CITATION: Coffin v. Atlantic Power Corp.

, 2015 ONSC 3686

COURT FILE NO.: CV-13-480939-CP
DATE: 20150724
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:

)
)
Jacqueline Coffin and Scott Fife
)
)
Plaintiffs / Moving Parties )
)
and
)
)
Atlantic Power Corporation, Barry )
Welch and Terrence Ronan
)
)
Defendants / Responding Parties )
)
)
)
)

Joseph Groia, Kirk Baert, Bonnie

Roberts Jones, Jonathan Ptak, David
Sischy and Garth Myers for the Plaintiffs/
Moving Parties
Benjamin Zarnett, David Conklin,
Michael Wilson and Charlie Pettypiece
for the Defendants / Responding Parties

HEARD: May 20 and 21, 2015

Proceeding under the Class Proceedings Act, 1992

Decision on Leave and Certification Motion

Justice Edward P. Belobaba

Page: 2

TABLE OF CONTENTS

Paragraph
Introduction
I.

Leave
(1) Background
(2) The alleged misrepresentation...
(3) The leave test.
(4) The volume of evidence before the court..
(5) Four points not in dispute..
(6) The parties positions.
(7) Corporate narrative
(8) Analysis.
(i)
The Q3 2012 financials and MD&A...
(ii)
The news release and earnings call.
(iii) The s. 138.4(1) issue...
(iv) The debenture prospectus
(v)
The two material change reports.
(vi) Greenhills mid-January conclusion
(vii) The notes and emails...
(9) Conclusion on leave motion..

7
10
16
22
26
32
36
71
74
83
91
95
98
100
111
123

II. Certification
(1) Scope and content..
(2) The shareholder claims..
(3) The debenture-holder claims
(4) Conclusion on certification motion..

129
131
147
152

III. Disposition..

153

Page: 3

Belobaba J.
Introduction
[1]
The plaintiffs in this proposed securities class action move for leave under s. 138.8
of the Securities Act1 (OSA) and certification under s. 5(1) of the Class Proceedings
Act2 (CPA). They say that the defendants Atlantic Power Corporation, CEO Barry
Welch and CFO Terrence Ronan misrepresented the companys ability to maintain its
dividend causing certain shareholders and debenture-holders to sustain losses when the
dividend was cut and the share price dropped.
[2]
In 2012, Atlantic Power was paying an annualized dividend of $1.15 per share.
Near the end of an earnings call in early November, 2012 the companys CEO advised
the analysts on the call that the company was confident in [its] ability to sustain the
current dividend level. Four months later, on February 28, 2013, ATP announced that it
was cutting its dividend by 65 per cent to $0.40 per share. Share prices dropped over the
next five days by more than 40 per cent, from $10.26 at the close of trading on February
28 to $5.82 on March 5, 2013. The price of the companys debentures was also affected
falling by an average of eight per cent.
[3]
The plaintiffs seek to pursue a class action on behalf of anyone who purchased
Atlantic Power common shares or debentures3 during the four-month period beginning on
November 5, 2012 and ending on February 28, 2013 (the Class Period.)
[4]
A similar class action, but only on behalf of shareholders who purchased ATP
common stock on the NYSE, was commenced in the U.S. in 2013.4 The action was
dismissed in March 2015 but the plaintiffs appealed and the appeal remains outstanding.5

Securities Act, R.S.O. 1990, c. S.5.

Class Proceedings Act, 1992, S.O. 1992, c. 6.

At the start of the Class Period, in addition to common shares, Atlantic Power had four classes of convertible
subordinated debentures that traded on the secondary market carrying interest rates of 5.6%, 5.75%, 6.25% and 6.50
%. Also, on December 3, 2012, the company raised CDN$100 Million in a public offering of 6.00% Series D
Extendible Convertible Unsecured Subordinated Debentures pursuant to a prospectus (discussed in more detail later
in these reasons.)

Page: 4

[5]
The defendants ask that the OSA leave motion be dismissed because no
misrepresentations were made and there is no reasonable possibility that the claim of
secondary market misrepresentation will succeed at trial. The defendants also ask that the
motion for certification be dismissed because the remaining claims all rest on the same
alleged factual foundation.
[6]

I will deal first with leave and then certification.

I. The Leave Motion
(1) Background

[7]
Atlantic Power (ATP) is a publicly-traded power generation company that owns
and operates power projects in Canada and the United States.6 Its shares are listed on the
Toronto and New York Stock Exchanges. The power projects sell electricity to public
utilities and large industrial customers under power purchase agreements or PPAs.
[8]
ATP is known as a dividend-paying company. Indeed, as stated in its 2011 Annual
Report, its corporate strategy is to increase the value of the company through accretive
acquisitions in North American markets while generating stable, contracted cash flows
from its existing assets to focus on the dividend payout to shareholders.7 The main
determinant of dividend level is the cash available for distribution which is primarily
the cash flow from the power projects.
[9]
The two plaintiffs, Jacqueline Coffin and Scott Fife purchased ATP common
shares several weeks before the dividend was cut.8 Ms. Coffins and Mr. Fifes primary
interest in acquiring the ATP shares was the income from the monthly dividends that

District of Massachusetts, Civil Action No. 1:13-CV-10537-IT.

In Re: Atlantic Power Corp. Securities Litigation, 2015 U.S. Dist. LEXIS 31166.

I will refer to Atlantic Power Corporation by its Toronto Stock Exchange trading symbol, ATP.

An acquisition is considered accretive if it adds to earnings per share.

Jacqueline Coffin purchased 260 ATP common shares for $11.74 per share and 186 ATP common shares at
$10.79 per share. Scott Fife purchased 5,500 ATP common shares at $12.75 per share. Both of the proposed
representative plaintiffs held all of their shares at the close of trading on February 28, 2013.

Page: 5

were being paid out at an annualized rate of $1.15 per share. Neither of them purchased
or ever owned ATP debentures. One of the original plaintiffs, Sandra Lowry, had
purchased some debentures but decided to withdraw from the litigation and her name has
since been removed on consent.
(2) The alleged misrepresentations
[10] The plaintiffs say, in essence, that the defendants are liable under ss. 138.3(1) and
(2) of the OSA for making misrepresentations about their ability to maintain the $1.15
dividend level. The OSA defines misrepresentation as an untrue statement of material
fact, or an omission to state a material fact that is required to be stated or that is necessary
to make a statement not misleading in the light of the circumstances in which it was
made.9
[11] The plaintiffs allege both misrepresentation by assertion and misrepresentation
by omission. They say the former can be found in the companys November 5, 2012
press release that accompanied the third quarter financials and in the earnings call with
analysts that took place on November 6, 2012. The November 5 press release contained
the following statement which the plaintiffs say is not true: The Company expects, based
on its growth assumptions, that there will be additional contributions from acquisitions
and dispositions, which are expected to further support the Companys continued ability
to pay its dividend. And, during the November 6 earnings call, after reviewing several
financial items, CEO Welch added this: For all these reasons taken together, were
confident in our ability to sustain the current dividend level. The plaintiffs say this
statement was also untrue and misleading.
[12]

Misrepresentation by omission is defined in the statement of claim10 as follows:

Misrepresentation by Omission means the failure to state that i)
Atlantics cash flow was unstable and that it did not have and would not
receive sufficient Cash Available for Distribution to sustain its then level
of dividends; and (ii) there was a material risk to the sustainability of
Atlantics then level of dividends and that the dividend level would have
to be cut if Atlantic was unable to make $600M-$800M of accretive
acquisitions.

OSA, supra, note 1, s. 1(1).

10

That is, in the Amended Fresh as Amended Statement of Claim.

Page: 6

[13] The plaintiffs say that misrepresentations by omission were made in the
following six documents:
(i)

The Q3 2012 interim financial statements released on November 5, 2012;

(ii)

The Q3 2012 MD&A released on November 5, 2012;11

(iii)

The press release of November 5, 2012;

(iv)

The Series D debenture prospectus dated December 3, 2012;

(v)

The Material Change Report (Form 8-K) filed on December 28, 2012
disclosing the impairment of the carrying amount for the Lake project; and

(vi)

The Material Change Report (Form 8-K) filed on February 1, 2013 disclosing
the sale of the Lake and Auburndale projects.

[14] The plaintiffs also allege under s. 138.3(4) of the OSA that the defendants failed to
disclose a material change in the companys business. The plaintiffs say the material
change occurred on or just after January 11, 2013 when financial advisor Greenhill & Co.
concluded that the companys cost of capital was becoming too high and that Greenhill
would not be able to assist ATP in executing an accretive acquisition plan that would
sustain the existing dividend.
[15] If leave to proceed is granted under s. 138.8, then any one of the alleged
misrepresentations by assertion or omission, or the alleged failure to make timely
disclosure of a material change, would allow a personal action for damages under s.
138.3(1)(2) or (4), and if certified, a class action without the need to prove reliance.
(3) The leave test
[16] An action for secondary market misrepresentation under Part XXIII.1 of the OSA
requires leave of the court. Leave will be granted under s. 138.8 if the court is satisfied
that the action is brought in good faith and there is a reasonable possibility that the
action will be resolved at trial in favour of the plaintiff.12

11

The MD&A is Managements Discussion and Analysis.

12

OSA, supra, note 1, s. 138.8.

Page: 7

[17] Here there is no suggestion that the action is not brought in good faith. Therefore,
the only issue is whether there is a reasonable possibility that the action will be resolved
at trial in favour of the plaintiff.
[18] In Theratechnologies,13 the Supreme Court provided a much-needed clarification
of the reasonable possibility standard. The Court made clear that the leave threshold
was more than a speed bump and that judges should undertake a reasoned
consideration of the evidence to ensure that the action has some merit.14 The reasonable
possibility threshold, said the Court, requires that there be a reasonable or realistic
chance that the action will succeed.15 The Court explained:
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. A full analysis of the
evidence is unnecessary ... What is required is sufficient evidence to
persuade the court that there is a reasonable possibility that the action
will be resolved in the claimants favour.16

[19] The Supreme Court has reminded class action judges that the leave threshold is
intended to provide a robust deterrent screening mechanism to ensure that cases
without merit are prevented from proceeding.17 I recognize, of course, that the Court of
Appeal in Green v. Canadian Imperial Bank of Commerce18 concluded that the leave test
under s. 138.8 of the OSA is akin to the cause of action analysis under s. 5(1)(a) of the
CPA and that the purpose of the leave test is to weed out hopeless claims and only allow
those to go forward that have some chance of success.19

13

Theratechnologies Inc. v. 121851 Canada Inc., 2015 SCC 18.

14

Ibid., at para. 38.

15

Ibid., at para. 38.

16

Ibid., at para. 39.

17

Ibid., at para. 38.

18

Green v. Canadian Imperial Bank of Commerce, 2014 ONCA 90.

19

Ibid., at para. 88.

Page: 8

[20] There may be important differences in these two approaches, or they may turn out
(with some tweaking) to be one and the same test.20 The Supreme Court will no doubt
resolve this issue when it decides Green.21 In the meantime, I am obliged to follow
Theratechnologies which, in my view, actually applies the same test that was approved
by the Court of Appeal in Green:
[W]hether, having considered all the evidence adduced by the parties and
having regard to the limitations of the motions process, the plaintiffs'
case is so weak or has been so successfully rebutted by the defendant,
that it has no reasonable possibility of success.22

[21] Given the decisions in Green and Theratechnologies, the question for me, as I see
it, is this: 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 is
has no reasonable possibility of success.
(4) The volume of evidence before the court
[22] Most leave motions under s. 138.8 of the OSA turn on the plain language of the
alleged secondary market misrepresentations and the plaintiffs expert report. Both sides,
of course, file fact affidavits from the parties and the defendant usually files its own
expert report. But it is the alleged misrepresentations and the plaintiffs expert report that
generally persuades the court that there is at least a reasonable possibility that the plaintiff
will succeed at trial.
[23] This case is different in at least two ways: one, the plaintiffs expert reports rely
completely on publicly disclosed information (which is obviously rendered less
persuasive if said information on its face contains no misrepresentations); and two, the
volume of evidence filed by the defendants. The defendants made a conscientious
decision to do battle from the outset. They have not only filed competing expert reports
but also a massive amount of non-public (indeed court-sealed) internal and corporate

20

One way is to simply equate the reasonable possibility test under s. 138.8 with the reasonable prospect test
under Rule 21 and s. 5(1)(a). The important difference, of course, is that the former involves a preliminary merits
test and requires some weighing of the evidence and the latter simply assumes the facts as pleaded.
21

The appeal has been argued and the Supreme Courts decision is pending.

22

Green, supra, note 18, at para. 93 (affirming Strathy J.s test in the court below).

Page: 9

narrative evidence to fully rebut the plaintiffs allegations and show they have no
reasonable possibility of succeeding at trial.
[24] The defendants have produced more than 14,000 electronic records from the time
period October 1, 2012 to February 28, 2013. The evidence filed on the leave motion
(mainly by the defendants) fills 10 banker boxes23 that contain fact affidavits,24 expert
reports,25 cross-examination transcripts, and numerous compendia with hundreds of
corporate documents, emails and board meeting minutes. Add to this the ten separate
facta and reply facta (on the leave motion alone) that in total run into the hundreds of
pages and one can understand why I say that the volume of evidence before this court is
substantial.
[25] As I have already noted, the question that needs to be answered is this: 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?
(5) Four points that are not in dispute
[26] Before turning to the evidence, I note the following four points that are not or
should not be in dispute and that provide an important back-drop for the analysis that
follows.
[27] The first point is that ATP repeatedly made clear in its public disclosures that
future dividends are not guaranteed and that the payment or amount of any dividend
was discretionary and could be reduced or eliminated at any time.26 ATP disclosed that

23

Plus three more boxes of material for the certification component.

24

The plaintiffs and defendants both filed six fact affidavits.

25

The plaintiffs retained four experts who filed a total of 11 reports; the defendants retained three experts who filed
a total of six reports.
26

See, for example, the following provision in the 2011 Annual Report (Form 10-K): Future dividends are not
guaranteed. Dividends to shareholders are paid at the discretion of our board of directors. Future dividends, if any,
will depend on, among other things, the results of operations, working capital requirements, financial condition,
restrictive covenants, business opportunities, provisions of applicable law and other factors that our board of
directors may deem relevant. Our board of directors may decrease the level of or entirely discontinue payment of
dividends. (Emphasis in original.)

Page: 10

its cash flows were subject to risks - that revenues earned under existing PPAs would not
necessarily be sustained after the PPAs expire, that the same revenues may not be
available under new or extended PPAs, and that the company may not be able to make or
integrate acquisitions on an accretive basis.27
[28] Secondly, the connection between cash flow and the companys ability to pay
dividends was also made clear. In its 2011 Annual Report, for example, ATP noted that
a significant portion of the cash received from project distributions is used to pay
dividends and that PPAs are the primary determinants of the amount of cash that will
be distributed from the projects to [ATP], and that will in turn be available for dividends
paid to [ATP] shareholders. It was obvious from the investor perception studies that
were conducted by the company as well as the analysts reports, the latter discussed in
more detail below, that the connection between cash flow and dividend levels was
understood.28
[29] The third point is that ATP had enough cash on hand during the time period in
question to continue to pay the $1.15 annual dividend for another one to three years even
without any further growth or accretive acquisitions. CFO Ronan on cross-examination
explained that there was no crisis and no liquidity issues and that the dividend could
easily be paid through 2013 without growth and into 2014. The plaintiffs own experts
agreed that ATP had enough cash to pay the $1.15 dividend into mid-2014 (Mr. Sabine)
or into 2014 or 2015 (Mr. Mak). ATPs financial advisor, Greenhill, went even further:
its status quo scenario in February, 2013 showed that the company could pay the
dividend into 2016. I also note that on December 7, 2012 the ATP Board approved a
budget that provided for the payment of the dividend at its existing level throughout
2013.
[30] The final background point (a more general point) is that dividend payments are
not formulaic calculations but business judgment calls. As Professor Hubbard, Dean of
the Columbia Business School and one of ATPs experts, explained:

27

28

Ibid.

Also, one of the plaintiffs experts, Mr. Sabine, acknowledged that when he reviewed ATPs public disclosure, he
understood that cash flows from projects were volatile; the company had not guaranteed its dividend; the expiry of
the PPAs at Lake and Auburndale posed a significant risk to cash flows; and absent new sources of cash, there
would be a significant reduction in cash available for distribution and for payment of the dividend.

Page: 11

Dividends are tied to expectations of long-term future earnings and firms

are unlikely to change their dividend level in response to changes they
perceive as temporary. Dividend payments are not formulaic, but instead
reflect managements judgment or risk-appetite concerning the level and
stability of long-term earnings. Past financial performance, as of a given
point in time, does not provide much insight as to whether a firm will
change its dividends in the future.

[31] Each of these points - that the dividends were not guaranteed; that they were very
much connected to and dependent upon PPA-related cash flow; that the company had
enough cash on hand to continue to pay the $1.15 dividend for another one to three years
even without any further acquisitions; and that dividend payments in general are not
formulaic calculations but business judgment calls - will obviously be important as I
consider the evidence and determine whether any of the alleged misrepresentations have
a reasonable or realistic possibility of success at trial.
(6) The parties positions
[32] The plaintiffs refer to their fact affidavits, expert reports, various corporate emails
and other filed ATP material and documentation. The plaintiffs argument, in essence, is
that ATPs management knew or should have known even before November 5, 2012
(when the Q3 Financials were released) that the $1.15 dividend was not sustainable and
had to be reduced. Instead of disclosing that a dividend reduction was imminent, ATP
made the misrepresentations by assertion and omission noted above.
[33] The plaintiffs also say that ATP failed to disclose a material change in its
business when it was advised by Greenhill on or just after January 11, 2013 that its
accretive acquisition growth plan could not be executed as planned and various scenarios,
including a dividend cut, should be considered.
[34] The defendants rely on their own fact affidavits and expert reports, Board meeting
minutes and boxes of related ATP corporate material and documentation as described
above. The defendants argument, in essence, is that the February 28, 2013 dividend cut
was the result of a reasoned Board decision that considered the changed financial
circumstances, discussed various available scenarios and concluded that it made business
sense to effect an immediate dividend cut that could remain in place over the next five
years, even though there was enough cash on hand to maintain the $1.15 dividend for one
or more years. The defendants are adamant that what was said in the November 5, 2012
press release and the November 6 earnings call was true. No misrepresentations of any
kind were made during the Class Period whether by assertion or omission. Nor were any
material changes not disclosed.

Page: 12

[35] To assist with the legal analysis that follows below, I think it important to set out a
factual narrative of the events leading up to the February 28, 2013 dividend cut. I will
then decide whether the defendants made any misrepresentations or failed to disclose
material changes and whether the motion for leave should be granted.
(7) Corporate narrative
[36] I base this narrative on the detailed evidence presented by the defendants including
the fact affidavits and cross-examinations of senior ATP management, the Greenhill
financial advisor and an independent Board member. This material provides an
uncontroverted internal ATP perspective of the time-line and events in question.
[37] The narrative begins with the fact that the PPAs relating to two of ATPs more
significant projects (Lake and Auburndale, both located in Florida) were expiring in July
and December, 2013 respectively. The expiration dates for the Lake and Auburndale
PPAs had been duly disclosed in previous years.
January, 2012
[38] At its annual strategy meeting on January 25 and 26, 2012 ATPs Board of
Directors reviewed a number of cash flow scenarios with various growth assumptions.
The Board understood that the company had to continue to make accretive acquisitions
and sell assets if it wanted to sustain the dividend past 2017. The Board asked for
presentations about how the company would handle the challenge presented by the expiry
of the Lake and Auburndale PPAs and the reduction in cash flow when these PPAs
expired. Because the company had managed a similar challenge in 2008 when the PPA
for Onondaga (another significant project) had expired, the Board believed the company
would be able to manage these challenges in 2013 as well. The company remained
committed to a growth strategy.
[39] In its 2011 10-K, released on February 27, 2012 ATP reported that Lake and
Auburndale would continue to generate cash flow after their existing PPAs expired, but
at significantly lower levels.
June, 2012
[40] On June 22, 2012, the Board met and reviewed updated scenarios that showed
that ATP would have positive ending cash balances in each year until either 2015 or 2016
even without accretive acquisitions. The Board confirmed the importance of enhancing
cash flow by making new accretive acquisitions and selling assets. The companys
MD&A for Q2 2012 updated the risks relating to the expiry of PPAs generally and
specifically noted the risks relating to the expiry of the Lake and Auburndale PPAs:

Page: 13

Our revenue and cash flows may be reduced upon the expiration of our
power purchase agreements Our current projects that have PPAs
expiring in the near term are Kenilworth, Greeley, Gregory, Lake and
Auburndale. When a PPA expires or is terminated, it is possible that the
price received by the project for power under subsequent arrangements
may be reduced and in some cases, significantly We believe that the
pricing for PPA extensions for some of our projects, such as the
Auburndale and Lake projects whose PPAs expire in 2013, will be
substantially lower than the current PPAs.

[41] The analysts covering ATP reported that the company might have to reduce its
dividend if it could not generate sufficient replacement cash flows from new acquisitions
to offset what would be lost from Lake and Auburndale. For example, CIBC reported on
August 8, 2012 that dividend sustainability will continue to challenge the company
through 2014 as Atlantic contends with its PPA/contract expires for its Florida-based
Auburndale and Lake project. RBC reported that because of the uncertainty regarding
the post-PPA economics of Lake and Auburndale, we believe investors should wait for
improved visibility before building a position. TD Bank stated on August 9, 2012
that it believed that the market will continue to focus on the Auburndale and Lake recontracting in relation to the security of the companys dividend.
[42] The connection between reduced cash flow and risk of reduced dividends was also
understood by investors. According to the uncontroverted evidence of independent
director Ladhani, ATP conducted perception studies and held conversations with
investors about their views about the company. From the comments received, the
company believed that investors understood that the expiry of the Lake and Auburndale
PPAs created a risk to the companys cash flows and thus to its dividend.
September, 2012
[43] On September 19, 2012, the Board reviewed and discussed scenarios setting out
the kinds and quantity of acquisitions that would be needed to offset the cash flow losses
from the Lake and Auburndale projects. The meeting ended with the Board again
committed to continuing the companys efforts to execute on a growth strategy that
would allow it to maintain the $1.15 dividend level.
[44] Following the September Board meeting and well into the fall, ATP continued
with its growth strategy. It submitted a bid to purchase two assets from General Electric;
amended its senior credit facility to facilitate the acquisition of late stage development/
construction projects and to accommodate the possible sale of the Florida projects; and
continued its efforts to negotiate the acquisition of the Ridgeline facility which had
started earlier in the year. Ridgeline was important because it had three projects in Idaho

Page: 14

(with 20-year PPAs in place), a portfolio of 20 potential wind and solar projects and a
skilled development team.
[45] Meanwhile, ATP was routinely receiving proposals from investment banks such as
Greenhill & Co. Senior management met with Greenhill on October 17, 2012. Greenhill
suggested a new approach - that ATP should be making acquisitions outside the
independent power generation space in the midstream or downstream sectors of the
energy market. The uncontroverted evidence of senior management and Greenhills
managing director, Mr. Randolph, was that Greenhill believed it could assist ATP in
successfully executing its growth strategy.
November, 2012
[46] On November 5, 2012 ATP released its Q3 2012 financial disclosure. Part of that
disclosure included the companys Q3 2012 financial statements. The financial
statements contained historical information and, consistent with GAAP, made no
forecasts or projections about future dividends.
[47] The Q3 2012 financial disclosure also included the Q3 MD&A. As was the case
with previous management reports, the Q3 2012 MD&A made specific disclosures about
the risks to revenues and cash flows due to the upcoming expiration of the Lake and
Auburndale PPAs and incorporated by reference the risk disclosures set out in the 2011
10-K: that the payment of dividends was not guaranteed and that they could be reduced
or eliminated. Also included in the MD&A was this statement: We believe existing
cash, cash equivalents and marketable securities and funds generated from operations
should be sufficient to meet our working capital and capital expenditure requirements,
and meet our obligations for the next 12 months.
[48] The Q3 2012 financial disclosure included the news release of November 5, 2012
which reported that even if ATP was able to obtain renewals for the Lake and
Auburndale PPAs they would likely not contribute more than $4 million per year to the
companys cash flows, confirming again that substantial reduction to cash flows could be
expected.
[49] The news release also described a future scenario in which the reductions from
Lake and Auburndale would be partially offset with increased cash flow from three other
projects and stated, based on the growth assumptions the company was then making, that
there would be additional contributions from acquisitions and dispositions to further
support the companys continued ability to pay its dividend. The news release duly
identified these statements about the future as forward-looking statements that involved

Page: 15

risks and uncertainties and should not be read as guarantees of future performance or
results.
[50] On November 6, 2012 ATPs senior management participated in an earnings call.
The telephone conference began with CEO Welch stating that any forward looking
statements made on the call were subject to the qualifications in the companys written
disclosure (which warned that such statements involved risks and uncertainties and were
not guaranteed). Mr. Welch again pointed out the decreased cash flow the company
would experience due to the expiry of the Lake and Auburndale PPAs. He reviewed the
companys expectations about how the decreased cash flow might be offset, the possible
sale of these projects and the possible sources of new cash flow that might result from the
implementation of the growth strategy the company was following. After explaining
ATPs cash flow projections and growth assumptions, which involved the company being
able to make future accretive acquisitions at a particular rate, Mr. Welch said this: For
all these reasons taken together, were confident in our ability to sustain the dividend
level.
[51]

Shortly after the earnings call, National Bank reported as follows:

While we do not expect a dividend cut through 2013, we expect investors
will grow increasingly concerned surrounding ATPs dividend
sustainability post 2013, until ATP secures additional accretive growth
through acquisition, disposition or development. Of note, ATP has
acquired ~$2.5 billion in projects / assets over the past few years and
expects, based on its growth assumptions, that there will be additional
contributions from acquisitions and dispositions, which are expected to
further support the companys continued ability to pay its dividend.
However, we do not expect the market to be so rewarding for
unconfirmed growth prospects.

[52] Other analysts also questioned the sustainability of the companys current
dividend. TD Securities said this: We question the sustainability of the current dividend,
given our high payout ratio forecast and a lack of transparent growth prospects beyond
current development projects. RBC Capital Markets issued a report using headlines that
read Significant Accretive Acquisitions Required to Sustain Dividends and We
Remain Cautious Due to Dividend Uncertainty. The RBC report urged investors to stay
on the sideline until there is better dividend visibility and concluded that there could be
further downside if Atlantic Power does not announce significant accretive acquisitions
over the next year.
[53] On November 8, 2012 ATPs share price dropped 19 per cent, from $14.79 to
$12.02. ATP senior management and Board members believed that the share price drop

Page: 16

would be temporary and that the company had to execute on making acquisitions to
address the markets concerns.
[54] On November 9, 13 and 15, 2012, the Board discussed the acquisition of
Ridgeline and the contributions that it could make to ATPs cash flows and decided to
proceed with the acquisition. Because of the drop in share price, the Board agreed to fund
the Ridgeline acquisition with a debt offering of convertible debentures for
CDN$100 million. The transaction closed on December 31, 2012.
December, 2012
[55] On December 3, 2012, ATP issued a prospectus for the offering of the Series D
convertible debentures due 2019 (the Series D debentures). The prospectus stated that
dividends were not guaranteed and referred to and incorporated the risk disclosure that
had been included in the companys 2011 10-K and in the 10-Qs for 2012. The CDN$100
million raised from the offering of the Series D debentures was used mainly for the
Ridgeline transaction. The prospectus stated in two places that the primary risk that
impacts our ability to continue paying dividends at the current rate is the operating
performance of our projects and their ability to distribute cash to us after satisfying
project-level obligations.
[56] On December 7, 2012, the Board reviewed and approved a budget for 2013 that
continued the payment of the $1.15 dividend for 2013. The Board also directed senior
management to prepare material for the upcoming strategy meeting that would facilitate a
discussion about the companys objectives as a dividend paying company and its overall
dividend policy.
[57] On December 14, 2012, ATP formally engaged Greenhill to help develop and
provide advice on strategic and business alternatives. The engagement agreement
provided that Greenhill was to be paid a fixed fee of $100,000 plus expenses but would
be compensated beyond this amount if it successfully identified acquisition opportunities
that were closed by ATP. According to Greenhill, it still believed at this point that
accretive acquisitions could be made.
[58] By mid-December, 2012 it became clear the Lake and Auburndale PPAs would
not be renewed. As a result, on December 28, 2012, ATP announced it would be
recognizing a US$50 million non-cash impairment charge to the value of the Lake project
in the fourth quarter of 2012 and filed a material change report.
January, 2013
[59]

In early January 2013, in preparation for the Boards annual strategy meeting,

Page: 17

CFO Ronan asked ATPs treasurer to develop cash flow forecasts. Because the Board
wanted to consider a wide range of scenarios the forecasts included scenarios that
projected dividend cuts of 50 and 70 per cent, and also scenarios that assumed a
recovering share price and no dividend cuts.
[60] By mid-January, ATPs share price had still not recovered even after the
announcement confirming the companys acquisition of Ridgeline and the
commencement of commercial operation at the Canadian Hills project. On or just after
January 11, 2013, Greenhill advised ATP that its cost of capital was too high (and was
not improving) and that Greenhill no longer believed that a sufficient number of accretive
acquisitions could be made to meet ATPs growth targets and assumptions. The
uncontroverted evidence of Greenhills managing director (Mr. Randolph) is that
between roughly January 11 and 24, 2013 it became apparent that after the company
satisfied its debt obligations and paid its common shares dividend, it would not be
generating enough cash flow to fund potential growth opportunities involving capital
expenditures and acquisitions.
[61] On January 24 and 25, 2013, the Board met and considered different projections
based on growth and non-growth scenarios and the opportunities for continuing to pursue
the growth strategy through new acquisitions and organic growth. The Board also agreed
to retain Greenhill to study the issues discussed at the January strategy meetings and
develop a recommendation for the companys strategic direction and dividend policy.
[62] At the end of January, 2013 ATP announced the sale of the Florida assets,
including Lake and Auburndale for US $136 million. The sale proceeds were in line with
the companys expectations.
February, 2013
[63] On February 1, 2013, ATP formally amended its engagement letter with Greenhill
to include the provision of dividend advisory services. From February 1 to February 19,
2013, Greenhill, ATP management and two directors (Ms. Ladhani and Mr. Duncan)
developed scenarios and sensitivity analyses to test different growth assumptions,
leverage (i.e. debt) and dividend levels. The company also had to begin preparing for the
release of the 2012 10-K at the end of February. ATP management drafted material
describing a possible dividend reduction so that the company would be ready to finalize
the 2012 10-K and related disclosures in the event that a decision was made to change the
companys strategy and dividend policy. The different scenarios prepared with Greenhill
included a status quo scenario that assumed no acquisitions but provided for asset sales.
It showed that the $1.15 dividend level could be maintained into 2016.

Page: 18

[64] During the weekend of February 9 and 10, 2013, Greenhills Randolph called
CEO Welch and advised him, based on dividend scenarios of $1.15, $0.75 and $0.55 that
ATP still would be exceeding its distributable cash levels in 2014 and that ATP
should consider testing larger dividend reductions. According to Mr. Randolphs
evidence (again uncontroverted) it was in the following week that Greenhill and ATP
began modelling scenarios that contemplated a reduction of the annual dividend to $0.45
and $0.40 per common share.
[65] On February 18, 2013, the Board met by phone to preview the scenarios that
would be discussed at the February 25 Board meeting. On February 25 the Board met in
person to review the 2012 financial year-end that would be released on February 28,
discuss the additional analysis prepared by management and Greenhill, and draft
disclosure language that could be used if the Board decided to reduce the dividend. The
Board made no decisions at this meeting. It wanted to review further sensitivity analyses
that focused on the companys financial covenants.
[66] On February 27, 2013, the Board met again to discuss the additional sensitivity
analyses. The uncontroverted evidence of independent director Ladhani is that it was
during this February 27 conference call that it became apparent for the first time that
the Board members were prepared to reduce the dividend to an annualized level of $0.40
per share. However, as Ms Ladhani put it, The Board decided to take one evening to
reflect on the analysis and discussions that were being made.
[67] On February 28, 2013, following the close of business, the Board met again by
conference call and decided to reduce the dividend to $0.40 per share. The decision was
immediately announced to the market as part of the companys 2012 year-end financial
disclosure that was released the same day.29
[68] The gist of this corporate narrative is summarized by CFO Ronan and Greenhills
Randolph. Here is how they viewed the key events. First, CFO Ronan:

29

It is interesting to note that analysts following ATP were expecting a significant dividend cut when the company
released its 2012 10-K on February 28, 2013. For example, on January 31 Macquarie was predicting a 27 per cent
cut and on February 19 RBC was predicting a 30 per cent cut. The company was able to announce the change as
soon as it was made because it had begun preparing draft disclosure materials a few weeks earlier. The evidence
shows that it was a common practice for management to prepare draft disclosure ahead of time, knowing that it may
or may not be used, depending on decisions that were made, but also knowing that meaningful disclosure could not
be prepared on short notice. For example, in preparing the Q3 2012 financial disclosure ATP had two forms of
releases ready: one announcing the Ridgeline acquisition and one not announcing that acquisition. Since an
agreement had not been signed by November 5, 2012, the company used the second version of the release.

Page: 19

As of November 5 and 6, 2012, the company believed that it could

maintain the dividend through a combination of sources that would offset
the significant cash flow reductions it expected to experience. These
sources included cash flows from Orlando in 2014, new cash flow from
Canadian Hills and Piedmont in Q4 2012 as these projects commenced
commercial operations, sales and new acquisitions. Unfortunately,
through Q4 2012 and Q1 2013, it became apparent the company could
not implement its planned growth strategy in terms of both scale and
accretiveness. It was only then after a careful and deliberate review of the
companys strategy, objectives and new forecasts based on new
assumptions with the benefit of advice from its financial advisor,
Greenhill, that management and the Board decided the dividend should
be reduced. That decision was communicated to the market immediately
after it was made on February 28, 2013.

[69]

And Greenhills Randolph:

At the time of our engagement in December, 2012, I believed it was
worthwhile to work with the company to search for acquisition
opportunities that would leverage the companys experience, allow it to
enter different sectors of the energy industry and be accretive to its
shareholders. Over time, as our analysis progressed, we became less
optimistic about the likelihood of finding acquisitions that would achieve
Atlantic Powers objectives. Eventually our work shifted in mid to late
January, 2013 towards a more targeted analysis of the companys
dividend policy which appeared to be unsustainable over the long term.
This work culminated in managements recommendation to the Board
that it approve a reduction of the annual dividend to $0.40 per common
share. In his phase of Greenhills engagement, we worked with
management to develop options for a sustainable dividend policy that
could be managed for at least five years. In my opinion, managements
ultimate recommendation to the Board was consistent with and supported
by the analyses that were performed and was the product of a deliberate
and thorough process of review conducted by management.

[70] This completes the summary of the events and decisions leading up to the
February 28, 2013 dividend cut. With this uncontroverted corporate narrative as
backdrop, I can now consider the allegations of misrepresentation and failure to disclose
a material change, and whether any of these allegations have a reasonable possibility of
success at trial. In doing so, however, it is important to note that there is no evidence that
ATPs management or Board or their financial advisor, Greenhill, did not believe what
they were saying. It is also important to understand that the issue on this leave motion is
not whether ATPs management or Board behaved reasonably or unreasonably,

Page: 20

competently or incompetently. The issue is whether the plaintiffs have established a

reasonable possibility of demonstrating at trial that misrepresentations (by assertion or
omission) were made or that material changes were not disclosed, such that leave should
be granted.
(8) Analysis
[71] I will consider each of alleged misrepresentations in turn and will do so by
discussing the impugned document or event namely, the Q3 2012 financial disclosure;
the Q3 2012 MD&A; the November 5, 2012 news release; the November 6, 2012
earnings call; the Series D debentures prospectus; the two material change reports; and
the alleged non-disclosure of a material change arising out of Greenhills advice on or
just after January 11, 2013. I will complete the analysis by considering the key notes and
emails relied on by the plaintiffs.
[72] My conclusion, as explained in detail below, is that no misrepresentations were
made, whether by assertion or omission; nor were any material changes not disclosed.
[73] I have therefore no difficulty concluding that there is no reasonable possibility that
any of the allegations levelled at the defendants would succeed at trial. The motion for
leave will therefore be dismissed.
The Q3 2012 financial disclosure and MD&A
[74] The Q3 2012 financial statements are a core document.30 They contained historical
statements and, consistent with GAAP, made no forecasts or projections about future
dividends. I can find no misrepresentations whether by assertion or omission. Almost all
of the plaintiffs criticism is directed at the MD&A.
[75] The Q3 2012 MD&A, also a core document, disclosed that ATP expected to
experience a significant reduction in cash flow beginning with the expiry of the PPAs at
Lake and Auburndale. The MD&A also reiterated that dividends were not guaranteed and
could be reduced or eliminated, and reaffirmed the connection between cash flow and
dividend level. The MD&A contained no guarantee, assurance, opinion or other

30

The OSA, supra, note 1, distinguishes, for the purposes of secondary market liability, between core documents
(such as financial statements, MD&As and prospectuses) and non-core documents (such as news releases or
earning call transcripts): see ss. 138.3(1)(2) and 138.4(1).

Page: 21

statement that the $1.15 dividend would continue in the future. I find that the Q3 2012
MD&A contained no misrepresentation by assertion.
[76] Nor do I find any misrepresentation by omission. Recall the definition: An
omission to state a material fact that is required to be stated or that is necessary to make a
statement not misleading in the light of the circumstances in which it was made.31
[77] As the narrative shows, there is no evidence that on or about November 5, 2012
either ATP management or Board members believed (to track the language of the
plaintiffs alleged omission) that ATP did not have and would not receive sufficient
Cash Available for Distribution to sustain its then level of dividends. On the contrary,
ATP was confident that its accretive acquisition plan would succeed and sustain the $1.15
dividend level. The connection between cash flows and dividend levels was understood,
as was the risk that the reduced cash flows from the Lake and Auburndale PPAs could
affect the dividend level.
[78] In my view, the failure to state that the accretive acquisition target was in the
range of $600 to $800 million was not an omission of a material fact that is required to
be stated.32 This was not an unusually large number - ATP had made $3.3 billion in
accretive acquisitions over the previous three and a half years. Also, the $600 to $800
million amount was explicitly discussed by CEO Welch in the earnings call the next day.
[79] If I am wrong on this point and ATP should have disclosed the $600 to $800
million amount in the November 5 MD&A rather than doing so in the November 6
earnings call, I would still conclude, given the explicit discussion on November 6, that all
of the elements of misrepresentation by omission (in particular, damages) have not been
established and thus there is no reasonable possibility that this alleged omission in the
MD&A would succeed at trial.
[80] During the hearing of this motion, counsel for the plaintiffs focused on the
following statement in the MD&A:
We believe existing cash, cash equivalents and marketable securities and
funds generated from operations should be sufficient to meet our working

31

OSA, supra, note 1, s. 1(1).

32

Ibid.

Page: 22

capital and capital expenditure requirements, and meet our obligations

for the next 12 months.

[81] This was not an untrue or misleading statement. ATP had sufficient cash to pay the
dividend, even if no further acquisitions were made, for the next twelve months and
beyond. Indeed, future dividends were not a corporate obligation and the ATP never
described them as such, emphasizing instead that dividends were discretionary and not
guaranteed. At law, the decision of a board to declare a dividend is discretionary, and
only declared and unpaid dividends are an obligation.33
[82] In short, I agree with the defendants and their experts that the Q3 2012 MD&A
provided a review of the important trends and risks that had affected the financial
statements or were reasonably likely to affect them. I also note that the plaintiffs expert,
Mr. Torchio, agreed that the analysts understood from the Q3 2012 financial disclosure
that there was going to be a dividend cut if accretive acquisitions were not made, even if
they did not know the size of the cut or its timing.
The news release and earnings call
[83] The eleven-page November 5, 2012 news release, as already noted, contained
project updates (including Lake and Auburndale), financial analyses, dividend pay-out
ratios and forward-looking statements that were duly qualified by the required cautionary
language. Under the heading Outlook ATP said this: The Company expects, based on
its growth assumptions, that there will be additional contributions from acquisitions and
dispositions, which are expected to further support the Companys continued ability to
pay its dividends.
[84] I can find no misrepresentations in the November 5 news release, either by
assertion or omission. The point made earlier about the failure to mention the $600 to
$800 million acquisition plan in the Q3 MD&A applies with equal force to the news
release.

33

McClurg v. Canada, [1990] 3 S.C.R. 1020, at para. 21.

Page: 23

[85] There were also no misrepresentations in the November 6 earnings call. After
providing a financial and projects update, CEO Welch discussed the companys cash
flow projections and growth assumptions, which involved making some $600 to $800
million in future accretive acquisitions. He noted that, Were very comfortable with how
many deals we need to do in relation to the market for deals that are out there. He also
said that ATP expected to target a combination of operating projects as well as
development construction stage projects. He then said this: For all these reasons taken
together, were confident in our ability to sustain the current dividend level.
[86] This was not an untrue or misleading statement. In early November, 2012 senior
ATP management believed that the dividend level could be sustained in large part
through accretive acquisitions, just as was done in previous years. There is no evidence to
the contrary that is, there is no evidence that CEO Welch was not telling the truth on
November 6 when he expressed confidence for all of these reasons taken together that
the $1.15 dividend could be sustained.
[87] As was shown in the narrative set out above, senior managements level of
confidence in the accretive acquisitions strategy changed as circumstances changed over
the next several months. Executive VP Rapisarda summarized the changed circumstances
as follows:

The decline in the companys share price and the corresponding increase in its cost of
capital. If the share price had not fallen, or had recovered as management and the
Board expected, the companys prospects for acquisitions after November 6, 2012
would have been different and better;

The timing and terms of the sale of the Lake and Auburndale projects;

The delay in Piedmont commencing commercial operations;

The fact that the company had to finance the balance due on the Canadian Hills
construction loan on December 22, 2012;

The company did not retain Greenhill until December 2012 because it was focused
on amending its credit facility, closing the tax equity financing for Canadian Hills
and releasing its Q3 2012 financial disclosure; and

The completion of Greenhills analysis in mid-January indicating that ATP would

not be able to complete a certain significant acquisition (Niska Gas Storage) because
it would not be sufficiently accretive to the companys cash flows.

[88] I will deal later in these reasons with the January and February time period. All
that need be said now about the November 6 earnings call is that (again) there was full

Page: 24

disclosure of the Lake and Auburndale situation, the reduced cash flows and the risk to
dividend levels. It was obvious to all concerned that if $600 to $800 million in accretive
acquisitions could not be made as anticipated, the current dividend was likely not
sustainable.
[89] During the hearing, I asked plaintiffs counsel what more should CEO Welch have
said in the earnings call. Counsel responded that Mr. Welch should have said: (1) that
ATP had no (accretive acquisition) targets in the pipeline; and (2) that he was not
confident that they could sustain the dividend level. But in my view, based on the
evidence before me, neither of these statements would have been true. The evidence
indicates (1) that in early November, ATP had numerous targets in their acquisition
pipeline34 and (2) that CEO Welch and ATP senior management, supported by the Board,
believed that their accretive acquisition growth plan would indeed sustain the dividend
level at least there is no evidence to the contrary. The plaintiffs suggestion as to what
CEO Welch should have said is therefore not supported by the evidence.
[90] In short, I have no difficulty concluding that there is no reasonable possibility that
the allegations of misrepresentation in the November 6 earnings call, whether by
assertion or omission, would succeed at trial.
The s. 138.4(1) issue
[91] There is a further reason why the allegations relating to the news release and
earnings call cannot succeed. The OSA distinguishes, for secondary market liability
purposes, between core documents on the one hand, and non-core documents and oral
statements on the other, prescribing different liability standards for each.35 For non-core
documents and oral statements, as s. 138.4(1) makes clear, the plaintiff must prove that
the person sued knew the statement contained a misrepresentation, deliberately avoided
such knowledge or was guilty of gross misconduct in making the misrepresentation.36

34

For example, Alterra Power, Ameresco, EmberClear, Finavera, First Wind and Mesa-Stephens Ranch. ATP was
also in discussions with Borealis with respect to a potential joint-venture opportunity in association with Midland
Cogeneration Venture. There is evidence that throughout the proposed Class Period, the company was actively
pursuing Sunrun, Maxim Power, Kingfisher, Cameron, Good Spring, Greenleaf, Hereford and Sunlight Partners.
35

OSA, supra, note 1, ss. 138.1, 138.3 and 138.4.

36

Supra, note 30.

Page: 25

[92] Since the statements were believed to be true, there can be no liability. There is no
reasonable possibility that the plaintiffs can show at trial that ATP senior management
knew that what was said in the news release or in the earnings call was not true; or that
they deliberately avoided such knowledge; or that in making the impugned statements
they were guilty of gross misconduct.
[93] The uncontroverted evidence before me is that as of November 5 and 6, 2012, the
company was committed to its growth strategy as a way to sustain the dividend. Even if
ATP was ultimately unable to achieve its growth objectives, this does not mean the
statements made in either the news release or the earnings call were known to be false at
the time they were made. The uncontroverted evidence also shows that the companys
ability to achieve its projections deteriorated through the Class Period as its share price
fell and the cost of capital increased with no apparent prospect for improvement.
[94] The question, as already noted, is not whether senior management acted
reasonably or unreasonably, competently or incompetently, but whether any
misrepresentations were made. In my view, no misrepresentations were made.
The debenture prospectus
[95] The plaintiffs argue that the December 6, 2012 Series D debenture prospectus was
misleading because it stated (in two different places) that the primary risk that impacts
our ability to continue paying dividends at the current rate is the operating performance
of our projects and their ability to distribute cash to us after satisfying project-level
obligations. The plaintiffs say this was false and misleading because it was the risk of
not completing acquisitions that put the dividend at risk.
[96] But there is nothing in the impugned statement that limits the focus to existing
projects and precludes additional acquisitions. There is nothing untruthful or misleading
in saying that the primary risk to dividends is the operating performance of our projects
and their ability to distribute cash. I can find no misrepresentation by assertion in the
debentures prospectus.
[97] The plaintiffs then say that the prospectus contained a misrepresentation by
omission. But the prospectus itself makes no statements about the payment of future
dividends, except to emphasize that dividends are not guaranteed. It also incorporates the
companys 2011 10-K and the Q1, Q2, and Q3 2012 10-Qs by reference. Hence, for the
reasons set out above, I agree with the defendants that there is no reasonable possibility
the plaintiffs will establish at trial that the debenture prospectus contained any
misrepresentations by omission.

Page: 26

The two material change reports

[98] The plaintiffs impugn the material change reports that ATP filed on December
28, 2012 and February 1, 2013. The first report disclosed that a $50 million non-cash
impairment charge relating to the companys interest in the Lake project (and the nonrenewal of its PPA) would be written off in Q4 2012. The second report disclosed the
sale of Lake and Auburndale.
[99] There were no misrepresentations in either of these documents, whether by
assertion or omission. Neither of the reports discussed dividends or risks to dividends
because neither was intended or required. The disclosures in these two reports are clear
and to the point. If the plaintiffs are alleging that the February 1 report should have
included a further material change, namely the information received from Greenhill in
mid-January that the accretive acquisition plan could not be implemented, then it is best
to deal with this allegation separately.
Greenhills mid-January conclusion
[100] On or just after January 11, 2013 Greenhill advised ATP that the companys cost
of capital was too high and that Greenhill would not be able to assist the company in
executing an accretive acquisition plan that would sustain the existing dividend. The
plaintiffs say this was a material change that should have been disclosed forthwith.
[101] The OSA defines a material change as a change in the business, operations or
capital of the issuer that would reasonably be expected to have a significant effect on the
market price or value of any of the securities of the issuer37 The focus is not on material
information that could reasonably be expected to affect share price if that were the case,
then the Greenhill information should arguably have been reported. The triggering
criterion is a material change in the business, operations or capital of the issuer.
[102] The plaintiffs focus primarily on the word business not operations or capital. I
am mindful of the admonition of the Ontario Securities Commission in Re Coventree38
that one should not take a supercritical or technical approach to the interpretation of
what constitutes a change in the business or operations of an issuer for purposes of the
definition of material change in the Act. And I do not do so.

37

OSA, supra, note 1, s. 1(1).

38

Re Coventree Inc., (2011), 34 O.S.C.B. 10209.

Page: 27

[103] The receipt of Greenhills (obviously negative) prognostication, that the planned
accretive acquisitions strategy could not be achieved and that ATP should focus on
reducing its leverage, did not amount to a material change in ATPs business. Nor did the
possibility, even probability, that ATP would not be able to sustain the $1.15 dividend
level amount to a material change. ATPs business was owning and operating power
projects throughout North America. ATP was and remained a power generation
company. It is true that a primary corporate objective, as already noted, was to increase
the value of the company to focus on the dividend payout to shareholders. But it is
also true, and it was made clear repeatedly over the years in the companys public
disclosures, that dividends were discretionary. They were not guaranteed and could be
reduced or eliminated at any time.
[104] In other words, by no stretch of the imagination, can it be said that the business
of ATP was paying a $1.15 dividend. The Greenhill prognosis, if accepted by
management, could very well have led to a dividend cut, but it did not constitute a
material change in ATPs business. The company continued to own and operate power
generating facilities and, as it turned out, also continued to pay dividends.
[105] Consider the applicable case law. In Re Rex Diamond,39 the Ontario Securities
Commission found that a material change occurred in the diamond companys business
when it was legally unable to access its mining properties in order to extract diamonds.
[106] In Re Coventree,40 the capital markets company was no longer able to issue
commercial paper (through its conduits) which was a primary source of its revenue and a
crucial aspect of its business. This inability was found to be a material change because
the securitization company was no longer able to carry on its principal business.41
[107] ATP, however, was able to carry on it principal business as a power generation
company and continued to do so. Greenhills mid-January prognosis about the viability of
the planned growth strategy was obviously considered by ATP. But note that even after
receiving the Greenhill opinion, the Board continued to review updates on potential

39

Re Rex Diamond Corp., (2008) 31 O.S.C.B. 8337.

40

Re Coventree, supra, note 38.

41

Ibid., at para. 583.

Page: 28

acquisitions.42 It was only after Greenhill was retained to advise on dividend scenarios
and the Board fully reviewed the various possible options that a decision was made (a
month and a half later on February 28) that the dividend should be cut by 65 per cent.
[108] The Greenhill advice did not constitute a change or decision to implement a
change. The Board was entitled to consider corporate strategy and the opinions of its
advisors and management and then use its own judgment. The evidence is
incontrovertible that it did so between the date of Greenhills January advice and end of
February decision. During this period ATP continued to pay the $1.15 dividend and could
have decided to do so through 2014 and perhaps even 2015; it entered into a further
engagement with Greenhill to advise on various dividend scenarios, including
maintaining the status quo; it considered further growth opportunities; and it only came
to a decision on February 28, 2013. Greenhills January advice did not pre-ordain any
decision and it did not constitute a change in ATPs business.
[109] Nor is there any basis for the submission that ATP was obliged to provide a
formal warning that the dividend may be reduced. It is true that some companies on
occasion have provided such pre-disclosure but the actual data (provided by one of the
plaintiffs own experts) shows that 77 per cent of companies do not do so.
[110] In sum, the mid-January Greenhill opinion did not result in a material change to
ATPs business as a power generation company. Thus, there was no need to file a
material change report. And there is no possibility, and certainly no reasonable
possibility, that the plaintiffs can show otherwise at trial.43

42

The defendants refer the court to the February 25, 2013 Board materials which list Sunrun, Maxim Power,
Kingfisher, Cameron, Goodspring, Greenleaf, Hereford and Sunlight Partners as active acquisitions at that time.
43

The plaintiffs also argue that Greenhills advice meant that ATP knew that the dividend would be cut by the
Board. There is no evidence to substantiate this position. In fact, as outlined in the narrative above, the evidence of
management and the Board is directly to the contrary. It is true that after hearing what Greenhill had to say in midJanuary, CFO Ronan believed that ATP would be required to reduce the dividend. But he did not and could not
know either the amount or the timing. He understood that these issues had to be considered by management and the
Board, and that the Board would make these decisions. More importantly, as already noted, Mr. Ronan did not
believe there was any crisis because the company had enough cash on hand to pay the dividend through 2013 as
planned.

Page: 29

The notes and emails

[111] The plaintiffs case on this motion for leave is based largely on (1) the reports of
their experts who reviewed publicly available information and concluded that ATP
should have known as early as November 5, 2012, when the Q3 financial information
was released, that the $1.15 dividend was not sustainable; and (2) various intra-corporate
notes and emails that were presented to this court to support the same point. I have
reviewed the evidence relating to the former and I have concluded, as set out above, that
no misrepresentations were made and no material changes not disclosed. I will now deal
briefly with the impugned notes and emails.
[112] My conclusion is that none of the emails and notes discussed below whether
separately or in combination alter my overall finding that no misrepresentations were
made and that there is no reasonable possibility of showing otherwise at trial. I will now
consider each of the items in turn.
[113] I begin with the June 27, 2012 email from director Ken Hartwick (sent at the
urging of the Board) to CEO Welch asking, inter alia, about the companys dividend
policy (increase, decrease) under various strategic scenarios and the plan to stay
competitive on acquisitions given its cost of capital. Mr. Welch forwarded the message to
Mr. Rapisarda and CFO Donahue (Mr. Ronans predecessor) with the following
comment: The note below is full of interesting questions and a fair amount of
uncertainty/anxiety.
[114] The plaintiffs say this is evidence that the entire Board was anxious about the
companys dividend policy in June 2012, months before the Q3 2012 financial disclosure.
Several points are clear from the evidence, again uncontroverted. First, it was CEO
Welch who used the word anxiety not Mr. Hartwick. Second, as independent director
Ladhani stated on her cross-examination, the Board was not anxious in June, 2012.
Indeed, at the September meeting it reviewed a range of scenarios and remained
committed to making acquisitions and maintaining the dividend; and in December,
approved the companys 2013 budget that provided for the continued payment of the
$1.15 dividend. Ms. Ladhani also suggested that Mr. Welch may have used the words
anxiety and uncertainty because the Board was accelerating the discussion about the
upcoming strategic review, which would be covered again in the annual strategy meeting
in January 2013.
[115] Third, the Board met on September 19, 2012 to consider the very questions in Mr.
Hartwicks email and to review different scenarios for the companys future, including
scenarios concerning possible dividend reductions effective January 1, 2014. The meeting
concluded with the Board and management both committed to maintaining the existing

Page: 30

dividend level and pursuing the companys growth strategy. All of this evidence remains
uncontroverted. This first email adds nothing to the plaintiffs allegations of
misrepresentation or of failing to disclose a material change.
[116] The second email dated November 6, 2012 is the exchange between ATPs
corporate controller and its treasurer. The corporate controller writes, Dividend cut in
2014 from all the analyst reports I have seen so far this morning and the treasurer
responds, Everyone sees [sic] it but our management.
[117] The plaintiffs say this email exchange between the two financial officers (neither
of whom were members of senior management) shows that senior management and the
Board should have known in early November that the $1.15 dividend was not sustainable.
However, if anything, this email exchange reinforces the fact that senior management
rightly or wrongly (but sincerely) believed on November 5 and 6, 2012 that a dividend
reduction would not be necessary, even in 2014. The treasurer and corporate controller
are certainly entitled to speculate about the need for or the timing of a dividend cut. But
neither of them was privy to the discussions of senior management or the Board of
Directors that, on uncontroverted evidence, demonstrate a decided commitment, from
early November, 2012 to well into January, 2013, to continue the accretive acquisition
strategy and maintain the $1.15 dividend. This particular email exchange, in my view,
does not assist the plaintiffs.
[118] Next is a handwritten note from a post-November 6 conference call with BMO
and TD discussing the December (debenture) public offering. The note, written by CFO
Ronan, consists of seven words: no benefit to signaling cut in advance. No further
information is available. Was this a comment made by Mr. Ronan or by someone else?
Was it something someone said out loud or just thought? The note was not put to Mr.
Ronan or any other witness on cross-examination. In any event, the evidence is
uncontroverted that the business plan in November and December was growth via
strategic acquisitions and not dividend reduction. (Hence the December debenture
offering to finance the Ridgeline acquisition.) The evidence is also uncontroverted that no
decision was made to cut the dividend until February 28, 2013. The isolated Ronan note,
albeit interesting, does not, without more, provide a meaningful contribution to this
courts review of the evidence.
[119] The plaintiffs refer to a February 4, 2013 email from an ATP investor relations
associate. The email that states that the associate and CFO Ronan were not confirming
their attendance at a Morgan Stanley conference until we have a better sense of timing
on our announcement of a divi [sic] cut. The plaintiffs say this is evidence that the
defendants knew the dividend was not sustainable. It is certainly evidence that in early
February, 2013 senior management (and no doubt those working with them) were alive to

Page: 31

the possibility, and perhaps even probability, of a dividend reduction. Greenhill had just
been retained to provide dividend advisory services and the Board was preparing for the
end-of-February financial disclosure.
[120] However, as already noted, the evidence is uncontroverted (recall again the
evidence of independent director Ladhani) that the decision to cut the dividend from
$1.15 to $0.40 was made by the Board on February 28, 2013. The fact that in early
February, some or all of senior management believed that the $1.15 dividend was
probably not sustainable did not amount to a material change in the companys business,
as I have already discussed. Nor does this email add anything of value to the plaintiffs
allegations of misrepresentation.
[121] The final email is a March 1, 2013 email from Mr. Coleman, a member of ATPs
commercial development team, who made the following comment about the dividend cut
that was announced the day before. He said that he knew it was coming for a long time.
But Mr. Coleman was not a member of senior management. He did not participate in any
of the discussions between the Board and senior management in reviewing the companys
strategy in 2013. Mr. Coleman was obviously entitled to his opinion and in a company
dealing with cash flow issues, opinions will differ.
[122] My concern is whether there is a reasonable possibility that the plaintiffs can show
at trial that ATP knew or should have known before February 28th that the dividend
would be cut and then misrepresented this knowledge. The evidence is uncontroverted
that the dividend decision was not made until February 28, 2013 and there is no evidence
that the ATP Board should have known any earlier that this would be their decision.
Recall that the plaintiffs experts suggesting otherwise base their assertions and opinions
on publicly disclosed corporate information and nothing more. Mr. Colemans email tells
me what a member of the companys commercial development team (not senior
management) may have actually thought or thought in hindsight, but none of this adds
anything to the reasonable possibility analysis.
(9) Conclusion
[123] I have now completed a reasoned consideration of the evidence to ensure that the
action has some merit as required by the Supreme Court in Theratechnologies.44 And

44

Supra, note 13, at para. 38.

Page: 32

my conclusion is this. I am not persuaded that the allegations of misrepresentation or

non-disclosure of a material change have a reasonable possibility of success at trial.
[124] ATP disclosed and the market understood that cash flows would be reduced due to
the expiration of the Lake and Auburndale PPAs and this could affect the dividend level
unless the company made accretive acquisitions to replace the lost cash flow. Senior
management expressed confidence that the growth plan would be successful and the
current dividend level would be maintained. The Board agreed and approved a budget for
2013 that continued the $1.15 payment.
[125] The evidence is unchallenged that as of November 6, 2012, the defendants
believed that ATP would continue to pay the $1.15 dividend, had the ability to do so for
one or more years even without future acquisitions, and was committed to a growth
strategy aimed at accretive acquisitions.
[126] It was only at the end of February, 2013 after a detailed and careful review of the
significantly changed circumstances and the various available options that the Board
decided to cut the dividend to a level that could be maintained over the next five years.
[127] There were no misrepresentations by assertion or omission, and no material
changes that were not disclosed. There is no reasonable possibility that the plaintiffs can
show otherwise at trial.
[128] The motion for leave under s. 138.8 of the OSA is dismissed.
II. The Certification Motion
(1) Scope and content
[129] Even though the motion for leave to pursue the statutory claim for secondary
market misrepresentation has been dismissed, the plaintiffs can still seek certification of
the remaining claims.45 The remaining claims fall into two categories: the shareholder
claims and the debenture-holder claims. The former category consists of shareholders
who purchased ATP securities in the secondary market during the Class Period. The latter
category consists of debenture-holders who purchased any of the companys debentures

45

See Musicians Pension Fund of Canada (Trustees of) v. Kinross Gold Corp., 2014 ONCA 901, at para. 97: It
does not automatically follow from the denial of leave for the statutory claims that there will be no basis in fact for
all of the class definition, common issues and preferable procedure certification criteria.

Page: 33

in the secondary market or the Series D debentures in the primary market via the
December 2012 prospectus.
[130] The secondary market claimants (the shareholders and certain debenture-holders)
advance a common law claim for negligent misrepresentation. The primary market
claimants (the Series D debenture-holders) assert a statutory claim under s. 130 of the
OSA and common law claims for negligence and negligent misrepresentation.
(2) The shareholder claims
[131] The apparent reason for this proposed class action was the loss allegedly
sustained by the shareholders who purchased on the secondary market during the
proposed Class Period. Hence, my decision denying leave to pursue the statutory action
for misrepresentation in the secondary market (which does not require proof of reliance)
will be a major setback for the plaintiffs. Indeed, I know of no securities class action that
has proceeded after leave under the OSA had been denied. As Strathy J., as he then was,
noted in Green, the statutory action under s. 138.3 is tailor-made for a class action.46
[132] Having lost the leave motion, the plaintiffs are now limited to the much more
cumbersome common law action for negligent misrepresentation which requires proof of
individual reliance that is, the plaintiffs will have to show that every shareholder (and
debenture-holder) that purchased ATP securities on the secondary market relied on one or
more of the alleged misrepresentations. This means that evidence will be needed to
establish which shareholder relied on what particular misrepresentation, which
misrepresentation caused what loss to whom and when did this occur? Given the highly
individualized nature of the inquiry, it is not surprising that the Court of Appeal has noted
that generally, common law negligent misrepresentation claims in securities cases are
not suitable for certification.47
[133] The reason for this is not because there is no reasonable cause of action under s.
5(1)(a) of the CPA or no identifiable class under s. 5(1)(b) of the CPA. Nor is it the case

46

Green v. Canadian Imperial Bank of Commerce, 2012 ONSC 3637, at para. 611 (S.C.J.).

47

Kinross, supra, note 45, at para. 136.

Page: 34

that negligent misrepresentation claims have never been certified in securities actions
they have.48
[134] The reason why common law negligent misrepresentation claims in securities
cases are generally not suitable for certification is that the plaintiff will probably have
difficulty satisfying the preferable procedure requirement under s. 5(1)(d). As Strathy J.
explained in Green,49 a class proceeding is not the preferable procedure for resolving
reliance-based claims with individual issues of causation and damages because that is a
task that would be unmanageable.50
[135] Class counsel have tried to side-step the proof of individual reliance problem
(and in doing so, the manageability problem) by building on the accepted proposition that
individual reliance can be inferred from the surrounding facts or circumstances.51 Thus,
in securities class actions, class counsel have presented expert evidence that the securities
in question were trading in an efficient market52 and then used this evidence to certify a
common issue that asked whether individual reliance could be inferred from these
(efficient market) circumstances. In the past, some class action judges, myself included,53

48

See, for example, Green, supra, note 18, at para. 103, and Fantl v. Transamerica Life, 2015 ONSC 1367 (Div.
Ct.) and the case law discussed therein at paras. 42-44. Also note that s. 138.13 of the OSA preserves common law
claims, such as the claim for negligent misrepresentation, even where leave to proceed with the statutory action
under s. 138.3 has been granted.
49

Green, supra, note 45, at para. 595.

50

Ibid., at para. 611.

51

NBD Bank Canada v. Dofasco (1999), 46 O.R. (3d) 514 (C.A.), at para. 81; Mondor v. Fisherman, [2001] O.J.
No. 4620 (S.C.J.), at para. 65.
52

The efficient market concept is an important component of the fraud on the market principle, an American
construct affirmed by the U.S. Supreme Court in Basic Inc. v. Levinson, 485 US 224 (1988). The U.S. Supreme
Court developed the fraud on the market principle to get around the problem of having to prove individual
reliance in securities actions alleging negligent misrepresentation. If counsel can show that the impugned securities
were trading in an efficient market (by filing an experts report) then one can assume that all relevant information,
including any (alleged) misrepresentations about the security, was reflected in its price. Investors who relied on this
price when they purchased the securities are deemed to have relied on these misrepresentations. Hence, there is no
need for any further individualized proof. The efficient market/fraud on the market theory is obviously essential to
the viability of many American securities class actions. In Ontario, however, there is arguably no need for this
deemed reliance construct because the statutory action under Part XXIII.1 of the OSA, in particular s. 138.3,
explicitly dispenses with the need to prove individual reliance.
53

Dugal v. Manulife Financial, 2013 ONSC 4083, at para. 93: Proposed Common Issue 8 is certified The
question asks whether each Class Members reliance can be inferred from the fact that each Class Member

Page: 35

accepted this approach and certified the question about the efficient market and inferred
reliance as a common issue. Class counsel were thus able to avoid both the s. 5(1)(c)
pitfall (individual assessments) and the s. 5(1)(d) pitfall (manageability).
[136] However, as I was soon to discover, this approach (inferring reliance via evidence
of an efficient market) is not available in Ontario. Justice Strathy explained why in Green
v. CIBC: 54
[T]he statutory remedy for a secondary market misrepresentation under s.
138.3 of the Securities Act was enacted, in part, due to the difficulty in
proving reliance-based common law claims and the rejection in Ontario
of the fraud on the market theory. The statutory provisions contain
checks, such as the leave procedure, to ensure that the remedy is not
abused and balances, such as the liability cap, to protect the corporation
and its continuing shareholders from crippling exposures In my view,
there is no authority to support the proposition that fraud on the market
or the efficient market theory can supplant the need to prove individual
reliance. 55

[137] The Court of Appeal agreed.56 To allow common law claims where the corporate
and shareholder protections set out in the OSA leave provision are not available would
render the [statutory] remedy and the protective leave provision redundant.57
[138] A few months later in Kinross,58 the Court of Appeal revisited the leave provision
and reaffirmed that reliance is a claimant-specific issue requiring individualized

acquired the MFC securities in an efficient market. Both the Court of Appeal and this court have held that individual
reliance can indeed be inferred from the surrounding facts or circumstances. Given that this Proposed Common
Issue only asks whether buying securities in an efficient market can provide the surrounding circumstances for
inferring individual reliance and does not require individual assessments, it is a legitimate query and one that, in my
view, will help advance the litigation.
54

Green, supra, note 46.

55

Ibid., at paras. 595 and 600.

56

Green, supra, note 18, at para. 103: [We] see no error in the motion judges analysis and no basis to interfere
with his conclusion that the reliance issues should not be certified.
57

Ibid., at para. 102.

58

Kinross, supra, note 45.

Page: 36

evaluation and fact-finding.59 The Court of Appeal also noted that the statutory action
under s. 138.3 was enacted in part due to the difficulty in proving reliance-based
common law claims and, quoting Justice Strathy, agreed that it was tailor-made for a
class action.60 In short, the Court of Appeal has closed the door (in my view correctly) to
any further use of the American-based efficient market/fraud on the market theory to
establish inferred reliance in a common law negligent misrepresentation claim.
[139] Thus, the plaintiffs attempt herein presenting expert evidence that the ATP
shares were trading in an efficient market during the proposed Class Period and asking
that an inferred reliance common issue be certified must be rejected. If, having lost
the leave motion, the plaintiffs intend to proceed with the negligent misrepresentation
claim they may do so, but they will be required to prove individual reliance.
[140] I can now return to s. 5(1)(d) of the CPA and the preferable procedure analysis.
My concern here is not manageability I agree with the observation of the Court of
Appeal in Green that manageability problems can often be addressed under s. 25 of the
CPA: The trial judge may order individual trials to determine the issues of reliance and
damages.61 My concern is the co-relation between the denial of leave and the
preferability analysis. As I read the decision in Kinross, the Court of Appeal made an
important pronouncement: that the denial of leave for the statutory claim is a relevant
factor in the preferability analysis.62
[141] Recall that the question of preferability has two concepts at its core: whether the
class proceeding would be a fair, efficient and manageable method of advancing the
claim; and whether the class action would be preferable to other reasonably available
means of resolving the claims of the class members.63 Recall as well that in Fischer,64 the
Supreme Court reaffirmed that the preferability inquiry has to be conducted through the

59

Ibid., at para. 117.

60

Ibid., at para. 136.

61

Ibid., at para. 104.

62

Ibid., at para. 99.

63
64

Hollick v. Toronto (City), [2001] 3 S.C.R. 158, at para. 28.

AIC Limited v. Fischer, 2013 SCC 69.

Page: 37

lens of the three principal goals of class actions, namely judicial economy, behaviour
modification and access to justice.65
[142] In Kinross, a case where leave to pursue the statutory action was denied by the
motion judge, the Court of Appeal concluded not only that the remaining common law
claims of negligent misrepresentation that required individualized proof of reliance,
causation and damages were inherently unsuitable for certification66 because of
manageability problems, but also that a class proceeding would not be the preferable
procedure for advancing the remaining common law claims.67 The Court said it was
inappropriate to simply ignore the denial of leave for the statutory claims68 and that:
The motion judges leave decision is a relevant consideration in
determining whether the class representative has demonstrated some
basis in fact that a class proceeding is the preferable procedure to resolve
the class members' claims. It, too, favours the conclusion that a class
action is not the preferred method of advancing the common law claims
in this case.69

[143] The Court of Appeal made clear that where leave under s. 138.8 of the OSA has
been denied because the statutory misrepresentation claims had no reasonable possibility
of success and where the common law misrepresentation claims are based on the same
evidentiary foundation as the statutory claims, and are thus destined to fail,70 a class
action is not the preferable procedure. To permit a class action to proceed in [these]
circumstances would render access to justice more illusory than real and would
significantly undercut the goal of judicial economy.71
[144] It is important to set out the Courts reasoning in full:

65

Ibid., at para. 22.

66

Kinross, supra, note 45, at paras. 117 and 129.

67

Ibid., at paras. 127-128.

68

Ibid., at para. 132.

69

Ibid., at para. 132.

70

Ibid., at para. 138.

71

Ibid., at para. 139.

Page: 38

[I]t has already been determined in this case that the appellants statutory
misrepresentation claims have no reasonable prospect of success at trial.
This assessment of the merits was made on the basis of the
comprehensive record on the leave motion. In my opinion, in the unique
circumstances where 1) statutory misrepresentation claims and common
law misrepresentation claims, based on the same evidentiary foundation,
are combined, and 2) the former claims have been found to have no
reasonable possibility of success under a statutory mechanism that is
directed at access to justice, it is appropriate to consider the outcome of
the leave motion for the statutory claims in the preferability inquiry
regarding the common law claims. This conclusion is reinforced, in my
view, by the fact that the courts have recognized that reliance-based
claims are particularly unsuitable for resolution in a class proceeding.
In the case at bar, as I have stressed, numerous individual trials will be
required to establish reliance, causation and damages. If a class action
were to be certified, those trials would proceed against the backdrop of
an existing judicial determination that the appellants core claims of
misrepresentation hold no reasonable prospect for success at trial. Yet
the same claim is said to warrant a class action for common law negligent
misrepresentation claims grounded on the same alleged facts. In these
circumstances, encumbering the parties and the courts with a complex
class action that is destined to fail hardly promotes the goals of judicial
economy and access to justice.
That said, I recognize that there may well be economic barriers to the
pursuit of the common law claims on an individual basis. I also
acknowledge that the option of individual actions to pursue securities
misrepresentation claims is unappealing, costly and cumbersome. But
that is precisely the access to justice impediment sought to be remedied
by s. 138.3 of the Securities Act. To permit a class action to proceed in
the circumstances of this case, in my view, would render access to justice
more illusory than real and would significantly undercut the goal of
judicial economy. The goal of behaviour modification does not alter this
conclusion.72

[145] The reasoning in Kinross applies here as well. I dismissed the leave motion for the
statutory claims because I concluded, after reviewing the evidence, that they had no

72

Ibid., at paras. 130, 138 and 139.

Page: 39

reasonable possibility of success. The common law claims rest on the same evidentiary
foundation as the statutory claims. As the Supreme Court noted in Fischer the preferable
procedure analysis under s. 5(1)(d) of the CPA requires a cost-benefit approach that
considers the impact of a class proceeding on class members, the defendants, and the
court.73 Encumbering the parties and the courts with a complex class action that is
destined to fail promotes neither judicial economy nor access to justice. Therefore, a class
action is not a preferable procedure.
[146] In sum, the shareholder claims do not satisfy the sy. 5(1)(d) preferable procedure
requirement and cannot be certified as a class proceeding.
(3) The debenture-holder claims
[147] Given that the shareholder claims cannot be certified as a class action, I must now
consider whether the remaining debenture-holder claims can be certified as a possible
sub-class or a completely separate class. The problem, however, is two-fold:
(i) Neither of the two current plaintiffs (who are shareholders only) are proper representative
plaintiffs for the debenture-holders.74 The law is clear that a secondary market purchaser
does not have a statutory cause of action for prospectus misrepresentation under s. 130 of
the OSA75 and can advance such a claim as a representative plaintiff only if he himself
has a cause of action.76 In other words, the proposed representative plaintiff for the
debenture-holder claims should be a debenture-holder.
(ii) The action as currently constituted needs to be fundamentally reconfigured. The
statement of claim has to be substantially amended or re-issued and the class definition
and proposed common issues completely revised to focus only on the debenture-holders.
There must be a rational relationship between the class and the common issues.77 And,
obviously, a new litigation plan must be submitted.

73

Fischer, supra, note 64, at para. 21.

74

The two proposed representative plaintiffs, Ms. Coffin and Mr. Fife, only purchased ATP shares, not debentures.
Recall the discussion above in para. 9.
75

Menegon v. Philip Services Corp., [2001] O.J. No. 5547, at para. 38 (S.C.J.).

76

Dobbie v. Arctic Glacier Income Fund, 2012 ONSC 773, at paras. 15-18 (S.C.J.).

77

Hollick v. Toronto (City), 2001 SCC 68, at para. 20.

Page: 40

[148] Therefore, if class counsel (or other counsel retained by the debenture-holders)
wish to reconstitute this action as a proposed class action on behalf of the debentureholders (in the face of the evidentiary findings made herein) they have leave to do so. But
two observations should be made, one positive and one negative.
[149] The positive aspect of pursuing an action under s. 130 of the OSA on behalf of the
prospectus-based purchasers of the Series D debentures is that neither leave of the court
nor proof of reliance is required. The negative aspect is that the court may decide that the
two added common law claims of negligence and negligent misrepresentation should be
collapsed, for reasons of duplication, into a single claim of negligent misrepresentation.78
Should this happen, there may be little to no value in certifying common law negligent
misrepresentation issues, given that individual trials will still be necessary to determine
the actual reliance of the debenture-holders who purchased in the secondary market.
[150] Put simply, if debenture-holders counsel believes that there is a worthwhile and
viable action here despite the evidence herein that suggests otherwise, he or she may wish
to proceed with a reconstituted debenture-holders only class action that is limited to the
statutory claim under s. 130 of the OSA.
[151] But I leave this decision to the debenture-holders and their lawyers. All I need to
say at this point is that any potential class action limited to the debenture-holders must be
completely reconstituted before it can be considered for certification.
(4) Conclusion on certification motion
[152] The shareholders component of this proposed class action fails to satisfy the
preferable procedure requirement in s. 5(1)(d) of the CPA and thus cannot be certified.
The debenture-holders component may be considered for certification if it is completely
reconstituted with a proper representative plaintiff, a redefined class, revised common
issues and a new litigation plan.
III. Disposition
[153] For the reasons set out above in Part I, the motion for leave under s. 138.8 of the

78

The defendants argue that the claim for negligence made on behalf of the Series D debenture-holders who
purchased under the prospectus does not plead a duty of care that is different from the duty to provide accurate
information; that the negligence claim is in fact simply a claim for negligent misrepresentation without the element
of reliance; that it is duplicative of the negligent misrepresentation claim and thus should not be allowed to proceed.

Page: 41

OSA is dismissed.
[154] For the reasons set out above in Part II, the motion for certification of the proposed
class action as currently constituted is dismissed.
[155] Class counsel have leave to file a reconstituted action limited to the debentureholder claims provided that the defendants are reimbursed on a partial indemnity basis for
their success on this motion.
[156] The defendants should forward brief cost submissions within 14 days and the
plaintiffs within 14 days thereafter.
[157] Counsel should be aware of the costs protocol for certification motions that was
set out in my 2013 Costs Decisions.79 Counsel should also note that this costs protocol
does not apply to leave motions, with one qualification: if the plaintiffs intend to argue
that the defendants quantum is excessive or unreasonable (other than obvious excesses
or non-compliance with the Rules Committees hourly-rate grid80) they should consider
submitting a certified copy of their own costs outline.81
[158] Finally, my thanks to counsel on both sides for their assistance and for the quality
of their oral and written advocacy.

Belobaba J.

Released: July 24, 2015

79

See, for example, Dugal, supra, note 53, at para. 5.

80

Counsel are directed to the discussion about hourly rates in Baroch v. Canada Cartage, 2015 ONSC 1147, at
paras. 7-8 and Goldsmith v Poseidon, 2015 ONSC 4581 at paras. 7-11.
81

See my comments in Goldsmith, supra, note 80, at para. 13.

Page: 42

CITATION: Coffin v. Atlantic Power Corp., 2015 ONSC 3686

COURT FILE NO.: CV-13-480939-CP
DATE: 20150724

ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Jacqueline Coffin and Scott Fife
Plaintiffs / Moving Parties
and

Atlantic Power Corporation, Barry Welch and

Terrence Ronan
Defendants / Responding Parties

REASONS FOR JUDGMENT

BELOBABA J.

Released: July 24, 2015