In a recent decision, the Ontario Court of Appeal
overturned a lower court decision that dismissed an action
on a summary judgment motion. Significantly, the motion judge had
dismissed the entirety of the claim, even though the Plaintiffs had
moved for judgment on only a portion of it.
The Plaintiffs were unsophisticated investors, who purchased
units in Toronto's Trump International Hotel, under a program
in which owners placed their units in a common pool of rooms to be
rented out at luxury rates. After unexpectedly low reservation
rates, the plaintiffs sued for rescission of their purchases,
claiming that they were misled by marketing materials that breached
an Ontario Securities Commission exemption order.
At the outset of the hotel's operations, pains were taken
before the OSC to treat the hotel units as real estate, rather than
securities, asserting that the units would not be marketed as
investments for profit or gain. The OSC granted the exemption, on
the basis that the pool program was a feature secondary to
occupancy rights, and that prospective purchasers would not be
provided with cash flow forecasts, or induced to rely on
expectations of economic benefits. The subsequent marketing
materials estimated a yearly rate of return of up to 21% per
The Plaintiffs moved for summary judgment. The motions judge
held that the Plaintiffs had not established their claims in breach
of the OSC ruling, and misrepresentations. However, it also
dismissed the Plaintiffs' claims in oppression, collusion, and
breach of fiduciary care.
The Court of Appeal held that the motions judge stepped outside
of the scope of the motion by dismissing the additional claims not
before the court, and that it was a denial of procedural fairness
and natural justice to do so.
The Court of Appeal set aside the motions judge's order, and
substituted an order rescinding the purchase, awarding damages for
negligent misrepresentation, and remitting the claim for fraudulent
misrepresentation to be decided properly on another motion.
In Ontario Securities Commission v. Tiffin, the Ontario Court of Justice clarified the limits of the definition of "securities" under s.1(1) of the Securities Act, as it relates to promissory notes. The defendant in the case was charged with trading in securities without being registered and while prohibited, and without filing a prospectus.
The OSC has issued a press release advising stakeholders that Ontario securities law may apply to any use of distributed ledger technologies, such as blockchain, as part of financial products or service offerings.
The use of electronic signatures is becoming increasingly commonplace in commercial transactions, as individuals and businesses capitalize on the administrative efficiency afforded by today’s digital world.
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