The requirement for leave of the court in order to proceed with
secondary market claims under Part XXIII.1 of the Securities
Act continues to evolve and be the subject of extensive
judicial commentary almost ten years after it came into force. In
facilitating class actions by purchasers of securities on the
secondary market, Part XXIII.1 was the product of significant
consultation and compromise as it sought to allow for such actions
while limiting the type of meritless litigation against issuers and
market participants that came to be known in the United States as
"strike suits." Coupled with a strict three-year
limitation period, damages caps, and other limitations on secondary
market actions, the requirement to obtain leave to proceed with a
misrepresentation claim under Part XXIII.1, s.138.8(1), serves a
significant gatekeeper role for securities class actions.
Most recently, in a
class action brought by investors against
SNC-Lavalin Group and its officers and directors,1
the Court of Appeal for Ontario had occasion to consider the not
infrequent situation in which plaintiffs in a misrepresentation
action seek to amend their statement of claim to plead additional
misrepresentations and other supporting facts after the action is
commenced. In this case, the plaintiffs had already made two sets
of amendments before obtaining leave to proceed under s.138.8(1)
and they sought to leave to amend their Third Fresh as Amended
Statement of Claim to make additional allegations of bribery,
embezzlement, and other illegal conduct on the part of the
defendants. The question in this case was whether, having already
obtained leave to proceed with an earlier version of their claim,
the plaintiffs were required to bring a further motion for leave
under s.138.8(1) to plead these additional allegations.
In the Superior Court below, Justice Perell rejected the
plaintiffs' argument that the spirit and intent of Part XXIII.1
requires that amendments be granted after the leave test has been
met unless the proposed pleading fundamentally alters the action
for which leave was granted. Rather, Justice Perell observed that
"obtaining leave cannot be used as a procedural
bait-and-switch tactic or a procedural bait-and-pile-on
tactic" in which leave to proceed with one type of
misrepresentation claim is then used to advance others that have
not themselves been subjected to the leave test under s.138.8(1).
Fresh leave is required for any new misrepresentation allegations
which must themselves be supported by evidence sufficient to meet
the test for leave.
The Court of Appeal agreed, finding that it would
"frustrate the objective of the leave requirement" to
permit a plaintiff that has met the leave test "to
significantly expand the scope of the action to include discrete,
untested allegations of misrepresentation that are without
merit." While not all amendments will necessarily require a
fresh leave application, the Court of Appeal accepted Justice
Perell's characterization of the amendments as discrete
misrepresentation claims that "go too far to be allowed
without being tested by a fresh leave application."
In upholding the majority of the conclusions reached by Justice
Perell on the amendments sought, the Court of Appeal showed
deference to Justice Perell, given his role in deciding the initial
leave motion and in case managing every aspect of the action.
Unfortunately for the plaintiffs, both levels of court found
that the amendments sought were, in any event, statute-barred under
the three-year limitation period prescribed by Part XXIII.1,
s.138.14(1) and that the plaintiffs were therefore too late in
trying to advance them. The only exception to all of this, was that
the Court of Appeal did overturn Justice Perell and permit the
plaintiffs to make a single amendment to plead a
misrepresentation by omission based upon the failure of SNC Lavalin
to disclose alleged payments and other criminal activity connected
to one of its projects in Bangladesh – but only to the extent
that this amendment could be tied directly to a claim for which
leave had already been granted.
It's not often that our little blog intersects with such titanic struggles as the U.S. presidential race – and by using the term "titanic" I certainly don't mean to suggest that anything disastrous is in the future.
J.J. v. C.C., is an interesting case in which the court held that an automotive garage owes a duty to minor children to secure the vehicles on the premises by locking the cars and safely storing the car keys...
In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
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