Don't Leave It At Leave: Ontario Superior Court Weighs In On The Evidentiary Threshold For Leave And The Merits Of Secondary Market Misrepresentation Claims

• Published date: 29 March 2021
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Class Actions, Securities
• Law Firm: Cassels
• Author: Ms Lara Jackson, Christopher Horkins, Joseph Hamaliuk and Stacey Weltman

In the much-anticipated decision in Wong v Pretium Resources Inc., the Ontario Superior Court of Justice has weighed in for the first time on the merits of a class proceeding under the secondary market liability provisions of Part XXIII.1 of the Ontario Securities Act (OSA), demonstrating the difficulty plaintiffs may have in actually proving such claims after clearing the hurdle of being granted leave to proceed.¹ The Court dismissed the plaintiff's secondary market misrepresentation claim against Canadian mining company Pretium Resources Inc. (Pretium) on a motion for summary judgment after the same motion judge had previously granted leave to the plaintiff to proceed with the claim.

The decision in Pretium highlights the interplay and delta between the "reasonable possibility" standard applicable on the test for leave under section 138.8 of the OSA, and the more stringent "balance of probabilities" standard applicable to the ultimate adjudication of an action on the merits. It further provides much-needed guidance to litigants involved in class proceedings alleging secondary market misrepresentations under the OSA, as they decide whether to explore settlement after leave has been granted or continue defending the claim on the merits.

THE MOTION FOR LEAVE

The Court granted the plaintiff leave to proceed with an action for secondary market misrepresentation by omission against Pretium, for failing to disclose concerns raised by one of its external consultants regarding negative mineral sampling results at its Brucejack gold mining project located in north-western British Columbia. Pretium had retained Snowden Mining Industry Consultants (Snowden) to review the initial results of Pretium's mineral exploration program and to conduct a mineral resource estimate for the project. To confirm the accuracy of the mineral resource estimate, and given the unique mineralization in the Valley of the Kings section of the Brucejack project, Snowden recommended that Pretium conduct tests on a bulk sample of the site. Pretium retained Strathcona Mineral Services (Strathcona) to oversee the excavation of the sample and report on the test results. The bulk sample results would then be reviewed by Snowden, which would interpret the results and, if necessary, adjust the resource estimate.

Following the excavation and sampling process, Strathcona provided Pretium with an unfavorable and unsolicited opinion regarding the mineral resource estimates at Brucejack and urged...