Securities Litigation includes litigation and broader dispute resolution and settlement on issues including insider trading; oppression remedies; shareholder disputes generally; contested merger & acquisition bid and defense work; proxy contests; amalgamations, reorganizations, and restructurings; corporate governance disputes; director, officer, issuer, and investment dealer disclosure and liability matters; and other such non-compliance matters generally.
National Securities Regulator Is Constitutional
In a recent decision of the Supreme Court of Canada, a proposed cooperative pan-Canada securities regulator was found to be constitutional, overturning a finding of the Court of Appeal in Québec. Canada is one of the only developed countries in the world that does not have a national regulator to oversee securities trading, and the effort to establish a national securities regulator—which has been ongoing since the 1970s—continues to be a challenge.
As reported in Canadian Lawyer, the decision in Reference re Pan‑Canadian Securities Regulation “makes clear that the Constitution allows the federal, provincial and territorial governments to work together to regulate securities trading under a single, unified system in Canada. A pan-Canadian regulator will get its authority from a Council of Ministers formed from the federal government and the provinces and territories participating. Provincial and territorial legislatures are not required to join a common regulatory system.”1
The decision allows a Cooperative Capital Markets Regulatory System to be formed and, potentially, other pan-Canadian regulatory systems.
Complicating Securities Class Actions
According to the Bennett Jones’ Class Action Litigation Group: “Recent trends towards the globalization of Canada’s class regime have continued. Canadian courts appear primed to accept global classes, apply creative solutions to address complex cross-border class proceedings and take jurisdiction over claims even where a defendant’s connections to Canada are limited. Canadian courts have also taken on claims paralleling those originally seen south of the border, including significant decisions addressing unpaid overtime and … deceptive marketing.”2
To no one’s surprise, plaintiff and defense lawyers differ on the extent to which the threshold leave requirement in Ontario’s Securities Act has proven to be an effective filter against scurrilous secondary market securities class actions. Before such actions can proceed, the plaintiffs must establish that the action is being brought in good faith and that there is a reasonable possibility that the action will be resolved at trial in favor of the plaintiff.
There have been several contested leave motions in Ontario. Leave was granted in part in six cases (Imax, Arctic Glacier, CIBC, Manulife, Canadian Solar, Celestica) and outrightly denied in two (Western Coal, Kinross). The defendants consented to leave in five instances (Agnico Eagle, Canada Lithium, SNC-Lavalin, Sino-Forest, easyHome). Otherwise in Canada, leave was denied in BC in Round v. McDonald Detwiler and granted in Québec in Theratechnologies, where the leave decision is under appeal to the Supreme Court of Canada.
Leave in Ontario
Meanwhile, the leave cases in Ontario, and in other provinces, continue to evolve or grow more complicated—depending on your point of view. As Matthew Fleming and Thomas Wilson of Dentons LLP wrote: “In Mask v. Silvercorp Metals Inc., the Court of Appeal for Ontario upheld a decision refusing leave to commence an action for secondary market misrepresentation under section 138.8 of the Ontario Securities Act. The Court of Appeal’s decision, released on August 24, 2016, confirms that the test for leave in statutory secondary market claims must be viewed as a substantive hurdle to such claims and that judges considering a motion for leave may weigh and evaluate the evidence before them.”3
- Raymer, Elizabeth. “SCC rules that a national securities regulator is constitutional.” Canadian Lawyer. November 9, 2018. https://www.canadianlawyermag.com/practice-areas/corporate-commercial/scc-rules-that-a-national-securities-regulator-is-constitutional/275631.
- “Looking Forward: Canada Class Actions.” Bennett Jones LLP. Accessed September 3, 2020. https://www.bennettjones.com/Publications%20Section/Guides/Looking%20Forward%20Canadian%20Class%20Actions%20in%202017.
- Fleming, Matthew, and Thomas Wilson. “Judges may weigh evidence on leave motions in secondary market securities class actions.” International Law Office. October 11, 2016. https://www.internationallawoffice.com/Newsletters/Litigation/Canada/Dentons/Judges-may-weigh-evidence-on-leave-motions-in-secondary-market-securities-class-actions.