Executive Summary: Key Legal and Evidentiary Issues

• Ward’s failure to defend resulted in deemed admissions of all pleaded facts, allowing the court to proceed to certification and default judgment based on the Third Fresh as Amended Statement of Claim and uncontroverted affidavits.
• Core allegations centred on materially false or misleading public statements about Wayland’s Langton, Ontario cannabis facility, its funding status, construction progress, and related financial disclosures, which were certified or authorized by Ward as CEO.
• Both common law negligent misrepresentation and statutory securities misrepresentation claims were advanced under Part XXIII and Part XXIII.1 of the Ontario Securities Act, addressing primary and secondary market investor losses.
• The court found that the statutory and common law elements of misrepresentation, including duty of care, misleading statements, reasonable reliance, and loss, were satisfied on the pleadings and evidence for class-wide liability.
• Class action requirements under s. 5(1) of the Class Proceedings Act, 1992 were met, including a workable class definition, common issues focused on Ward’s role in the misrepresentations, and the preferability of a class proceeding over individual suits.
• Expert evidence on market efficiency and loss causation supported a class-wide damages model, leading to a judgment of $53,616,189 in damages and $200,000 in costs against Ward, with no statutory cap on his liability due to knowing misrepresentation.

Background and factual context

Wayland Group Corp. was a publicly traded cannabis company (formerly Maricann Group Corp.) that promoted a major cannabis production facility in Langton, Ontario. During the material time, Benjamin Allan Ward served as Wayland’s CEO and was responsible for authorizing and certifying the company’s public disclosure. The investors’ claim arises out of a series of public documents and statements released between December 13, 2017 and August 2, 2019. These documents described the Langton facility expansion as on-schedule, on-budget, fully funded, and expected to generate revenue during the class period. In reality, the plaintiffs say— and, because of Ward’s default, it is deemed admitted— that these statements were materially untrue. Construction and funding of the Langton facility were significantly off target, and Wayland’s management failed to appreciate and disclose serious problems around funding, operations, and financial reporting. The Langton facility was not fully funded, Phase One was behind schedule, and Phases Two and Three were so far off the disclosed plans that they were effectively omitted from later disclosures. When Wayland ultimately entered insolvency proceedings, it was only about 65% complete with Phase One of the project and did not even refer to further phases, confirming how far reality diverged from earlier representations. Beyond the facility itself, the plaintiffs alleged misrepresentations in relation to the acquisition of Colmed for $22 million in shares. The company touted that this transaction would support substantial outdoor THC cannabis cultivation and related processing capacity, but internal board materials raised concerns about the target’s lack of operating history and financial substance. The plaintiffs further pointed to Wayland’s relationship with its auditor, MNP LLP, noting that management negligently failed to recognize or address serious objections raised by the auditor to Wayland’s accounting practices. Those concerns ultimately triggered MNP’s resignation and Wayland’s inability to finalize its 2018 year-end financial statements.

Timeline of corrective disclosures and market fallout

The impugned misrepresentations were corrected in stages through public disclosures, which form the backbone of both the statutory and common law claims. On October 1, 2018, Wayland disclosed that it needed to raise additional capital and that $15 million would be allocated to the first phase of the Langton facility expansion, contradicting earlier claims that the project was fully funded; it also postponed the completion date from 2018 into 2019. On April 23, 2019, Wayland announced it would be forced to delay the release of its 2018 annual financial statements and MD&A, signalling serious internal financial reporting and control issues. The final and most consequential disclosure came on August 2, 2019, when Wayland announced that MNP LLP was resigning as auditor due to unresolved issues linked to Ward’s conduct, and that Ward himself had resigned as CEO and director. Following this disclosure, Wayland’s securities became worthless and were delisted from trading. Investors who had relied on prior optimistic statements about the Langton facility, funding, and the company’s financial health saw their investments effectively wiped out. The plaintiffs allege, and the court accepts for purposes of this motion, that the collapse in value was directly tied to the market’s realization that Wayland’s public statements, authorized and certified by Ward, had concealed significant operational and financial problems.

Claims advanced and legal framework

The plaintiffs advanced multiple causes of action against Ward. At common law, they claimed negligent misrepresentation in both the primary market (investors who purchased securities directly in offerings) and the secondary market (investors who purchased on the open market). These claims required proof of a special relationship giving rise to a duty of care, a misleading representation, negligence in making the statement, reasonable reliance by investors, and resulting damages. Statutorily, the plaintiffs relied on Part XXIII of the Ontario Securities Act for misrepresentation in prospectuses and offering memoranda, and on Part XXIII.1, including s. 138.3, for misrepresentations contained in public disclosure documents affecting the secondary market. For these statutory claims, the plaintiffs needed to show that Wayland, as a responsible issuer, released documents containing misrepresentations, that investors acquired securities during the period between release and public correction of those misrepresentations, and that Ward, as a director and CEO with authority over the disclosures, was among the designated parties liable for damages. Ward had already been subject to Mareva injunctions, supported by evidence that he had been moving assets internationally and appeared to be doing business overseas while litigation was ongoing. In this certification and default judgment motion, Ward did not appear and had not delivered a defence. As a result, he was noted in default, which meant that, under the Rules of Civil Procedure, all factual allegations properly pleaded in the Third Fresh as Amended Statement of Claim were deemed admitted. The plaintiffs supplemented those pleadings with affidavit evidence from a class member, an economics expert, and a witness familiar with Ward’s role and the misrepresentations, none of which was challenged.

Class definition and certification analysis

This judgment builds on an earlier decision (the “Wayland Certification” decision) that had already granted leave under the Securities Act and certified the class action against Wayland and related defendants. In the present motion, the plaintiffs sought certification and related relief specifically as against Ward. The proposed class was defined as all non-excluded persons who acquired Wayland common shares, or other securities convertible into common shares, during the class period— from December 13, 2017 through the close of trading on August 2, 2019— and who held some or all of those shares until after at least one of the corrective disclosures. A detailed list of excluded persons carved out executives, their family members and related entities, certain named individuals and entities associated with Wayland, holders of securities from specified acquisitions, and several institutional investors and related companies. The court accepted that this definition created a workable class whose members could be identified and ascertained through trading records and issuer lists. For common issues, the plaintiffs proposed a central question focused on whether Ward made or authorized misrepresentations or failed to disclose material facts or changes about Wayland, its operations, financial status, and particularly the Langton facility, during the relevant period. The court noted that this formulation followed an approach previously approved in large securities class actions such as Sino-Forest. Because the same alleged misrepresentations affected all class members in a similar way, this issue was common and would materially advance the litigation if determined once on a class-wide basis. As to preferability, the court observed that individual investor actions would be impractical and inefficient, especially in light of many small to medium-sized claims that would not warrant stand-alone litigation. A class proceeding was therefore the preferable procedure, promoting both judicial economy and access to justice. Finally, the representative plaintiffs— the same individuals already recognized in the earlier Wayland Certification decision— were again found to be appropriate: they had viable claims, no apparent conflict with the class, and the capacity to instruct counsel. Collectively, these findings meant that all five criteria under s. 5(1) of the Class Proceedings Act, 1992 were satisfied for certification of the action against Ward.

Default judgment and evidentiary basis for liability

Having found the certification requirements met and granted leave under the Securities Act, the court turned to the plaintiffs’ request for default judgment against Ward. The analysis focused on three questions commonly applied in default judgment motions: what facts are deemed admitted by virtue of the default; whether those admitted facts, as a matter of law, entitle the plaintiffs to judgment; and whether any additional uncontroverted evidence is required to support the judgment. Because Ward was in default, the detailed allegations of misrepresentation, reliance, and loss in the Third Fresh as Amended Statement of Claim were treated as true. On top of that, the court had before it unchallenged affidavit evidence: one affiant traced Ward’s conduct and the misrepresentations and subsequent corrective disclosures; another, an expert economist, explained market efficiency, loss causation, and class-wide damages; and a representative plaintiff described his own investment experience and losses as an example of class members’ harm. On this record, the court held that all the constituent elements of the common law and statutory misrepresentation claims against Ward were established. The misrepresentations were made in public documents and statements released during offerings and in the secondary market; Ward, as CEO and a director, had authority over and certified these disclosure documents; investors purchased and held securities during the period when these misstatements remained uncorrected; and they suffered losses when the truth was revealed and the securities collapsed in value. The court also underscored that, for the purposes of statutory liability, Ward’s knowing authorization of documents containing material misrepresentations meant that normal statutory liability caps under the Securities Act did not apply to him personally.

Damages methodology, quantum, and ultimate outcome

The damages analysis was grounded in expert evidence from a recognized specialist in securities litigation economics, who applied multi-sector, multi-trader models to measure the impact of the corrective disclosures on Wayland’s share price and to attribute investor losses to the misrepresentations. He first calculated total primary and secondary market damages at approximately $122.4 million. He then performed a more conservative analysis based on Non-Objecting Beneficial Owner (NOBO) lists, arriving at class-wide damages of $1.21 per qualified damaged share, aggregating to $53,616,189. The plaintiffs elected to seek judgment using this conservative NOBO-based figure, which amounted to about 47% of the overall losses tied to Ward’s conduct. The expert explained, and plaintiffs’ counsel confirmed, that this amount already reflected appropriate discounts to account for factors such as a recent settlement with other directors and officers of Wayland, so no further reduction was necessary. Given that Ward’s conduct was wilful and that he knowingly authorized documents containing misrepresentations, the court held that statutory liability limits did not shield him, leaving him fully exposed to the assessed class-wide damages. The expert evidence was uncontroverted, and the court found it credible and reliable. In the result, the court granted the plaintiffs leave under the Ontario Securities Act, certified the class action against Ward under the Class Proceedings Act, and awarded default judgment against him in the amount of $53,616,189 in damages. The court also ordered Ward to pay the plaintiffs $200,000 in all-inclusive costs, recognizing the substantial work expended by plaintiffs’ counsel over the life of the litigation. Taken together, this meant that the plaintiffs— as representative investors for the certified class— were the successful party, obtaining a total monetary award of $53,816,189 in damages and costs against Ward.