The Supreme Court of Canada released reasons in its highly-anticipated trilogy of securities class action cases. In Canadian Imperial Bank of Commerce v. Green, a deeply divided Court reached differing conclusions on limitation period issues which have largely been rendered moot as a result of amendments to relevant securities legislation.1 More importantly, the Court unanimously confirmed that Plaintiffs face "rigorous" screening before leave will be granted to commence a statutory cause of action for secondary market misrepresentations. The Court also held that the determination of certain common issues arising from common law negligent misrepresentation claims were appropriate for class action proceedings.
The Test for Leave – A Rigorous Screening Process
Pursuant to s. 138.8 of the Securities Act (Ontario) (and in similar legislation across Canada), two requirements must be met before a court can grant Plaintiffs leave to pursue a statutory cause of action for secondary market misrepresentations: (i) the action must be brought in good faith and (ii) there must be a reasonable possibility that the action will be resolved in favour of the claimant.
In the trilogy, the Ontario Court of Appeal found that the test for obtaining leave is equivalent to the threshold applied during a motion for the certification of a class action. The purpose is to weed out hopeless claims and only allow those to go forward that have "some chance of success".
Earlier this year, in Theratechnologies Inc. v. 121851 Canada Inc., a case on appeal from the Quebec Court of Appeal, the Supreme Court articulated a significantly higher threshold at the leave stage than had been previously applied in either Quebec or Ontario.2 The Supreme Court held that the threshold should be more than a "speed bump" requiring that there be a reasonable or realistic chance that the action will succeed. A case with a reasonable possibility of success requires the claimant to offer both: (i) a plausible analysis of the applicable legislative provisions and (ii) some credible evidence in support of the claim.
Although Theratechnologies was decided on the basis of Quebec's Securities Act, the Supreme Court noted in the trilogy that there is no difference between the language in that Act and the OSA. Accordingly, the Court affirmed Theratechnologies and held that the threshold test for granting leave articulated in that case applied in the context of s. 138.8 of the OSA and, by analogy, to the other common law provinces with similar legislative schemes. This decision will provide more certainty with respect to the leave test in statutory securities actions in the common law provinces.
Helpfully for those seeking to oppose such claims, the Court specifically noted that the leave requirement was meant to prevent U.S.-style "strike suits", which the Court characterized as "meritless actions launched in order to coerce targeted defendants into unjust settlements", and that the leave test was to serve as a "screening mechanism" to prevent against "entrepreneurial litigation".
Certification of Common Law Negligent Misrepresentation Claims
One of the advantages for plaintiffs of the statutory causes of action is that under the OSA, individuals are deemed to have relied upon the misrepresentation when deciding to purchase the relevant security on the secondary market eliminating the need to prove individual reliance, a necessary element to the common law cause of action of negligent misrepresentation. As such, the statutory regime removes a significant hurdle for plaintiffs, particularly in the class action context.
There has been healthy debate about whether common law misrepresentation claims should be certified in addition to statutory causes of action (or in lieu of statutory causes of action when leave is denied). The obvious hurdle to such claims is that in the absence of the statutory provisions, reliance must presumably be proven on an individual basis. This matter is important to plaintiffs and defendants alike given that common law causes of action are free from the stringent damages caps that apply to the statutory cause of action.
At the Supreme Court, the defendants argued that none of the purportedly common issues relating to the common law negligent misrepresentation claims should be certified and that a class action was not the preferable procedure with respect to such claims. The Supreme Court rejected the defendants' arguments and noted that the statutory right of action under s. 138.3 of the OSA was intended to be in addition to, and without derogation from, any other rights. In the result, the Supreme Court allowed some common issues to be certified, including those relating to the alleged misconduct by the defendants, but not issues relating to reliance or damages. The practical impact of this finding remains to be seen.
 A divided Supreme Court held that s. 28 of the Class Proceedings Act only operates to suspend the three-year limitation period once leave has been granted. While this issue was significant for the parties in question, it has largely been rendered moot given that relevant securities legislation has been amended to provide that the limitation period is suspended on the date a notice of motion for leave to commence the action is filed with the Court.
 In the opinion of the authors, the primary distinction between the leave test as set out by the Ontario Court of Appeal and the one set out by the Supreme Court in Theratechnologies lies not in the articulation of the test, but in the focus in Theratechnologies on the evidentiary record, and the Court's policy driven statement that the threshold should be more than a "speed bump".