Following on the heels of leave to appeal being denied in
IMAX,1 a second case has been granted leave to
pursue secondary market misrepresentation claims under Part XXIII.1
of the Ontario Securities Act ("OSA") and has
been certified as a class action for common law and statutory
misrepresentation claims: Dobbie v. Arctic Glacier
The action raises primary and secondary market
misrepresentation. It alleges that Arctic Glacier Income Fund
("Income Fund"), a mutual fund trust and a reporting
issuer, misrepresented that it and its subsidiaries were good
corporate citizens operating lawfully in a very competitive market.
In 2009, the principal operating subsidiary of the Income Fund
pleaded guilty to a charge of participating, during the proposed
class period, in a criminal, anti-competitive conspiracy in the
The following findings of The Honourable Justice Tausendfreund,
in the Court's reasons released on March 1, are worthy of
(a) Statutory Misrepresentation Claims Under the OSA
Defendants do not need to file any responding material in
opposing a plaintiff's leave motion under Part XXIII.1 of the
In interpreting the leave test under Part XXIII.1 of the OSA,
Justice Tausendfreund adopted the analysis in IMAX.
The Court allowed claims under Part XXIII.1 of the OSA to
proceed for statements made as far back as 2002. While Part XXIII.1
only came into effect at the end of December 2005 and includes a
three-year limitation period, the Court accepted that it was open
to the plaintiffs to demonstrate at trial that the defendants'
representations between 2002 and 2008 could be treated as a single
misrepresentation3 and a continuing fact situation.
To pursue statutory claims for investors who purchased their
units outside of Ontario, the plaintiff must plead the relevant
provisions of the securities acts of the other provinces in which
purchases were made by the proposed class.4
(b) Common Law Misrepresentation
Section 130 of the OSA does not subsume common law claims, and
it is not "plain and obvious" that an issuer's
directors/trustees do not owe a duty of care to investors.
Claims in negligence and negligent misrepresentation are not
necessarily duplicative. In this case, Justice Tausendfreund found
the claims to raise separate causes of action, noting that the
plaintiffs' negligence simpliciter claim asserts that
securities issued pursuant to the prospectuses would not have been
issued but for the defendants' negligence, whereas the
negligent misrepresentation pleading deals with a number of
misrepresentations contained in various prospectuses and public
The Court refused to strike out the plaintiffs' assertion
that reliance can be inferred from the act of purchasing units on
the secondary market. Instead, it adopted the previously
articulated view in CP Ships5 that the case law remains
in a state of evolution.
Justice Tausendfreund acknowledged that depending on the type
and number of alleged misrepresentations in a particular case,
questions of reliance could in certain circumstances overwhelm the
common issues and would, as such, not be suitable to be resolved as
a class proceeding. However, in this case he noted that the alleged
misrepresentations were consistent, repetitive and could
essentially be treated as one. Therefore, he was prepared to allow
the question of whether reliance could be inferred on a class-wide
basis to proceed as a common issue for trial.
1 Silver v.IMAX Corporation, 2011 ONSC
2 Dobbie v.Arctic Glacier Income Fund,
2011 ONSC 25
3 The Court cited s. 138.3(6) of the OSA which provides
that multiple misrepresentations having a common subject matter or
content may, in the discretion of the court, be treated as a single
4 Arctic Glacier Income Trust was a reporting issuer in ten
provinces including Ontario. The plaintiffs had simply pleaded the
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