Canada: Court Denies Leave To Appeal And Certification Of Class Action

Copyright 2011, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Class Actions/Securities Regulation, February 2011

On February 14, 2011, the Ontario Superior Court of Justice released a highly anticipated decision in respect of civil liability for secondary market disclosure under Part XXIII.1 of the Ontario Securities Act (the OSA).

In Silver v. IMAX Corp., Justice Corbett denied leave to appeal two decisions of Justice van Rensburg that had been released concurrently on December 14, 2009. In those earlier decisions, Justice van Rensburg had granted leave to the plaintiffs to commence an action under s. 138.3 of the OSA and certified the proceeding as a class proceeding against IMAX Corp. and certain of its directors and officers.

The plaintiffs are pursuing a claim for secondary market misrepresentation contained in Part XXIII.1 under s. 138.3 of the OSA, which provides a relatively new statutory cause of action to shareholders of reporting issuers. These provisions permit a shareholder to sue a reporting issuer and certain others (including its directors and officers) when there has been a misrepresentation in its secondary market disclosure. Liability follows proof of the misrepresentation, without the need to prove reliance, subject to certain statutory defences.

One of the decisions of Justice van Rensburg was the first decision in Canada dealing with s. 138.8(1) or analogous sections found in other provincial securities acts that create liability on corporations, directors, and officers for disclosure made in the secondary market. In order to obtain leave to commence an action under s. 138.3, plaintiffs must first obtain leave of the court under s. 138.8, upon satisfying the court of two elements: the action is being brought in good faith and there is a reasonable possibility that the action will be resolved at trial in favour of the plaintiff.

For greater detail on these decisions of Justice van Rensburg, please see our December 2009 Blakes Bulletin on Class Actions/Securities Regulation.


IMAX is a public issuer on both the TSE and NASDAQ stock exchanges. In August 2006, IMAX announced that it was responding to an informal inquiry from the U.S. Securities and Exchange Commission about revenue recognition in its 2005 financial results. The following day, IMAX's share price fell 40%. Shortly after, IMAX acknowledged that its 2005 statements had not conformed with generally accepted accounting principles (GAAP) and it issued restated financial statements for 2005.

The plaintiffs had purchased shares after IMAX's initial statements and sold them at a loss after the sharp fall in share price. The plaintiffs claim damages of C$200-million for negligent and "reckless" misrepresentation, negligence, and civil conspiracy, as well as punitive damages of C$10-million. In their statement of claim, the plaintiffs also claim damages for secondary market misrepresentation under s. 138.3 of the OSA.


IMAX had brought a motion seeking leave to appeal the decisions of Justice van Rensburg, which required IMAX to establish, among other things, that there is either a conflicting decision on the matter or there is good reason to doubt the correctness of Justice van Rensburg's decisions. Justice Corbett entirely dismissed the motion and denied the defendants leave to appeal to the Divisional Court. Accordingly, the prior decisions of Justice van Rensburg are maintained with some additional elucidation, as follows. In December 2009, Justice van Rensburg had held that the "good faith" element of the leave test is met where plaintiffs establish that they are bringing the action in the "honest belief that they have an arguable claim." Justice Corbett found ample evidence that the plaintiffs wished to recover their losses and to deter other public issuers from behaving as IMAX did. The court found that a more rigorous scrutiny to satisfy the "gatekeeper" function of the court could work serious injustice against potential plaintiffs.

In December 2009, Justice van Rensburg had also held that, in respect of the "reasonable possibility of success" element of the leave test, once this "relatively low" threshold is established, the onus shifts to the defendants to establish their affirmative defences on, what Justice Corbett characterized as, a standard sufficient to grant summary judgment dismissing a claim. Corbett J. saw no reason to doubt the correctness of Justice van Rensburg's decision, whatever the precise formulation of the onus, standard of proof, and test to be applied in respect of affirmative defences.

Justice Corbett also denied leave to appeal the dismissal of the defendants' Rule 21 motion to strike the common law claims of misrepresentation. The defendants had argued that there is no duty of care owed by reporting issuers to the "investing public" in respect of statements made in continuous disclosure documents and, secondly, that the plaintiffs failed to plead actual reliance by each class member, which is necessary to establish causation between the statements and the plaintiffs' alleged losses. Unlike common law claims of misrepresentation, liability under s. 138.3 of the OSA is without regard to whether plaintiffs relied upon the misrepresentation.

Justice Corbett acknowledged that the relationship between common law and statutory claims of misrepresentation merits appellate consideration and held that "the decision of van Rensburg J. does no more than permit the plaintiffs to proceed to trial. The Court of Appeal will be able to give full consideration to these issues if and when the case is appealed after a trial judgment."

Justice Corbett briefly dismissed other aspects of the motion for leave to appeal, including leave to appeal the decision of Justice van Rensburg in respect of certifying the proceeding as a class proceeding. Justice Corbett noted that addressing in detail the score of issues and sub-issues raised on the motion could have led to reasons as lengthy as the 670 paragraphs of Justice van Rensburg's decisions.


Justice Corbett's decision denying leave to appeal represents a nod of approval to Justice van Rensburg's construing of the requirement for leave to commence an action under s. 138.3 of the OSA. As Justice Corbett noted, "van Rensburg J.'s decision is the first word on the test for leave under s. 138.8(1) of the OSA. Doubtless it is not the last."

Other securities class actions are pending before courts in Canada and have been awaiting the release of Justice Corbett's decision. Blakes is currently acting as defence counsel in some of those class actions engaging both the common law and secondary market liability provisions in a number of jurisdictions across Canada.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
16 Oct 2018, Seminar, Toronto, Canada

Join Blakes lawyers for our 10th annual overview of recent legal and regulatory developments and practical strategies to navigate the changing regulation of Canada’s payments industry.

26 Oct 2018, Other, Vancouver, Canada

Cybersecurity, including data privacy and security obligations, has become a critical chapter in every company’s risk management playbook.

30 Oct 2018, Other, Toronto, Canada

Please join us for discussions on recent updates and legal developments in pension and employee benefits as well as employment law issues.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions