In the recent decision of Dugai, Murphy v. Manulife
Financial Corporation (2013 ONSC 327), the Divisional Court confirmed
the principle that defendants have no obligation to lead evidence
on a motion for leave to assert a cause of action for secondary
market misrepresentation under s. 138.8(1) of the Ontario
Securities Act, R.S.O. 1990, c. S.5 (the "Act").
In Dugai, the plaintiff investors proposed a class
action alleging inadequacies in the defendant corporation's
Risk Management Policies and Practices, including a cause of action
for secondary market misrepresentation under Part XXIII.1 of the
Act (for which they require leave under s. 138.8(1)). After being
advised that the defendants did not intend to file any affidavits
on the leave motion (currently scheduled for March 2013), the
plaintiffs summoned two Manulife employees under Rule 39.03 of the
Rules of Civil Procedure to provide relevant evidence for
use during the leave motion. The defendants brought a motion to
quash the summonses, and the plaintiffs brought a cross-motion to
compel the defendants to file affidavits. Belobaba J. granted the
defendants' motion and dismissed the cross-motion; the
plaintiffs sought leave to appeal in the Divisional Court.
In upholding Belobaba J.'s decision and dismissing the
plaintiffs' application, Harvison Young J. agreed with his
analysis that the two issues on motion – whether defendants
are required to serve and file affidavits on a s. 138.1 motion, and
the availability of Rule 39.03 summmonses in such circumstances
– have already been fully adjudicated. Both judges drew
particular attention to the decision of Lax J. in Ainslie v. CV
Technologies(2008), 93 O.R. (3d) 200 (S.C.J.), one of the
first actions brought under Part XXIII.1 of the Act. In
Ainslie, FMC's Robb Heintzman and Matthew Fleming
successfully argued that the Act only requires a defendant to file
an affidavit where it intends to lead evidence in response to a
leave motion, and that allowing the plaintiffs to examine the
defendants in the absence of such affidavit evidence would amount
to an abuse of process, as it would afford the plaintiffs greater
rights of discovery than in an action where it is unnecessary to
Harvison Young J. concluded that the number of recent cases
which accepted and applied the reasoning in Ainslie
"overwhelming supports the motion judge's interpretation
of s. 138.8 that it does not require the defendants to deliver
affidavits or to be subjected to cross examination when they do not
intend to lead evidence in response to the leave motion".
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