A secondary market misrepresentation class action was brought against a coal mining company and its former CFOs and directors following the company's restatement of financial statements for 2010-2012.
The motion judge granted leave to proceed against the company but denied leave against the individual defendants, finding they had established a reasonable investigation defence.
The Court of Appeal reversed, holding that the motion judge erred by treating the leave motion as a mini-trial and failing to consider significant credibility issues and gaps in the evidentiary record.
The court found that the defendants' position—that they should evade liability because they previously made material misrepresentations in the restatement but are now telling the truth—was inconsistent with fundamental securities regulation principles requiring scrupulous continuous disclosure.
