Here Are Six Important Securities Litigation Cases From 2020 That You Need To Read

• Published date: 10 February 2021
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Class Actions, Trials & Appeals & Compensation, Securities
• Law Firm: Aird & Berlis LLP
• Author: Hansen Wong

Now that we are into 2021, it seems like an ideal time to reflect on six noteworthy securities law cases from the past year. From securities class actions to enforcement of sanctions, we hand-picked five cases from Ontario and British Columbia, plus one U.S. decision, which together highlight some key securities litigation developments in 2020.

Ontario Securities Commission v. Tiffin, 2020 ONCA 217

The Tiffin decision is confirmation from Ontario's highest court of the breadth to the definition of a "security" under the Securities Act (Ontario) (the "Securities Act"), and of the courts' approach to assessing whether a financial instrument is a security. At issue was whether a simple, non-convertible promissory note is a "security" within the meaning of the Securities Act. The Court of Appeal declined to import the "family resemblance" test formulated under U.S. law into Ontario jurisprudence.¹ Instead, the court found the Securities Act employs a "catch and exclude" regime, intended to define key terms broadly to capture a wide range of instruments, before providing exemptions crafted to exclude more specific instruments from the scope of the Securities Act. In the end, the court concluded that a simple, non-convertible promissory note is a "security" within the meaning of the Securities Act and that the Securities Act applies to the distribution of a promissory note.

Baldwin v. Imperial Metals Corporation et al, 2020 ONSC 5616

Baldwin underscores that a statutory cause of action for secondary market liability under s. 138.1 of the Securities Act requires that there be a corrective disclosure following a misrepresentation in disclosure documents or public statements. Following the collapse of a mine's tailing storage facility releasing millions of cubic metres of liquid mining waste onto adjoining areas and waterways, Imperial Metals issued a press release regarding the collapse, and the company's share price dropped by 40%. A proposed class action suit was brought under s. 138.1 of the Securities Act. Belobaba J. rejected the argument that a statutory cause of action had arisen given the absence of any public correction of a misrepresentation. To constitute a "public correction", the alleged correcting statement must be reasonably capable of revealing to the market the existence of an untrue statement of material fact or an omission to state a material fact in a previous disclosure document or public statement. In other words, there must be some...