Rahimi V. Southgobi Resources, 2015 ONSC 5948
In this motion for leave, the defendants relied upon the reasonable investigations defence in s. 138.4(6) of the Ontario Securities Act.
A coal mining company, SouthGobi, had issued a press release announcing a restatement to consolidated financial statements after the company began using GAAP. The press release resulted in a dramatic decrease in the share price. Rahmini sought leave under s. 138.8 of the Securities Act to bring a secondary securities market misrepresentation claim against SouthGobi and a number of its directors and officers.
The defendants raised the "reasonable investigation" defence, which requires a defendant establish (1) that reasonable investigations were conducted before the document was released and (2) it had no reasonable grounds to believe the document contained the misrepresentation. While the onus at trial would be to prove the defence on a balance of probabilities, the Ontario Superior Court noted that at the leave stage, defendants must establish that there is no reasonable possibility that they will not be able to establish one or both branches of the reasonable investigation defence.
The Court found that the directors and officers were protected by the reasonable investigation defence, but granted leave to bring the statutory misrepresentation claim as against SouthGobi.
To view the original article please click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
