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Introduction
The Supreme Court of Canada has arguably broadened the scope of continuous disclosure standards for issuers, in the context of allowing an investor class action to proceed to trial. The decision's practical consequences for Canadian issuers and capital markets will depend on how lower courts apply these principles in future cases.
Lundin Mining Corporation, et al. v. Dov Markowich,1 the Court's first securities law decision in a decade, addressed "perhaps the most difficult area of securities law" — the distinction between "material fact" and "material change" under Ontario's Securities Act and equivalent legislation across Canada.1 The Court also addressed the requirements for leave to proceed with a statutory cause of action under section 138.8 of the Securities Act.
Key Takeaways
- Issuers face broad continuous disclosure obligations that will
be flexibly construed by the courts.
- The Court adopted a wide interpretation as to when a public company should find that a "change" has occurred in its "business, operations or capital". The words should be interpreted according to their ordinary meanings, and the "change" need not be significant or important to the business, operations or capital of the issuer;
- The Court explained that materiality is the second-stage assessment: to trigger the Securities Act's timely disclosure requirement, the change must be "material", in the sense that it "would reasonably be expected to have a significant effect on the market price or value of the securities". Materiality will continue to play a limiting role for continuous disclosure obligations.
- The Court's interpretation may increase litigation and regulatory risks for Canadian issuers, though the full impact will depend on how these concepts are applied in practice.
- As to the threshold test for leave to proceed motion brought by investors seeking to pursue the secondary market misrepresentation cause of action in the Securities Act, the Court took a more rigorous approach to the interpretation of the wording of the Act than had the Court of Appeal for Ontario. The Court confirmed that the modern approach to statutory interpretation applies in the same way on a motion for leave to proceed with a statutory cause of action as it would at a trial on the merits. A plaintiff must advance the "correct" interpretation of the legislation, and then advance a "plausible analysis" — that is, a plausible application of the legislative provisions to some credible evidence in support of the claim.
Background – The Distinction Between Material Fact and Material Change
Under the Securities Act, a "material fact" is "a fact that would reasonably be expected to have a significant effect on the market price or value of the securities".2 Material facts must be disclosed, but not "forthwith"; rather, they are to be disclosed in the issuer's next regularly scheduled filing.
When a "material change occurs in the affairs of a reporting issuer", however, the reporting issuer "shall forthwith" disclose the nature and substance of the change.3 The Securities Act defines a "material change" in this context as "a change in the business, operations or capital of the issuer that would reasonably be expected to have a significant effect on the market price or value of any securities of the issuer".4
The distinction between a "material fact" and a "material change" is fundamental to the Securities Act's disclosure regime.5 That distinction turns on the interpretation of the phrase "a change in the business, operations or capital of the issuer".
Factual Summary
Lundin, a global mining company, discovered pit wall instability at its Chilean copper mine in October 2017. The instability led to a rockslide, which restricted access to a part of the mine and forced Lundin to lower its production forecasts for the next few years. Lundin waited until November 2017 to disclose these events. After the announcement, its share price fell by 16%.
A shareholder, Mr. Markowich, sought leave from the Ontario Superior Court under section 138.8 of the Securities Act to bring a statutory cause of action against Lundin for its failure to disclose "forthwith" a "material change" in its "business, operations or capital".6 The plaintiff also sought certification of a class action under Ontario's Class Proceedings Act to advance statutory causes of action and a claim for negligent misrepresentation on behalf of certain shareholders of Lundin.
Procedural History
The motion judge dismissed the plaintiff's motions. He accepted that if the pit wall instability and subsequent rockslide were a "change", then they were material.5 However, he found that there was no reasonable possibility, based on a plausible interpretation of the Securities Act and credible evidence, that there had been a "change" in Lundin's business, operations or capital. The motion judge reasoned that there was no evidence that the pit wall instability or rockslide led Lundin to change its lines of business, stop operating the mine, or change its capital structure.7
The Court of Appeal for Ontario allowed the appeal and granted the plaintiff leave to proceed under section 138.8 of the Securities Act. In a unanimous decision authored by Justice Favreau, the Court of Appeal held that the motion judge erred in law by interpreting the statutory terms "change", "business", "operations" and "capital" too narrowly, especially in the context of a motion for leave. In the Court of Appeal's view, based on a more generous interpretation of those terms, there was a reasonable possibility that Mr. Markowich could demonstrate that the pit wall instability and rockslide constituted changes in Lundin's operations. As there was no dispute that if there was a "change" in this case, it was a "material change", the Court of Appeal granted leave to proceed with a statutory cause of action.8
The Supreme Court's Decision
The Statutory Interpretation of "Material Change"
The Distinction Between "Material Fact" and "Material Change"
The Court acknowledged that the distinction between material fact and material change has been described as a "conundrum".9 The Court summarized its prior jurisprudence on this distinction:
- Static vs. Dynamic. A material fact is static; it provides a snapshot of the issuer's affairs at a particular point in time. By contrast, a material change is dynamic; it "necessarily compares an issuer's affairs at two points in time".10
- Internal vs. External. A material change must be internal to the issuer (a change "in the business, operations or capital of the issuer"). External political, economic and social developments cannot give rise to a material change, unless the external development results in an internal change in the business, operations or capital of an issuer and is material. By contrast, a material fact may be internal or external.11
- Breadth. A material fact is broader than a material change. Only changes in an issuer's "business, operations or capital" can be material changes, but any fact can be a material fact.12
Interpreting "Material Change"
The Court rejected the motion judge's narrow interpretation of "material change" in favour of a broader disclosure standard, which the majority found better promoted the fundamental purposes of theSecurities Act. The Court held that interpreting "material change" involves two steps.13
At the first step, the focus is on the nature of the change. The Court emphasized that the Ontario Legislature intentionally left terms like "change", "business", "operations" and "capital" undefined to allow for flexible, contextual application across industries. The meaning of these terms is not constrained by dictionary definitions.14 In the Court's view, such rigid interpretations would undermine the purpose of disclosure requirements, which is to prevent informational asymmetry between issuers and investors.15 Instead, the Legislature intended for these words to retain their ordinary meaning.[16]In short, "a change is a change".17
The Court expressly held it is inappropriate to import qualifiers such as "core", "fundamental", or "key" to the undefined term "change".18 Therefore, certain lower court decisions that required an "important and substantial" change should no longer be followed. A change does not have to be "important or substantial" or "a significant disruption or interference" to the issuer's business, operations or capital.19
The second step considers the magnitude, or materiality, of the change. Materiality is determined from the perspective of a reasonable investor.20 The Court explained that the materiality requirement means that issuers need not evaluate whether every minor internal event within a company needs to be disclosed as a "material change". The materiality of a "change" is often obvious, and issuers are well-positioned to assess whether any particular "change" is material given their industry knowledge and familiarity with their business, operations and capital.21
The Requirements for Leave to Proceed with a Statutory Cause of Action
The Court disagreed with the Court of Appeal and confirmed that a plaintiff investor must do more than advance a "plausible interpretation" of the applicable legislative provisions to meet the test for leave under section 138.8(1) of theSecurities Act. Instead, a "plausible analysis" of the legislative provisions is required. The modern approach to statutory interpretation always governs, both on the interpretive exercise on a motion for leave, and at a trial on the merits.22 At either stage, therefore, the plaintiff must apply the correct interpretation of the statute to "some credible evidence in support of the claim" to persuade the court that they have a reasonable possibility of success at trial.23
Application
The outcome in this appeal turned on whether Mr. Markowich could establish a reasonable possibility that the pit wall instability and the rockslide constituted a "change" in Lundin's business, operations or capital. There was no dispute that if he could so establish, then there was also a reasonable possibility that any such change was material.24
The Court held that had the motion judge correctly interpreted a change in business, operation or capital and applied that interpretation to the evidence on the leave motion, he would have concluded that there was a reasonable possibility that Mr. Markowich could show that the pit wall instability and rockslide resulted in a change to Lundin's operations.25 There was uncontested evidence that the pit wall instability and rockslide impacted Lundin's operations by requiring Lundin to revise its production forecasts downward, to use lower grade ore in 2019, and to adjust the phasing of its open pit mine.
Accordingly, the Court dismissed the appeal and granted Mr. Markowich leave to commence an action for the alleged breach of Lundin's timely disclosure obligations.26 Certification of the action as a class proceeding regarding the statutory cause of action was not opposed below.27 The case will now proceed to a merits determination.
The Dissenting Reasons
Justice Côté, in dissent, would have allowed the appeal and restored the motion judge's decision denying Mr. Markowich's motion for leave to bring the action against Lundin.28 In her lengthy dissenting reasons, Justice Côté rang the alarm about the implications of the majority's holding for issuers and Canadian capital markets.
The point of departure for Justice Côté is that the distinction between "material fact" and "material change" is critical for the functioning of Canadian securities law, and yet remains uncertain and confusing. In her view, this appeal called out for "much-needed certainty and clarity for securities issuers, investors, officers, directors, courts and tribunals alike."29 Justice Côté expressed her concern that the interpretation upheld by the majority will invite over-disclosure and premature disclosure, which would serve neither issuers nor investors.30 She also cautioned that the majority's approach invites heightened risk for directors and officers, which may deter people from stepping into these roles and adversely affect the availability and cost of D&O insurance.31
What's Next?
The lawsuit will proceed against Lundin Mining as a certified securities class action. But the ongoing query is the effect that the interpretation of "material change" will have on issuers. Justice Côté, in dissent, warned of a new "disclosure standard that imposes excessive strain on issuers and muddies the informational landscape for investors[,] ultimately undermin[ing] market integrity rather than strengthening it".32Time will tell, as issuers make their disclosure decisions, and investors bring those choices back to the Court for evaluation in future investor class actions.
McCarthy Tétrault LLP acted as counsel for the intervener, Insurance Bureau of Canada, represented by Dana Peebles and Valérie Lord, and for the intervener, Canadian Chamber of Commerce, represented by Brandon Kain and Aya Schechner.
Footnotes
1 Lundin Mining Corp. v. Markowich, 2025 SCC 39 ("Lundin"), ¶ 1.
2 Securities Act, s. 1 ("material fact").
3 Securities Act, R.S.O. 1990, c. S.5, ("Securities Act"), s. 75(1).
4 Securities Act, s. 1 ("material change").
5 TSX-listed issuers must also bear in mind a further category, "material information". However, this concept and related disclosure obligations were not addressed in Lundin and are outside the scope of this article.
6 This is required under sections 75(1), 138.1, and 138.3(4) of the Securities Act.
7 Markowich v. Lundin Mining Corporation, 2022 ONSC 81.
8 Markowich v. Lundin Mining Corporation, 2023 ONCA 359. See also: Peters v. SNC-Lavalin Group Inc., 2021 ONSC 5021, aff'd 2023 ONCA 360, leave to appeal ref'd, 2024 CanLII 90829(S.C.C.).
9 Lundin, ¶ 47.
10 Lundin, ¶ 48.
12 Lundin, ¶ 50.
13 Lundin, ¶ 77.
14 Lundin, ¶ 77.
16 Lundin, ¶ 71.
18 Lundin, ¶ 77.
19 Lundin, ¶ 76-77, 87, 123; Green v. Canadian Imperial Bank of Commerce, 2012 ONSC 3637, ¶ 25, 28, rev'd 2014 ONCA 90, aff'd 2015 SCC 60; Mask, 2015 ONSC 5348, ¶ 57, aff'd 2016 ONCA 641.
20 Lundin, ¶ 77.
21 Lundin, ¶ 78.
22 Lundin, ¶ 115-119.
23 Lundin, ¶ 7, citing Theratechnologies Inc. v. 121851 Canada Inc., 2015 SCC 18,¶ 39.
24 Lundin, ¶ 122.
25 Lundin, ¶ 125.
26 Lundin, ¶ 126.
27 Lundin, ¶ 25.
28 Lundin, ¶ 140.
29 Lundin, ¶ 128.
30 Lundin, ¶129.
31 Lundin, ¶ 134.
32 Lundin, ¶ 194.
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