Canada: The Poseidon Adventure, Part II – Big Win For Bankers Confirmed On Appeal

The Ontario Court of Appeal has confirmed an important decision limiting the exposure of investment banks to secondary market misrepresentation class actions. In Goldsmith v. National Bank of Canada, the Court refused to extend the meaning of the term "promoter" in Part XXIII.1 of the Ontario Securities Act to cover conventional banking and advisory services. "Something more" is required before an action lies against an issuer's bankers for secondary market disclosure.


Poseidon Concepts Corp. collapsed in 2013 after briefly operating as a publically traded energy services company. In Poseidon's wake sprung thirteen proposed class actions alleging misrepresentations in Poseidon's financial statements and disclosure documents. Ms Goldsmith sought leave under Part XXIII.1 to sue National Bank for its role in the reorganization and public offering of Poseidon. She alleged that National Bank was liable for secondary market disclosure as a "promoter" of Poseidon that "knowingly influenced" the release of two misleading documents.

Under Part XXIII.1 of the Securities Act, an action for secondary market disclosure lies against an "influential person" – which includes a "promoter" – who "knowingly influenced" the issuer to release a document containing a misrepresentation. A "promoter" is someone who "takes the initiative in founding, organizing or substantially reorganizing the business of an issuer." The court must grant leave before anyone may commence an action against a "promoter" under Part XXIII.1.

The motions court denied Ms Goldcorp leave to sue National Bank on the basis that conventional banking and advisory services do not a "promoter" make. It was not sufficient that National Bank provided essential loans for the reorganization of Poseidon or that its wholly owned subsidiary acted as financial advisor and underwriter of the public offering. These banking activities did not amount to taking "the initiative in founding, organizing, or substantially reorganizing" Poseidon.

For more on the motions court decision, see our post of June 16, 2015.

Robust Standard For Leave Under Part XXIII.1

The Court of Appeal emphasized the "robust[ness]" of the test for granting leave to commence an action under Part XXIII.1. Following the Supreme Court of Canada's recent decisions in Theratechnologies Inc. v. 121851 Canada Inc. and Canadian Imperial Bank of Commerce v. Green, the Court of Appeal held that the general standard for interlocutory factual review was "inappropriately low" in this context. Rather, the threshold for granting leave under Part XXIII.1 is "more stringent" to meet the "objective of screening out unmeritorious claims at an early stage."

The Court of Appeal defined a two-part burden on the claimant to obtain leave under Part XXIII.1:

  • First, the claimant must offer "a plausible interpretation of the applicable legislative provisions" supporting the theory of liability.
  • Second, the claimant must offer "credible evidence sufficient to convince the court that there is a reasonable possibility that the action will be resolved at trial in the claimant's favour."

For more on the standard for leave to commence a proposed secondary market class action, see our post of April 17, 2015 regarding the Supreme Court's decision in Theratechnologies.

"Something More" Than Conventional Banking And Advisory Services

The Court of Appeal held that Ms Green failed to meet either part of her two-part burden to obtain leave to sue National Bank. She offered neither a credible interpretation of the term "promoter" nor credible evidence to hold National Bank liable for secondary market disclosure as a promoter.

The Court of Appeal's approach is significant for other capital market participants, particularly investment banks and other advisors to public companies. To come within the definition of "promoter," a person must take a leading role in the organization or reorganization of the company. This means that the person must be active and autonomous and have meaningful control. Merely providing advice, regardless of how important, to the company's decision-makers is not sufficient.

As the Court of Appeal put it, "something more" than advice and banking services is required for a capital market participant such as National Bank to qualify as a "promoter." To get over the leave stage, there must be credible evidence of this "something more" to support liability as a promoter.

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.

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.