Securities Law - SCJ

The applicant, a hedge fund shareholder, brought an urgent application under section 248 of the OBCA seeking to adjourn the respondent corporation's annual general and special meeting of shareholders and to reset the record date.

The applicant alleged the notice was non-compliant with the OBCA and that the board acted oppressively by setting a timeline that effectively prevented shareholders from nominating an alternative slate of directors.

The court found that the respondent was not an "offering corporation" and had met all statutory notice requirements under sections 95(4) and 96(1) of the OBCA.

The court held that the notice procedures followed past practice and did not breach the reasonable expectations of shareholders as established in BCE Inc. v. 1976 Debentureholders.

The application was dismissed with costs of $75,000 to the respondent.

An anti-SLAPP motion brought by directors of MediPharm Labs Corp. to dismiss a libel action arising from a lawyer's letter sent during a proxy contest.

The letter, authored by counsel and approved by the defendants, raised concerns about the plaintiffs' solicitation activities, potential securities law violations, and market manipulation.

The court found the expression related to matters of public interest, the plaintiffs failed to establish substantial merit to their claim, and the defendants had valid defences including qualified privilege, fair comment, responsible communication, and truth.

The motion was granted and the claim dismissed.

An Ontario resident brought a proposed securities class action against a U.K. issuer alleging secondary market misrepresentation under Part XXIII.1 of the Securities Act following the Deepwater Horizon oil spill.

The defendant moved to stay the action in part, arguing Ontario lacked jurisdiction over claims of investors who purchased securities on foreign exchanges and that the matter should proceed in U.S. or U.K. courts.

The court held that the statutory cause of action under s. 138.3 constitutes a statutory tort presumptively connected to Ontario where an Ontario investor is deemed to have relied on the misrepresentation.

The legislation did not restrict claims to purchases on Ontario exchanges, and the defendant failed to rebut the presumptive connecting factor.

The court further found the defendant did not establish that foreign courts were clearly more appropriate forums.

In a securities class proceeding under the Class Proceedings Act, 1992 and the Securities Act, the plaintiffs sought certification for settlement purposes against certain underwriters, approval of three settlements totalling approximately $10.85 million, approval of counsel fees, and approval of a proposed plan of allocation.

The court held that the settlements were fair, reasonable, and in the best interests of the class and approved them, along with counsel fees and the appointment of an administrator.

However, the court rejected the parties’ proposed distribution plan because it excluded class members who purchased shares on the day of the corrective disclosure from any compensation.

Exercising its authority to determine the plan of allocation, the court varied the distribution plan to include those purchasers and approved the modified plan as fair and reasonable.

The appellant appealed convictions and sentence imposed after guilty pleas to two offences under the Securities Act for trading securities while subject to a cease trade order and trading without registration.

He argued that his guilty pleas were not unequivocal, voluntary, or informed and therefore constituted a miscarriage of justice, and alternatively that the custodial sentence imposed was cruel and unusual or unfit.

The court held that the plea inquiry conducted by the trial judge demonstrated that the pleas were unequivocal, voluntary, and informed, and that the appellant’s mistaken personal belief that a conditional discharge might be available did not invalidate the pleas.

The court further held that the 90‑day intermittent custodial sentence and probation order were entitled to deference and were not demonstrably unfit given the need for deterrence and denunciation in securities offences.

The plaintiff brought a motion to compel the defendants to answer questions and produce documents refused during cross-examination on an affidavit filed in response to a certification motion in a proposed securities class proceeding.

The dispute concerned the interpretation of s. 138.8(2) of the Ontario Securities Act, which governs affidavit evidence on a motion for leave to commence a statutory secondary market misrepresentation claim under Part XXIII.1.

The plaintiff argued that because the defendants filed an affidavit addressing certification, they should be required to answer questions relevant to the leave motion.

The court followed the line of authority beginning with Ainslie v. CV Technologies Inc. holding that defendants are only required to file an affidavit if they intend to lead evidence on the leave motion.

As the defendants had intentionally filed no affidavit addressing the leave motion, they could not be compelled to answer questions for that purpose.

The representative plaintiffs in a proposed securities class action sought court approval of a third party litigation funding agreement after the Ontario Class Proceedings Fund declined funding and class counsel declined to indemnify against adverse costs.

The funder agreed to indemnify the plaintiffs for adverse costs in exchange for a fixed percentage of any net recovery.

The court reviewed the developing jurisprudence on litigation funding in class proceedings and articulated guiding principles for approval, including requirements that the agreement not impair the solicitor‑client relationship, not undermine the representative plaintiff’s control of the litigation, and be fair and reasonable to the class.

The court also held that such agreements must be disclosed and approved by the court and may require security for costs.

Finding the agreement necessary to facilitate access to justice and fair to the class, the court approved the funding arrangement.

The plaintiffs sought consent certification of a proposed securities class action alleging that the defendant mining company and certain officers misrepresented the scope and impact of water inflow problems at a Quebec gold mine, causing losses to purchasers of the company’s shares.

The court considered the certification requirements under s. 5(1) of the Class Proceedings Act, 1992 and, given the parties’ consent and the evidentiary record, found that the statutory criteria were satisfied.

The plaintiffs also sought leave under Part XXIII.1 of the Securities Act to pursue statutory secondary market misrepresentation claims.

The court held that the action was brought in good faith and that there was a reasonable possibility of success at trial.

Certification and leave were granted.

The defendants brought a motion under Rule 59.06(1) of the Rules of Civil Procedure to amend a previously issued and entered order arising from a Rule 21 motion in a proposed securities class action.

The original order dismissed the defendants’ motion to strike claims under Part XXIII.1 of the Securities Act but failed to reflect the judge’s reasoning that the special circumstances doctrine permitted leave to be granted nunc pro tunc despite the expiry of the statutory limitation period.

The court held that the omission of this conclusion from the formal order was an oversight and that Rule 59.06(1) permits amendment where the order does not accurately express the court’s manifest intention as reflected in the reasons for decision.

The court rejected arguments that the requested amendment was premature or an improper reconsideration of the earlier ruling.

The order was amended to include the finding regarding the special circumstances doctrine.

The plaintiffs invested $300,000 in an offshore investment program after being advised by the defendant, who represented the investment as secure and guaranteed to yield a 17.52% return.

The defendant failed to disclose that the investment scheme was under investigation by the Ontario Securities Commission and that he was receiving undisclosed commissions for referring investors.

The court found that the defendant had held himself out as a financial advisor and stood in a fiduciary relationship with the plaintiffs.

By recommending the investment, failing to disclose conflicts of interest, and concealing regulatory investigations, the defendant breached his fiduciary obligations.

The court awarded equitable compensation for the plaintiffs’ lost investment with pre‑judgment interest and held both the individual defendant and his corporation jointly and severally liable.

The Crown appealed a sentence imposed under the Securities Act for unregistered trading, trading without a prospectus, and breaching prohibition orders.

The sentencing judge had imposed an 18‑month sentence to run concurrently with a 27‑month sentence the respondent was already serving for separate securities offences involving a different company.

The Crown argued that the concurrent sentence undermined deterrence and failed to reflect that the offences arose from separate schemes occurring at different times with different victims.

The Superior Court held that the sentencing judge erred by failing to adequately consider the distinct nature of the schemes and the respondent’s repeated breaches of prohibition orders.

The court concluded that the totality principle did not render a 45‑month total sentence disproportionate and ordered the 18‑month term to be served consecutively.

The applicant corporation sought orders under the Securities Act and the Business Corporations Act to restrict certain shareholders from voting shares allegedly acquired in breach of early warning reporting requirements, to declare that a shareholder rights plan “flip‑in event” had occurred, and to invalidate a dissident proxy solicitation ahead of an annual general meeting.

The court declined to address the alleged early warning breach because the matter was already the subject of an ongoing Ontario Securities Commission investigation and had previously been withdrawn from related litigation.

Even if a breach had occurred, the court held that the discretionary remedy of prohibiting voting rights would not be appropriate given the circumstances and absence of harm to the market or shareholders.

The court also found no evidence that the respondents acted jointly or in concert in organizing the proxy solicitation or that the circular was misleading under applicable securities and corporate law regulations.

The application was dismissed.

Following a successful motion striking a punitive damages claim in a proposed securities class proceeding, the defendants sought partial indemnity costs of approximately $43,000.

The plaintiff argued that no costs should be awarded because the motion raised a novel point of law concerning the availability of punitive damages under Part XXIII.1 of the Securities Act.

The court accepted that the issue was legally novel and reasonably contested, noting that existing case law did not clearly resolve the question.

Exercising its discretion, the court held that fairness justified departing from the usual costs rule.

No order as to costs was made.

In a securities class proceeding, the plaintiffs sought costs following successful motions in which they opposed summary judgment and obtained nunc pro tunc relief permitting pursuit of a statutory claim despite the expiry of a limitation period under the Securities Act.

The defendants argued that no costs should be awarded due to alleged delay by the plaintiffs, the alleged unnecessary nature of the cross‑motion, and the claim that the plaintiffs succeeded on grounds not advanced by their counsel.

The court rejected these arguments, finding no delay attributable to the plaintiffs and confirming that the cross‑motion seeking nunc pro tunc relief was appropriate.

The court held that the plaintiffs succeeded on their arguments regarding the court’s nunc pro tunc authority and the interpretation of the Court of Appeal’s Timminco decision.

Applying the general rule that costs follow the event, the court awarded the plaintiffs their claimed partial indemnity costs.

In a proposed securities class action, the plaintiffs sought leave under s. 138.8 of the Ontario Securities Act to commence a statutory secondary market misrepresentation claim against certain corporate directors.

The defendants had been noted in default and did not oppose the motion.

The court held that the statutory leave test requires a showing that the action is brought in good faith and that there is a reasonable possibility it will succeed at trial.

Given the deemed admissions arising from the defendants’ default and the evidentiary record concerning alleged misrepresentations in financial disclosure documents, the court found the threshold satisfied.

Leave to proceed against the directors under Part XXIII.1 of the Act was granted.

In a proposed securities class action arising from the collapse in value of a publicly traded corporation’s shares following accounting audit issues, the plaintiffs sought an order permitting substituted service of motion materials on foreign-resident defendants in China.

The request was urgent due to a potential limitation period expiry for secondary market misrepresentation claims under Part XXIII.1 of the Ontario Securities Act.

Although China is a signatory to the Hague Service Convention and ordinarily requires service through its central authority, the court held that substituted service remained available where defendants had attorned to Ontario’s jurisdiction or appointed an agent for service in Canada.

The court found that the defendants’ roles as officers and directors of an Ontario corporation and their submissions to Ontario securities regulatory processes established sufficient connections to Ontario.

The court concluded that the plaintiffs had taken reasonable steps to locate and serve the defendants and that substituted service was reasonably likely to bring the proceeding to their attention.

In a certified securities class action arising from a take‑over bid, the defendant law firm moved for summary judgment dismissing negligence and statutory misrepresentation claims.

The plaintiff alleged that a partner of the firm, who acted as counsel to the bidder and sat on its board, participated in preparing a take‑over circular containing misrepresentations contrary to s. 131 of the Securities Act.

The court held that there were genuine issues requiring a trial regarding whether the law firm owed a duty of care to shareholders who received and relied on the circular.

The court further held that the question of whether a law partnership could be vicariously liable under the Partnerships Act for a partner’s statutory liability as a corporate director should also proceed to trial.

Summary judgment was refused because the issues were novel and required a full factual record.

The moving party sought production of documents and information held by a court‑appointed receiver in connection with an investigation related to alleged securities fraud proceedings before the Ontario Securities Commission.

The court considered whether the principles governing third‑party production established in R. v. O'Connor and R. v. McNeil applied to records held by a receiver acting as an officer of the court.

It held that although receivers generally are not required to disclose investigative materials beyond their reports, that protection cannot override an accused’s constitutional right to make full answer and defence.

Applying the O'Connor framework, the court required the moving party to demonstrate that the requested records were “likely relevant.” Only limited categories of documents met that threshold, including certain materials from lawyers, the accountant, and recovered emails, while most requests were rejected as speculative fishing expeditions.

The moving party brought a consent motion seeking certification of a securities class proceeding and leave to advance a secondary market misrepresentation claim under Part XXIII.1 of the Securities Act.

The claim arose after the issuer disclosed a prolonged fraud in a related loan business that required restatement of financial results.

The proposed class consisted of investors who acquired the issuer’s securities during a specified class period.

The court found that the criteria for certification under the Class Proceedings Act, 1992 were satisfied and that the statutory leave requirement under the Securities Act was met.

The court granted certification, granted leave to advance the statutory claim, and dismissed a parallel action against additional defendants pursuant to the parties’ procedural agreement.

In a proposed securities class action alleging misrepresentations in the primary and secondary markets, the plaintiffs sought an order compelling defendants to deliver statements of defence and requested that the certification motion be heard together with a leave motion under s. 138.8 of the Securities Act.

The defendants opposed delivering defences before certification and sought a sequence of motions beginning with the leave motion, followed by Rule 21 motions and then certification.

The court held that pleadings should generally be completed before certification and that ordering the delivery of a statement of defence was not contrary to law or due process.

However, the court limited the requirement to defendants who filed affidavits under s. 138.8(2) of the Securities Act, while permitting other defendants to plead voluntarily without losing the ability to bring Rule 21 motions.

The court further ordered that the leave motion and certification motion be heard together to avoid delay, inefficiency, and serial appeals.