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Introduction
On November 28, 2025, the Supreme Court of Canada (the "SCC") released its pivotal decision in Lundin Mining Corp. v. Markowich ("Lundin"). The decision revisits and clarifies the standards and interpretation of a "material change" and the leave test in securities class actions.
In Lundin, the central question before the court was whether a rockslide at a Chilean copper mine was a "material change" under Ontario's Securities Act (the "Act"), which would require prompt disclosure by Lundin Mining Corporation ("Lundin Mining"). The SCC broadly interpreted a "material change", which many commentators believe will lead to increased disclosure and potentially more risk of liability for a reporting issuer.
The SCC has also confirmed the test under section 138.8(1) of the Act for leave to commence an action for breach of an issuer's disclosure obligations.
Background
Minority shareholder Dov Markowich sought leave under the Act against Lundin Mining for its alleged failure to disclose a "material change" in the company's "business, operations or capital" in a timely manner as required by the Act, following a pit wall instability and associated rockslide at its Candelaria mine (the "Mine").
A pit wall instability was detected at the Mine on October 25, 2017, and a rockslide followed shortly on October 31, 2017. This resulted in a deferral of copper production at the Mine, which translated to about a 5% change in Lundin Mining's 2018 global production outlook.
Lundin Mining's public disclosure of these events occurred around a month later, on November 29, 2017, as part of an operational update news release. The news release also contained impacts on Lundin Mining's 2018 and 2019 production forecasts, with a drop of approximately 20% in the outlook for 2018 copper production at the Mine.
The next day, the price of Lundin Mining's shares on the Toronto Stock Exchange fell about 16%, amounting to a loss of over $1 billion in market capitalization.
After markets closed on November 30, 2017, Lundin Mining released a technical report describing the rockslide and its impact on operations. Before markets opened on December 1, 2017, the company hosted an investors' call during which further detail was provided.
Key Issues in the Courts Below
a. The Ontario Superior Court of Justice
Lundin Mining was successful at first instance. The motion judge found that although the motion for leave was brought in good faith, the pit wall instability and rockslide did not constitute a "material change" as contemplated by the Act. He relied on evidence that these events were considered common in mining and did not otherwise affect Lundin Mining's viability and ability to continue its business, operations or capital as a global corporation.
b. The Ontario Court of Appeal
The Ontario Court of Appeal ("ONCA") overturned the trial court's decision, unanimously finding that the trial judge applied too narrow an interpretation of "material change" that was unfounded in jurisprudence, particularly in the early-stage context of a motion for leave.
The ONCA instead held that "material change" should be interpreted broadly, especially at the leave application stage. In doing so, the court endorsed a two-step analysis wherein a court must first determine whether a change has taken place in the company's business, operations or capital, then whether the change was material such that a significant impact to share price or value would be reasonably expected.
In its reasons, the court emphasized the clear and deliberate distinction between "material change" and "material fact" and the expansive definition of "change" previously adopted by case law. It also highlighted that in the statutory test for leave, the weighing of evidence is not to replicate trial standards: it is a weighing of both what is in front of the court at that current stage, but also of what might be produced when at trial.
Subsequently, when applying this broader interpretation and in view of the evidence, the ONCA held there was reasonable possibility the plaintiff could succeed at trial.
The Supreme Court Decision
a. Material Change
Lundin Mining's appeal was heard by a full bench at the SCC on January 15, 2025. In this 8-1 decision (Justice Côté dissenting), Justice Jamal, representing the majority, dismissed the appeal.
The SCC addressed the distinction between a "material fact" and a "material change", and the test for leave to commence an action for breach of an issuer's disclosure obligations.
The majority held that the motion judge erred by relying on restrictive dictionary definitions of "change", "business", "operations", and "capital" in determining whether there was a reasonable possibility that there had been a material change. Rather, what constitutes material change is a highly contextual question of mixed fact and law. There is no bright line test and "the determination is a matter of judgment and common sense applied to the unique circumstances of each case." These terms were left undefined by the legislature to give light to their ordinary commercial meaning. Neither does a change in the issuer's business, operations or capital have to be "substantial" or "important" to constitute a change in the issuer's business, operations or capital. To consider the magnitude of a development in an issuer's affairs wrongfully collapses a two-step test into one step. The consideration of materiality is a distinct analysis in the test for a material change to ensure that minor internal events are not needlessly disclosed. Reading the Ontario legislature's intentions in this light "promote[s] the statutory purpose of preventing and deterring informational asymmetry between issuers and investors."
A material fact, on the other hand, is static and provides a snapshot of an issuer's affairs at a particular point in time. A fact can be unrelated to an issuer's business, operations or capital "as long as it has a significant effect on the market price or value of the securities being issued." Furthermore, a material fact does not have to be internal to the issuer, but can be external. Lastly, the majority notes that "negotiations and internal deliberations, without more, will not usually amount to a change in the business, operations or capital of the issuer, even if they are material." Material changes, however, are dynamic, related to changes in the issuer's business, operations or capital, internal rather than external to the issuer, and usually involve more than mere negotiations or internal deliberations. The common theme between both a material fact and a material change is that they "must be reasonably expected to have a significant effect on the market price or value of securities."
In dissent, Justice Côté disagreed with the majority's interpretation of "material change" suggesting that the interpretation invites overbroad disclosure and premature disclosure obligations from issuers seeking to inoculate themselves from increased liability. Accordingly, Justice Côté would restore the motion judge's order denying the investor's motion for leave to bring the securities class action.
b. Leave Test under the Act
In a secondary market securities class action, the plaintiff must bring a leave motion to proceed. The motion is a preliminary merits assessment. The action must be instituted in good faith and there must be a "reasonable possibility" that the action will be resolved at trial in favour of the plaintiff.
The decision reaffirms and clarifies the Theratechnologies/Green standard for leave under section 138.8(1) of the Act, requiring plaintiffs to demonstrate a "reasonable or realistic chance of success" based on a "plausible application" of the statute and "some credible evidence". Importantly, the Court continued to affirm that at the leave stage, judges may weigh the comparative strength of evidence, assess credibility and reliability, and avoid resolving contentious factual conflicts, while recognizing that evidentiary gaps exist because discovery has not yet occurred and the test is not a "mini-trial".
The test requires a plausible application of the legislation to the facts, not a plausible statutory interpretation. In determining what a "plausible analysis of the applicable legislative provisions" means under section 138.8(1), courts must consider how the legislation applies to the facts by accounting for the limited evidence available on a motion for leave.
In Lundin, the evidence on the motion was that the pit wall instability and rockslide impacted the company's operations at the Mine, which could have resulted in a material change. Accordingly, a plausible analysis of the relevant provisions and evidence showed a realistic chance that the action could succeed at trial.
Observations
a. Material Change
The decision of the SCC confirms what some may consider a broad application of the term "material change".
In determining what constitutes a "material change", one must first consider whether the "change" is a change in the business, operations or capital of an issuer without importing a consideration of the magnitude, significance or importance of the change. The interpretation of this phrase is dependent on the context and circumstances, and one should not parse each element separately. The contextual exercise of identifying a change in the business, operations or capital of an issuer is to be guided by the purpose of disclosure obligations to level informational asymmetry between issuers and investors, which serves to maintain market integrity and protect the public interest.
The second part of the analysis relates to materiality, which was not considered by the SCC, and examines whether the change would reasonably be expected to have a significant effect on the market price or value of any of the securities of the issuer.
The practical impact of this analysis is that issuers will more carefully consider whether a material change has occurred and will likely decide to make timely disclosure of more events than they would have before this decision. Nevertheless, the previously accepted clear limitations of the application of the test, as summarized in the dissent, would appear to continue to be available to issuers:
- external facts or changes beyond the control of an issuer, unless they actually result in a change in an issuer's business, operations or capital;
- simple fluctuations in revenue or production – even explained changes in results that do not stem from alterations in an issuer's business, operations or capital can fall outside the category of "material change";
- uncertain developments in an issuer's business, operations or capital, such as moving through interim stages of a merger negotiation, having new discussions relating to an acquisition, or responding to a take-over bid; and
- events that maintain the status quo of an issuer.
The dissent sets out certain concerns as to the negative impact of this decision to the markets, investors and issuers, which have been echoed by many commentators. It is not clear to us that this decision will have the negative impacts suggested, but in any event the law is now clear and for it to change legislative action will be required.
b. Impact on Securities Act Filings and Settlement Dynamics
It may be that the decision in Lundin will not translate into more successful claims or increased settlement values for potential plaintiffs.
The decision's practical impact on plaintiff filings may be modest for various reasons: (1) the SCC's analysis on "material change" is, in our view, aligned with prior jurisprudence and is not a sea-change; (2) if the decision results in more conservative and proactive disclosure, it could reduce filings for failure to disclose a material change; (3) there is significant litigation cost and adverse costs risk to prosecute a securities class action, which is the primary deterrent for prosecuting weak claims; and (4) there remain less favourable damages calculations for material change claims under the Act.
Footnote
1 Acknowledgements and thanks to Yu Mao for contributions as a summer student.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2025
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