Securities Law - SCC

A Canadian mining company detected pit wall instability and a subsequent rockslide at its premier mine in Chile.

The company did not immediately disclose these events to investors, disclosing them about a month later as part of regular updates, after which its share price dropped 16 percent.

An investor sought leave under s. 138.8(1) of the Ontario Securities Act to commence a class action for failure to make timely disclosure of a material change.

The Supreme Court of Canada, dismissing the appeal, held that the motion judge erred in interpreting 'material change' too restrictively.

The undefined terms 'change', 'business', 'operations', and 'capital' should not be constrained by dictionary definitions but applied flexibly and contextually.

The leave test requires a plausible application of the legislative provisions to the facts, not merely a plausible statutory interpretation.

On the uncontested evidence that the events impacted the company's operations, there was a reasonable possibility the action could succeed at trial.

The appellants, undischarged bankrupts, sought to have administrative penalties and disgorgement orders imposed by the British Columbia Securities Commission released upon bankruptcy discharge.

The Commission had sanctioned the appellants for market manipulation contrary to the Securities Act, ordering $13.5 million in administrative penalties and approximately $5.6 million in disgorgement orders.

The majority held that neither the administrative penalties nor the disgorgement orders fall within s. 178(1)(a) of the BIA because orders of an administrative tribunal registered with a court are not 'imposed by a court' within the meaning of that provision.

As to s. 178(1)(e), the majority held that administrative penalties do not result directly from the fraudulent scheme and therefore are dischargeable, but the disgorgement orders — representing the exact value of property obtained by fraud — are directly linked to the fraudulent misrepresentation and survive bankruptcy.

The dissent would have held that both orders survive under s. 178(1)(e) as debts resulting directly from deceitful conduct, without requiring a correspondence between the debt quantum and the gain derived.

Four British Columbia residents alleged to have participated in a transnational pump-and-dump securities manipulation scheme with links to Quebec challenged the adjudicative jurisdiction of Quebec's Financial Markets Administrative Tribunal (FMAT) over out-of-province defendants.

The majority held that while the Civil Code of Québec's private international law rules did not independently ground jurisdiction, the Quebec securities scheme — comprising the Securities Act and the Act respecting the Autorité des marchés financiers — properly interpreted in light of the Unifund sufficient connection test, conferred jurisdiction on the FMAT over appellants who had a real and substantial connection to Quebec.

The majority dismissed the appeals, finding that using Quebec as the 'face' of the scheme and injuring Quebec investors established the requisite connection.

Côté J. dissented, arguing that the majority conflated constitutional applicability of legislation with adjudicative jurisdiction, and that in the absence of express conferral of territorial jurisdiction by special statute, the C.C.Q.'s private international law rules exclusively govern, under which the FMAT lacked jurisdiction.

This appeal addressed whether a provincial securities offence carrying a maximum sentence of five years less a day, together with a potential multimillion-dollar fine, engaged the right to a jury trial under s. 11(f) of the Charter.

The appellate record concerned conflicting lower-court rulings on whether the penalty scheme amounted to a more severe punishment requiring jury process.

The Court held that the accused was not entitled to a jury trial and adopted the majority reasoning of the provincial appellate court.

The statutory maximum imprisonment threshold was not transformed into a constitutionally jury-entitling punishment by adding the prospect of a financial penalty.

The appeal was dismissed.

The Court considered whether a person charged under Alberta securities legislation carrying a maximum sentence of imprisonment of five years less a day, plus potential substantial fines, was entitled to a jury trial under s. 11(f) of the Charter.

The lower courts held that this penalty structure did not trigger the constitutional jury right.

The Court agreed substantially with the majority below and held that the appellant was not entitled to a trial by jury.

The appeal was dismissed.

The Court addressed three securities class action appeals on whether limitation periods for statutory secondary-market misrepresentation claims are suspended before leave is granted, and on related nunc pro tunc, special circumstances, leave-threshold, and certification issues.

The CIBC and IMAX appeals were dismissed, while the Celestica appeal was allowed.