Canada: Theratechnologies Leave Threshold Proves Too Robust For Plaintiff Shareholder In Securities Class Action

Last Updated: December 14 2015
Article by Barbara Capes

Theratechnologies1 Leave Threshold Proves Too Robust For Plaintiff Shareholder In Securities Class Action

In Mask v. Silvercorp Metals Inc.2 released on October 22, 2015, the Ontario Superior Court of Justice considered a motion for leave to commence an action for secondary market misrepresentation under section 138.8 of the Ontario Securities Act,3 and a motion to certify the action as a class proceeding under section 5(1) of the Class Proceedings Act, 1992.4

Deficient pleadings, uncontroverted expert evidence and a strict application of the Court of Appeal's analysis in Musicians' Pension Fund of Canada (Trustees of) v. Kinross Gold Corp.5 led Justice Belobaba to dismiss both motions.

The Facts

Over a two week span in 2011, anonymous internet postings questioned Silvercorp Metal Inc's ("SVM") financial accounting and alleged that the company had overstated certain mineral resources and reserves. As a result, SVM's share price dropped about 30 percent. SVM responded by issuing a press release and a Schedule 4 that reconciled production to revenue from 2006 to the middle of 2011 (the "Schedule 4"). SVM also retained AMC Mining Consultants to prepare a new technical report, which was produced in June 2012 (the "AMC Report").

In May 2013, the plaintiff, a former SVM shareholder, alleged that a comparison of the AMC Report and the Schedule 4 demonstrated that SVM had overstated its mineral production and grade levels in its 2010 and 2011 public reports.

The plaintiff advanced three claims: (1) a statutory and common law claim for misrepresentation; (2) a statutory claim for failure to make a timely disclosure; and (3) a common law claim in negligence alleging that SVM co-authored and published public reports that it knew, or should have known, had not been prepared in accordance with industry standards or properly audited.

The Leave Motion

The Court found that the plaintiff's pleadings did not identify which words or figures, in particular documents or on particular dates, were alleged to be misrepresentations pursuant to section 138.3(1) of the OSA. The plaintiff is required to link the misrepresentations to a public correction, however, the plaintiff failed to indicate what public correction was made or when it occurred. Nevertheless, the Court determined that since "publicly corrected" is not defined in the OSA, anonymous internet postings can constitute public corrections under section 138.3 of the OSA.

The leave requirements under section 138.8 of the OSA require that the court be satisfied that an action was brought in good faith and that "there is a reasonable possibility that the action will be resolved at trial in favour of the plaintiff".6 In the wake of Theratechnologies, plaintiffs must adduce sufficient evidence to demonstrate a reasonable chance of success, lest their claim be denied at the outset. Here, the plaintiff alleged that there were obvious misrepresentations in SVM's Schedule 4 due to material differences between the numbers in the AMC Report and the Schedule 4. An AMC geologist involved in the preparation of the AMC Report swore an affidavit on behalf of SVM explaining that different reporting parameters had been applied to the two reports and, therefore, there were no actual discrepancies between the reports. While the plaintiff produced an expert report of its own, the plaintiff's expert failed to rebut or even address the conclusions of SVM's expert. The Court favoured AMC's detailed and uncontroverted evidence.

The plaintiff also alleged that SVM failed to make timely disclosure of a material change as required under section 138.3(4) of the OSA. The plaintiff did not, however, plead any material facts as to any specific production data received by SVM showing a material change within the OSA definition.

The Certification

The Court applied the Court of Appeal's analysis in Kinross and concluded that a class action is not the preferable procedure where leave under section 138.8 of the OSA has been denied because the statutory misrepresentation claim has no reasonable possibility of success and where the common law misrepresentation claim is "destined to fail" because it rests on the same evidentiary foundation.7

The Court also found that the plaintiff's negligence claim was in substance a pleading of negligent misrepresentation and could not therefore be certified where the claim for misrepresentation had been denied.


This case reaffirms the Supreme Court of Canada's ratio in Theratechnologies. Where a plaintiff's case is so weak or has been so successfully rebutted by the defendant that it has no reasonable possibility of success, the leave threshold is intended to provide "a robust deterrent mechanism" to ensure that cases without merit are prevented from proceeding.8


1 Theratechnologies Inc. v. 121851 Canada Inc., 2015 SCC 18 [Theratechnologies].

2 Mask v. Silvercorp Metals Inc., 2015 ONSC 5348.

3 R.S.O. 1990, c. S.5 [OSA].

4 S.O., 1992, c. 6 [CPA].

5 Musicians' Pension Fund of Canada (Trustees of) v. Kinross Gold Corp., 2014 ONCA 901 [Kinross].

6 OSA, supra at s 138.8.

7 Kinross, supra at para 138.

8 Theratechnologoes, supra at para 38.

For more information, visit our Canadian Securities Litigation blog at

About Dentons

Dentons is a global firm driven to provide you with the competitive edge in an increasingly complex and interconnected marketplace. We were formed by the March 2013 combination of international law firm Salans LLP, Canadian law firm Fraser Milner Casgrain LLP (FMC) and international law firm SNR Denton.

Dentons is built on the solid foundations of three highly regarded law firms. Each built its outstanding reputation and valued clientele by responding to the local, regional and national needs of a broad spectrum of clients of all sizes – individuals; entrepreneurs; small businesses and start-ups; local, regional and national governments and government agencies; and mid-sized and larger private and public corporations, including international and global entities.

Now clients benefit from more than 2,500 lawyers and professionals in 79 locations in 52 countries across Africa, Asia Pacific, Canada, Central Asia, Europe, the Middle East, Russia and the CIS, the UK and the US who are committed to challenging the status quo to offer creative, actionable business and legal solutions.

Learn more at

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. Specific Questions relating to this article should be addressed directly to the author.

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
25 Nov 2016, Seminar, Toronto, Canada

On Thursday, September 22, 2016, Dentons hosted a panel discussion about the management of liabilities and risks associated with environmental crises, including potential liabilities for directors and officers and provided insight into risk and liability techniques associated with environmental crisis management.

In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.