Securities Class Actions Trends

• Published date: 02 December 2021
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Cannabis & Hemp, Corporate and Company Law, Class Actions, Securities
• Law Firm: Cassels
• Author: Ms Lara Jackson, Christopher Selby, Stephanie Voudouris and Robert Sniderman

We believe that the following securities class action developments are largely issuer/defendant friendly, but their impact on the number and types of future securities class action filings remains to be seen.

FIRST MERITS DECISION BRINGS HOPE TO DEFENDANTS

The leave test for secondary market disclosure misrepresentation cases under Part XXIII.1 of the Ontario Securities Act (the Securities Act) has been well developed through case law, including by the Supreme Court of Canada. While this test is intended to be a significant screening mechanism, and has been described as "more than a speed bump," the courts are still clearly guided by the principle that the Securities Act is remedial legislation that should be interpreted broadly and purposively.¹ The resulting reality is that a large percentage of proposed secondary market cases survive the leave motion, and most of these cases then go on to settle.²

Notably, 2021 saw the first decision of a secondary market securities class action on its merits. The plaintiff in Wong v. Pretium Resources alleged that the mining company defendant made a misrepresentation by omission when it did not disclose in a timely manner the negative opinion of one of its consultants concerning the mineral resources estimate prepared by another consultant. While Justice Belobaba had previously granted leave to the plaintiff to proceed with this claim,³ he dismissed the claim on its merits on the defendant's summary judgment motion, finding that there was no misrepresentation and that, in any event, the defendants were entitled to a reasonable investigations defence.⁴

The significance of this decision is the commentary and insight on the relationship between the test for leave to proceed with a secondary market class action and a finding on the merits of the action. Justice Belobaba noted that while "leave to proceed will be granted if there is enough evidence to clear the 'reasonable possibility' hurdle," the defendants may still prevail "when the matter is litigated in full and the plaintiff's hurdle is the more demanding 'balance of probabilities.'"⁵

In addition to demonstrating that the merits threshold is more onerous than the leave threshold, this decision provides useful guidance to issuers when making disclosure decisions. At the merits hearing, sufficient evidence was presented to allow Justice Belobaba to dislodge his initial views of the significance of the negative opinion of the consultant and to conclude that the...