The appellants appealed a trial judgment finding them liable for prospectus misrepresentation under s. 130(1) of the Securities Act.
The trial judge had held that the appellants had a continuing obligation to disclose poor intra-quarterly financial results before the closing of their initial public offering, and that their failure to do so rendered an implied representation of objective reasonableness in their financial forecast false.
The Court of Appeal allowed the appeal, holding that the Act distinguishes between material facts and material changes, and imposes no continuing obligation to disclose material facts after a prospectus receipt is issued.
The Court further held that the trial judge erred in implying a representation of objective reasonableness and in failing to apply the business judgment rule to management's assessment of the forecast.
