explained that: [The] courts must undertake a reasoned consideration of the evidence to ensure that the action has some merit. In other words, to promote the legislative objective of a robust deterrent screening mechanism so that cases without merit are prevented from proceeding, the threshold requires that there be a reasonable or realistic chance that the action will succeed. [30] Abella J. also endorsed the views of Belobaba J. in Ironworkers Ontario Pension Fund (Trustee of) v. Manulife Financial Corp., 2013 ONSC 4083, 44 C.P.C. (7th) 80. In Ironworkers, at para. 41, Belobaba J. indicated that the standard applied on a motion seeking leave under s. 138.8 should be more stringent than that applied on a motion to strike. [31] In Theratechnologies, at para. 36, Abella J. also held that the screening mechanism was intended to be a higher standard than the threshold for the authorizing a class action. And in Green, at para. 76, Côté J. noted that the screening mechanism in Part XXIII.1 was introduced, in part, because the certification process under the Class Proceedings Act, S.O. 1992, c. 6, did not provide sufficient safeguards. [32] Therefore, the threshold applied on a motion seeking leave under s. 138.8 is more stringent than that generally applied on interlocutory review, consistent with the objective of screening out unmeritorious claims at an early stage. [33] Furthermore, the motion judge did not err by scrutinizing the evidence proffered by the appellant. Applying that scrutiny is necessary to give effect to the purpose of the screening mechanism. Moreover, given that s. 138.8 provides for the filing of competing affidavit evidence and for cross-examination on that evidence, it clearly anticipates such scrutiny. As noted by Cronk J.A. in Bayens v. Kinross Gold Corporation, 2014 ONCA 901, 61 C.P.C. (7th) 1, at para. 56, if motion judges were prevented from scrutinizing the evidence proffered by an applicant, “the leave requirement would be hollow indeed.” [34] To conclude, in order to obtain leave under s. 138.8, a claimant must offer both a plausible interpretation of the applicable legislative provisions and credible evidence sufficient to convince the court that there is a reasonable possibility that the action will be resolved at trial in the claimant’s favour. (2) Has the Appellant Offered a Plausible Interpretation of the term Promoter? [35] As noted, the appellant argues that the motion judge adopted an overly narrow view of the promoter provisions and, consequently, erred in concluding that her preferred interpretation is not plausible. The appellant submits that the legislature used “elastic” terms when drafting the relevant provisions, and that the “legislature intended to capture a spectrum or orbit of actors who work behind the scene and who influenced the decision maker’s actions.” She submits that “taking the initiative” only requires that someone “influenced the decision maker” or “indirectly participated in the initiative, alone or in conjunction with others” and that the “initiative functionality” is met by “influencing or participating with the decision makers.” [36] The appellant’s proposed interpretation must be rejected. When considered in light of the relevant text, context, and legislative purpose, the appellant’s interpretation is clearly implausible. That conclusion is supported by the jurisprudence from other jurisdictions defining the term promoter, and by considering the objectives of both Part XXIII.1 and the OSA as a whole. (a) Text, Context, and Purpose of Promoter Provisions [37] A court engaged in statutory interpretation must read the words of an act in their grammatical and ordinary sense harmoniously with the scheme of the act, the object of the act, and the intention of the enacting legislature: Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559, at para. 26; Wilson v. British Columbia (Superintendent of Motor Vehicles), 2015 SCC 47, 476 N.R. 60, at para. 18. In other words, to determine the plausibility of the appellant’s interpretation, it must be measured against the text, context, and purpose of the relevant provisions. [38] First, to reiterate, the OSA provides that a person or company is a promoter if they, acting alone or in conjunction with others, “[take] the initiative in founding, organizing or substantially reorganizing the business of an issuer”. [39] When one considers the ordinary meaning of “[taking] the initiative” it is clear that the appellant’s interpretation is not plausible. That phrase requires a form of active and autonomous involvement in the organization or reorganization of a company. For instance, the Canadian Oxford Dictionary, 2d ed., provides a number of definitions for the term “initiative”, including the “ability to initiate things; enterprise, self-motivation” and “[the] power or right to begin something”. To initiate something is defined as to “cause something to begin”. [40] In contrast, the appellant submits that the “initiative functionality” can be met simply by “influencing or participating with the decision makers.” That interpretation accepts a level of passive involvement that is simply incompatible with “[taking] the initiative”. [41] Second, the relevant legislative context undermines the appellant’s interpretation. Part XXIII.1 provides that a promoter may be liable as an “influential person”. In addition to promoters, the definition of an influential person includes the following: · A “control person”, meaning a person or company, or combination thereof, which holds voting securities sufficient to “to affect materially the control of the issuer”. · An “insider” which includes a person or company that holds more than ten percent of the voting rights of a reporting issuer. · An “investment fund manager” which means a person or company that directs the business, operations or affairs of an investment fund. [42] Section 58(1) obliges the chief executive officer, the chief financial officer, two directors of the issuer, and “any person or company who is a promoter of the issuer” to sign a certificate contained in a prospectus. Section 61(2) provides that a receipt for a prospectus may be refused based on the financial condition or past conduct of “any of the issuer’s officers, directors, promoters, or control persons”. [43] In all of these provisions, promoters are listed alongside people and companies who exercise meaningful control over a reporting issuer’s business, such as officers, directors, and control persons. It suggests that a promoter is someone who plays a comparable role in a company’s business. It does not support the appellant’s claim that the provisions should capture people and companies who merely exercise some influence over the actual decision makers. [44] Finally, the legislative purpose, demonstrated through the legislative history, supports the same conclusion. The Allen Committee, appointed by the Toronto Stock Exchange to study a possible statutory remedy for secondary market misrepresentations, created a draft legislation that included a cause of action against promoters. In its interim report, Toward Improved Disclosure: A Search for Balance in Corporate Disclosure (Toronto: The Toronto Stock Exchange Committee on Corporate Disclosure, 1995), at p. 64, the Allen Committee provided the following rationale for that cause of action: [We] are concerned that there are many cases where a promoter deliberately declines to accept the responsibility that flows from holding office or acting as a director, and yet continues to exert a significant influence over the conduct of the corporation through economic leverage or force of personality. Such persons should not be immune from the consequences of the conduct they induce in others or their responsibility for misleading statement they make themselves. [45] A promoter is not someone who is casually connected with the issuer. It is a person or company that played a driving role in founding an issuer, and who consequently wields influence comparable to that of an officer or director. However, the appellant’s interpretation can capture people who are far removed from that level of influence. It could render liable as a promoter a lawyer who gave general advice about corporate restructuring to a board like Open Range’s or a tax advisor who provides generic advice on restructuring choices. The legislature could not have intended such an outcome when enacting Part XXIII.1. [46] The text, context, and purpose of the promoter provisions all support the conclusion that a person or company that merely provides advice for or assists during an issuer’s organization or reorganization cannot be a promoter. Therefore, because the appellant’s interpretation explicitly provides for that possibility it is simply implausible. (b) Jurisprudence about Promoters [47] As noted, the motion judge referred to the historical origins of the term promoter in securities legislation, and relied on case law restricting the meaning of that term. The appellant criticizes that choice, and argues that these decisions, arising in radically different contexts, cannot provide meaningful guidance in this case. [48] The jurisprudence at issue can provide useful guidance. The term promoter and its definition predate Part XXIII.1. Part XXIII.1 provides new causes of actions against promoters, but leaves the meaning of the term unchanged. Given that the jurisprudence considered the corresponding terms in other securities legislation that provide similar definitions, it provides useful guidance in this case. [49] The respondent has provided many decisions defining the term promoter in securities legislation in Alberta, British Columbia, and the United States. I do not intend to discuss every single decision, but a review of a few representative examples is beneficial. [50] In Re Gordian Financial Group Inc., 1995 LNABASC 250, the Alberta Securities Commission had to determine whether a respondent, Peter Santin, was a promoter and, consequently, entitled to certain exemptions provided by securities legislation in Alberta. The commission concluded that Santin was not a promoter. In coming to that conclusion, the commission made the following observations: [P]romoters are intended to be the people who are at the very heart of the issuer and the organization or reorganization of the company. It is not contemplated that persons who are casually connected to the company or who are advisers would be promoters. … It is clear that Mr. Santin was “indirectly involved” with the reorganization as was suggested by counsel for the respondent; however, being indirectly involved is not enough. The promoters are those who are central to the reorganization, and as the Act says, they must take initiative in the reorganization…they are the ones who are the very heart of the reorganization. Taking the initiative in finding target companies for the reorganization is not enough. Those are just methods of doing the reorganization. Gordian Financial was Mr. Bucci's company, and he was the one who would make the decisions as to what would happen by way of reorganization, and he was the one who was taking the initiative within the meaning of the Act. Furthermore, merely coming up with the idea that there should be a reorganization does not make one a promoter. The Board notes that if the definition was that wide, many lawyers and tax accountants would become promoters within the meaning of the Act, and that is clearly not what was intended. [Emphasis added.] [51] In Ingenito v. Bermec Corp., 441 F. Supp. 525 (S.D.N.Y. 1977), the plaintiffs had commenced an action seeking damages for alleged violations of United States’ securities legislation. One of the questions before the court was whether the defendant, State Mutual Life Assurance Company of America, was a promoter and liable for failing to disclose that fact. The court noted that, among other things, the plaintiffs relied on State Mutual’s status as a lender. The court rejected the proposition that State Mutual was a promoter and, in coming to that conclusion, made the following observations: Once again, plaintiff’s counsel has confused the colloquial meaning of “promoter” with its statutory import. As a matter of law, State Mutual's loan to Black Watch does not constitute taking "initiative in founding and organizing the business or enterprise" of Black Watch. To be found a promoter within the meaning of that subsection, one must either be active in the issuer's business, or actively engaged in the formation of the issuer. The latter form of promoter activity invariably involves more than a general loan to an issuer (which is all that plaintiffs have offered in support of this branch of their promoter claim); to be an active participant in formation, one must be involved either in the transactions by which the issuer acquires the properties essential to the conduct of its business, or in the mechanics of the underwriting and registration processes. [Citations omitted.] [52] In Re Cartaway Resources Corp., 2000 LNBCSC 156, the British Columbia Securities Commission had to decide, among other things, whether the respondents Robert Hartvikson and Blayne Johnson were promoters and in a conflict of interest. In contrast to Gordian Financial and Ingenito, in this case the commission concluded that the respondents were promoters. In rendering its decision, the commission relied on the following: We find that Hartvikson and Johnson were the driving force behind Cartaway's reorganization as soon as they were offered the Koguluk claims on April 4, 1995. From then on to at least July 4, 1995, all of their actions were to effect the control group's common purpose to change Cartaway's business direction by vending in some new business venture and finance it going forward through First Marathon. In short they found Cartaway's new business, new management and most of its new capital. Consequently Hartvikson and Johnson were promoters of Cartaway within the meaning of "promoter" in section 1(1) of the Act and ought to have been disclosed as such in the offering memorandum of June 23, 1995 and in the prospectus of November 3, 1995. [Emphasis added.] [53] There is a clear theme running through the applicable jurisprudence: a promoter is someone who plays a vital or leading role in the organization or reorganization of an issuer’s business. Anything less is insufficient. Merely being involved in organizing or reorganizing a business is not sufficient, even if that involvement involves important services or support. Rather, one must be an “active participant”, a “driving force” behind the reorganization, or at the “very heart of the issuer and the organization”. (c) Objectives of Part XXIII.1 and the OSA [54] The conclusion that the appellant’s proposed interpretation is implausible is supported by the objectives of Part XXIII.1 and the OSA as a whole. [55] Section 1.1 of the OSA provides that the legislation has two purposes: (a) to provide protection to investors from unfair, improper or fraudulent practices; and (b) to foster fair and efficient capital markets and confidence in capital markets. As noted in Drywall Acoustic Lathing and Insulation, Local 675 v. SNC-Lavalin Group Inc., 2015 ONCA 718, at para. 46, the statutory scheme in Part XXIII.1 also has two purposes: (a) facilitating and enhancing access to justice for investors; and (b) deterring corporate misconduct and negligence. [56] The appellant’s interpretation is completely unconnected from the goals of protecting investors and deterring corporate misconduct. That interpretation imposes liability solely on the basis of proximity to decision makers, without any regard for the actual role played by the party in question. The only effect of adopting such an expansive definition, as opposed to a carefully tailored one, would be to capture people and companies who have little or no control over a corporation’s governance and its disclosure practices. Logically, such an expansive definition would not promote greater protection for investors or deter corporate misconduct. [57] Significantly, the appellant’s interpretation undermines the goal of fostering fair and efficient capital markets. The appellant admits that her interpretation will capture (and impose the risk of liability on) ordinary, everyday activities of many capital market participants. Particularly if that increased liability comes without any improvement in the disclosure practices of reporting issuers, the interpretation risks doing significant harm to the capital markets in this province. [58] Arguably, the appellant’s interpretation would promote the goal of facilitating access to justice for investors, if that purpose is understood only as providing investors an avenue for securing damages. Even if that is the case, as noted by Hoy A.C.J.O. in Drywall, at para. 49, Part XXIII.1 includes “various defences and other important limitations that temper its goals of providing access to justice for aggrieved secondary market investors” and “[the] objectives of Part XXIII.1 must be considered in light of these countervailing limitations.” [59] Finally, the appellant’s interpretation conflicts with the general approach taken by Part XXIII.1. As noted by Côté J. in Green, at paras. 63 and 67-69, Part XXIII.1 was enacted after a long period of study and is a carefully calibrated enactment that “strikes a delicate balance between various market participants.” That balance finds expression in the many limits built into the scheme itself, and is a central element of the legislative purpose animating Part XXIII.1. [60] The appellant’s proposed interpretation is out of step with that carefully calibrated scheme. In oral argument, the appellant submitted that the applicability of the promoter provisions should depend on the degree of proximity between the decision makers and the person in question. The closer a person is to the decision makers, the more likely that they are a promoter. Simply put, such a nebulous, indeterminate, and far-reaching basis for liability does not respect the careful balance struck in Part XXIII.1. (d) Conclusion on Interpretation [61] The interpretation advanced by the appellant is not plausible. That interpretation is undermined by the text, interpretation and purpose of the promoter provisions. The objectives of Part XXIII.1 and the OSA as a whole, and the jurisprudence interpreting the term promoter in comparable securities legislation in other jurisdictions support that conclusion as well. [62] I agree with the motion judge that “something more” is required before NBC can be found to be a promoter. The motion judge suggested that a plausible interpretation would require a plaintiff to show that a defendant “took steps, directly or indirectly, to (actually) found or organize the business in question – for example, by funding the required incorporations, organizing the board of directors, actively managing the company or making the key business decisions.” [63] Of course determining whether a plaintiff has offered a plausible interpretation is something that will have to be analyzed on a case-by-case basis. However, the motion judge’s reasons provide a useful guide. It is with this guide in mind that I now turn to an examination of the evidence offered by the appellant. (3) Does the Appellant have a Reasonable Possibility of Proving that NBC was a Promoter? [64] The appellant submits that even if her proposed interpretation is implausible and “something more” is required for NBC to be a promoter, she has provided evidence sufficient to demonstrate a reasonable possibility of success. [65] In support of that submission, the appellant relies on evidence about the relationship between Open Range and both NBC and NBF. The motion judge concluded that NBF’s actions could not be attributed to NBC unless the former was an agent. The appellant challenges that conclusion. However, it is not necessary to address that argument. Even if NBF’s actions could be attributed to NBC, the appellant has not established a reasonable possibility of success. (a) Evidence Proffered by Appellant [66] The evidence provided by the appellant falls into three categories. [67] First, the appellant relies on the role played by NBC in the reorganization. NBC, as a creditor, had security interests over a number of assets involved in the reorganization, and provided its consent to Open Range spinning off some of these assets into another company. NBC also agreed to provide a credit facility for up to $75 million to Poseidon during the reorganization process. [68] Second, the appellant relies on NBF’s role as the exclusive financial advisor to Open Range in the reorganization process. In particular, she relies on evidence that NBF provided assistance in evaluating various options, and then in implementing the spin-out transaction. The appellant also relies on the fact that NBF provided a fairness opinion, which was included in the Circular. [69] Third, the appellant relies on a number of emails that, she submits, demonstrate “significant and long standing relationships” between people working at NBF and Open Range. In particular, she focuses on one Sandy Edmonstone, an employee of NBF. The appellant argues that the record discloses that he had close relationships with and exercised influence over a number of people at Open Range and Poseidon. She points to emails which suggest that Edmonstone was Poseidon’s lead banker, that he may have had a personal stake in the company’s success (and a resulting conflict of interest), and that other people saw him as wielding undue influence. (b) The Appellant has not Demonstrated a Reasonable Possibility of Success [70] The evidence provided by the appellant is insufficient to justify granting leave. Interpreted generously and taken at its highest, the evidence establishes that NBF played an important role by assisting Open Range during the reorganization. It may be credible evidence for long-standing and close relationships. It does not provide a basis for concluding that NBC or NBF took the initiative in the creation of Poseidon. [71] I agree with the motion judge’s conclusion that NBC did not become a promoter by providing a credit facility, even if it was essential for Poseidon’s liquidity during the reorganization. Moreover, subsequent developments show that Poseidon was not dependant on NBC for obtaining credit. In late 2011, Poseidon became dissatisfied with the credit facility provided by NBC and began looking for other lenders. Eventually it negotiated a $100 million credit facility with a syndicate of banks. NBC’s contribution to this second facility was smaller than that of every other member of the syndicate. [72] Equally, the fact that NBC acquiesced to certain assets being spun-off does not amount to taking the initiative. NBC’s consent did not amount to active involvement in the reorganization, but was merely passive agreement to something conceived and implemented by others. [73] Furthermore, the evidence supports the motion judge’s conclusion that NBF was not a promoter. Open Range engaged NBF as financial advisor to assist the board in its review of alternatives while it was considering a reorganization of Open Range’s business. As one would expect with any complex transaction, Open Range relied on professional advisors when developing and implementing the reorganization. None of that displaces the conclusion that the relevant decisions were made by the board of Open Range. [74] The Information Curricular states that, in the second quarter of 2011, the board concluded that the trading price of Open Range’s shares did not reflect the full value of the company’s business, and that separating the company’s two business lines would enhance shareholder value. That predates NBF’s involvement in the matter, including the earliest emails provided by the appellant. [75] The appellant refers to the fact that NBF’s fairness opinion was mentioned in the Circular, and was provided to shareholders along with the Circular. However, the fairness opinion was provided for a specific purpose. NBF provided its opinion that the consideration provided to Open Range’s shareholders in the reorganization was fair. Open Range’s board relied on it to recommend to the shareholders that they vote in favour of the proposed plan of arrangement. At its highest, the evidence shows that NBF provided an opinion that the board of Open Range relied on when making a decision about one aspect of the reorganization. [76] NBF’s role was that of a professional advisor. It provided services that the board of Open Range needed in exchange for consideration paid to it. At the end of the day, NBF’s role was to assist the board of Open Range realize their objectives; nothing in the evidence provided suggests that NBF took a central or controlling role in the reorganization. [77] Finally, the emails tendered by the appellant do not assist her case either. As noted by the motion judge, many of them are “colourful” but they are not evidence that NBC or NBF were promoters. For instance, the fact that Edmonstone knew an executive at Open Range and had gone to university with him is not a nefarious circumstance which, standing alone, permits any inference to be drawn. Similarly, an email in which two independent directors of Poseidon expressed concern over Edmonstone’s influence over an officer in December 2012 – well after the reorganization had been completed – was not significant. [78] Edmonstone made some statements that could suggest that he personally played a vital role in the reorganization. However, as noted by the motion judge, these “innocent boast[s]” cannot ground a finding that NBF was a promoter. [79] The appellant seeks to put a very sinister spin on the emails, and attempts to draw inferences that cannot be supported. The emails and the evidence in general show that people at NBF, including Edmonstone, played a significant role in realizing the reorganization. The appellant may be correct in asserting that Edmonstone had a conflict of interest. None of that is evidence that NBC or NBF took a leading role in the reorganization. [80] When evaluating the evidence presented, it is helpful to consider what role it could play if introduced at the trial the appellant seeks. In my opinion, at best, it would be evidence that would provide some support for tangential aspects of the appellant’s case. Some of the evidence provided – for instance the description of NBF’s role in the Circular or evidence about the deteriorating relationship between NBC and Poseidon over time – might actually hurt her case. However, at the end of the day, a trial judge hearing the case would likely consider the vast majority of the evidence to be irrelevant to the ultimate question. [81] The appellant has not provided evidence sufficient to demonstrate that she has a reasonable possibility of establishing that NBC “[took] the initiative in founding, organizing or substantially reorganizing the business” of Open Range and Poseidon. Therefore, the motion judge did not err by denying leave. (4) Does the Appellant have a Reasonable Possibility of Proving that NBC knowingly influenced the Release of the Impugned Documents? [82] In any event, the appellant’s motion could have been dismissed solely on the basis that she has not provided evidence showing that NBC “knowingly influenced” the release of the impugned documents. [83] The appellant alleges that NBC is liable for misrepresentations contained in documents released by Open Range and Poseidon. Section 138.3(1)(d) provides that an influential person will be responsible only if they “knowingly influenced” either the responsible issuer to release the document, or a director or officer of the responsible issuer to authorize, permit or acquiesce in the release of the document. [84] The appellant relies on the following pieces of evidence: NBF’s fairness opinion was included in the Circular, the Prospectus mentions that NBF is a “connected issuer” because its parent (NBC) was a creditor of Poseidon, and NBF signed the Prospectus in its role as underwriter. The appellant argues that all of this demonstrates that NBC may have knowingly influenced the release of the documents when considered in light of the significant role NBC and NBF played in both the reorganization and the public offering. The appellant also relies on the decision in Dobbie v. Arctic Glacier Income Fund, 2011 ONSC 25, 3 C.P.C. (7th) 261, in support of her position that an influential person who signs a document influences its release. [85] The evidence does not meet the requisite threshold. To begin with, I have already concluded that the evidence does not justify the appellant’s claim that NBC or NBF played a central or integral role in either the offering or the reorganization. [86] Moreover, the motion judge addressed all the specific pieces of evidence. The “related issuer” disclosure merely informed readers that NBC and Poseidon had a debtor-creditor relationship and nothing more. As noted, the fairness opinion only opined on one aspect of the reorganization and was subject to information and representations provided to NBF by Open Range. NBF signed the prospectus as an underwriter because it was obliged to do so under s. 59 of the OSA. The evidence provided does not support the conclusion that NBC knowingly influenced the release of either the Information Circular or the Prospectus. [87] The decision in Dobbie does not assist the appellant. In that case, after having determined that Arctic Glacier Inc. was a promoter of Arctic Glacier Income Fund, at para. 141, the court concluded that: The Income Fund has no separate business and is entirely dependent upon the operations of Arctic. The documents at issue are reports of the business of Arctic. Additionally, these reports were signed by Arctic’s officers. It follows that Arctic must have influenced the release of the impugned documents. [88] In those circumstances, a promoter’s signature supported the conclusion that the promoter knowingly influenced the release of the documents at issue. In this case, a signature that NBF was obliged to provide because of legislation does not support the conclusion that NBC, a commercial lender, or NBF, a financial advisor and underwriter, influenced the release of documents by a reporting issuer independent of them. G. Disposition [89] Accordingly, the appeal is dismissed with costs to the respondent fixed at $30,000, inclusive of disbursements and taxes. Released: (KMW) January 13, 2016 “G. Pardu J.A.” “I agree K.M. Weiler J.A.” “I agree M.L. Benotto J.A.”