John Campion

The plaintiff sought leave under s. 138.8 of the Securities Act to pursue a secondary market misrepresentation class action arising from a mining company’s public restatement of prior financial statements related to “bill and hold” revenue recognition.

The court held that the explicit restatement acknowledging prior errors and internal control weaknesses created a reasonable possibility that the claim against the issuer could succeed at trial.

However, the individual officers and directors demonstrated a reasonable investigation defence through detailed evidence of their reliance on professional auditors and careful review of revenue recognition practices.

As a result, the statutory leave requirement was satisfied only as against the issuer company.

Leave was refused against the individual defendants.

The appellant appealed a decision of a Master who declined to proceed with a reference related to a judgment for partition and sale of several apartment properties.

After obtaining the judgment, the appellant privately sold its minority interest to the majority owner outside the reference process and removed the instrument registering the judgment for sale.

The appellant later sought to continue the reference solely to pursue an accounting against the property manager for alleged overcharged management fees.

The court held that the reference was governed by the judgment for sale and that the accounting was merely ancillary to the sale process.

Because the appellant’s private transaction rendered the judgment for sale moot, the Master correctly found that she lacked jurisdiction to continue the reference.

The appeal was dismissed.