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Securities Class Action Update

This article originally appeared in our Canadian Securities Litigation: Trends to Watch 2023 publication, which provides an in-depth overview of the most significant developments in the Canadian securities litigation landscape in 2022 and trends to watch for in 2023. Download the full publication here.


This article summarizes some important trends and developments in securities class actions in Canada in 2022.

1) Defendants Appear More Willing to Fighting the Merits

Securities class actions have rarely proceeded to trial in Canada. The typical trend has been for defendants to focus their efforts on challenging the preliminary motions, namely the class certification and leave to proceed motions (the latter in the case of statutory secondary market representation claims), and if unsuccessful, settle in advance of trial. Two rare exceptions to this historical trend are the recent cases of Wong v. Pretium Resources Inc.[i] (Pretium) and Turpin v. TD Asset Management Inc. [ii] (Turpin), where the defendants contested the allegations on the merits— and won.

In Pretium, the plaintiffs alleged secondary market misrepresentation for the company’s failure to disclose concerns raised by a mining report. The defendants brought a motion for summary judgment after the case was certified. The same judge who found that the plaintiff had met the lower “reasonable possibility of success” threshold and granted leave to proceed as a statutory secondary misrepresentation action, dismissed the case on its merits in 2021. In 2022, the Court of Appeal for Ontario upheld the dismissal. Pretium is an important reminder that defendants should actively consider, and, when appropriate, bring motions to limit/dismiss actions on the merits.

Similarly in Turpin, the plaintiffs alleged primary market misrepresentation by an investment fund manager engaged in “closet indexing”. Similar actions were initiated against several other investment fund managers. The defendant TDAM consented to certification and challenged the plaintiff’s allegations in an eight-week trial. The defendant’s strategy is an important reminder of the benefit of forcing plaintiffs to prove their allegations on the merits. Turpin is also a reminder of strategic and efficiency advantages from negotiating narrow common issues to settle certification and litigating at the “front of the line” when other similar cases have been commenced.

2) Increase in Cases Targeting the Wealth Industry

Canadian securities class actions have typically targeted public company issuers, their directors and officers, and gatekeepers, including legal advisors, auditors and underwriters. However, there is a recent trend in cases filed targeting the wealth industry. We have seen an increase in filings in our own practise. Three recent decisions in Boal v. International Capital Management Inc.[iii] (Boal), Fisher v. Richardson GMP Ltd.[iv] (Fisher), and Turpin v. TD Asset Management Inc.[v] (Turpin) reflect this trend—and all examples where the defendants succeeded.

In Boal, the plaintiff started a proposed class action against mutual fund advisors for losses associated with an investment in promissory notes. The plaintiff alleged the advisors breached their fiduciary duties. The Ontario Superior Court denied certification, finding that that the allegations did not support a fiduciary duty claim. On appeal, the Ontario Divisional Court upheld the decision, emphasizing that an advisor’s fiduciary duty to a client is a “case-by-case” determination based on the traditional hallmarks of a fiduciary relationship, and that therefore the case could not be determined in a class action.

In Fisher, the plaintiff alleged that they suffered capital and opportunity losses from unsuitable and negligent investment advice. The Alberta Court of King’s Bench denied certification due to the high degree of variability among the members of the proposed class. The court noted that the proposed class members had different factual circumstances and backgrounds, were owed different duties, and were alleged to have suffered different losses for different reasons.

In Turpin, the plaintiff alleged that a fund portfolio manager was not making active investment decisions (i.e., researching, using discretion and expertise), and was simply attempting to track and replicate the fund’s benchmark index, also known as “closet indexing”. The court ruled in favour of the defendant TDAM finding that throughout the class period the fund was actively managed with the objective of outperforming the benchmark index. The court found that each trust’s unique context should be taken into account when interpreting the duties of investment fund trustees, and investment decisions made by professional portfolio managers should not be second-guessed.

Undisclosed fees class actions alleging breaches of consumer protection legislation are also continuing. However, there appears to be a trend in such lawsuits being brought against brokerages. Recently, in Salko c. Financière Banque Nationale inc.[vi], Superior Court of Quebec authorized a class action on behalf of persons who were parties to a non-advisory brokerage contract and who were charged currency conversion fees when trading foreign-listed securities. This case is the first class action in Quebec involving direct non-advisory brokerage accounts and the first to consider whether currency conversion and the disclosure of conversion fees are transactions governed by the Quebec Consumer Protection Act (CPA). Answering this question in the negative, the Court held that currency conversion is not a separate transaction from the purchase or sale of securities, which is itself governed by the Quebec Securities Act (QSA) and therefore excluded from the scope of the CPA. We expect class actions alleging undisclosed fees to be limited to historic allegations given changes made to CRM2 under NI 31-103.

3) Growing Interplay with CCAA Proceedings in Securities Class Actions

In a distressed environment, there is growing interplay between class actions and insolvency proceedings.

In Arrangement relatif à Xebec Adsorption Inc.[vii] before the Superior Court of Quebec, two shareholders sought a limited lifting of a stay in a proceeding under the Companies’ Creditors Arrangement Act (CCAA) to seek leave to commence a class action alleging statutory misrepresentation against the company’s underwriters and directors. Citing earlier precedent, the court refused the motion, holding that a stay “should only be lifted in circumstances where to do so is consistent with the goals of the stay” and that an “overriding consideration” is the impact of proceedings on the CCAA process and whether they would “seriously impair […] the debtor’s ability to focus on the business purpose of negotiating the compromise or arrangement”. Given the amount of secured and unsecured debt burdening the debtors, the court held it was highly speculative, if not unlikely, that there would be sufficient proceeds for a compromise or arrangement to generate funds to satisfy all the secured and unsecured creditors. Accordingly, the Court concluded the plaintiffs would not suffer a significant prejudice if the authorization motion was delayed.

Another interesting case is Koroluk v. KPMG Inc.[viii] out of Saskatchewan. In the context of a voluntary liquidation, the liquidator argued that the plaintiff must provide his claim against the directors and auditors of the company through the liquation process even though he did not sue the company. The Court of King’s Bench agreed with the liquidator. The Saskatchewan Court of Appeal disagreed, reasoning that the provisions of Saskatchewan’s Business Corporations Act dealing with liquidation and dissolution were designed to ensure that the corporation’s liabilities were identified and paid, and were not suited to the resolution of claims made against other parties.

In CannTrust Holdings Inc., et al. (Re),[ix] the Ontario Superior Court considered the fairness and reasonableness of a plan of arrangement in a CCAA processing that sought to settle class actions commenced in multiple provinces, US federal court and US state court. At issue was the broad bar order that released claims for all settling defendants, including contribution and indemnity claims against them, while maintaining joint and several claims against the non-settling defendant, the auditor. The auditor argued that the plan was not fair even though there was a judgment reduction provision that reduced any award of damages made against the auditor by an amount the court determined the auditor could have recovered from the company in a claim for contribution and indemnity. The company argued such a provision placed the auditor in an economically neutral position. The Court disagreed, holding that the plan failed to balance the interests of all stakeholders, favouring the interests of the plaintiffs over those of the auditor because the plaintiffs did not agree to limit their claims against the auditor to several liability.

4) Where Does Reliance Stand at Certification/Authorization?

The longstanding debate over reliance continues without clear resolution in Canadian securities class actions. In British Columbia, it was recently held by the Court of Appeal in 0116064 B.C. Ltd. v. Alio Gold Inc.[x] that issues of causation and reliance are not a definite bar for certification. In that case, the Court of Appeal allowed an appeal from the lower court’s refusal to certify class proceedings founded upon an allegation of misrepresentation brought by a former shareholder of Rye Patch Gold Corp, whose shares were sold to the respondent, Alio Gold Inc. In overturning the refusal to certify, the Court of Appeal acknowledged that many common law misrepresentation cases are unsuitable for certification, as they raise questions of causation and reliance that require an analysis to be made at an individual level that overwhelms common issues. However, the Court also found that in some cases, causation may not be a bar to certification. The case at bar involved a limited number of representations at issue, and a single transaction via plan of arrangement which compelled all shareholders to transfer their shares at a fixed exchange rate. Due to this singular nature and the circumstances of the case, the Court of Appeal concluded that there were common questions, and that certification of those questions by means of class action was strongly preferable to advancing numerous and lengthy individual claims.

In Quebec, however, in Graaf v. SNC-Lavalin Group Inc.[xi] the Superior Court concluded that reliance is an essential component of a secondary market claim against an issuer and its officers and employees under Quebec civil law outside the QSA. The plaintiff sought authorization to institute a worldwide secondary-market securities class action in relation to alleged misrepresentations by the SNC-Lavalin Group (SNC). Dismissing the motion for authorization, the Court confirmed the necessity to establish reliance in the context of a class action based on Quebec civil law not covered by the QSA. Although reliance may be inferred based on a presumption of fact, it remains an essential component of the claim and failure to allege it will be fatal to the action. Consequently, the Court concluded that, given that the plaintiff had not alleged having relied on any information coming from SNC, whether individually or collectively, the action could not succeed.

The analysis of reliance continues to be a live issue at certification/authorization, and the facts are dispositive of the outcome.

5) Will Canada Follow the Increasing US Trend in Cryptocurrency Filings?

Several publications have reported an increasing trend in 2022 in crypto-currency related filings in securities class actions in the United States, particularly in federal courts, including cases relating to crypto exchanges and allegations related to securitization. In Canada, 2022 showed early signs of an emerging trend with proposed class actions in Ontario against cryptocurrency exchanges Binance and Coinbase and their related companies, alleging that they sold cryptocurrency derivatives contracts contrary to Canadian securities laws.

As US filing trends are often a bellwether of future Canadian filings, it remains to be seen whether the pace of crypto-currency filings will follow our neighbors to the south.


[i] Wong v. Pretium Resources Inc., 2022 ONCA 549.

[ii] Turpin v .TD Asset Management Inc., 2022 BCSC 1083.

[iii] Boal v. International Capital Management Inc., 2022 ONSC 1280.

[iv] Fisher v. Richardson GMP Ltd., 2022 ABCA 123.

[v] Turpin v. TD Asset Management Inc., 2022 BCSC 1083.

[vi] Salko c. Financière Banque Nationale inc., 2022 QCCS 3361.

[vii] Arrangement relatif à Xebec Adsorption Inc, 2022 QCCS 3888.

[viii] Koroluk v. KPMG Inc., 2022 SKCA 57.

[ix] CannTrust Holdings Inc., et al. (Re), 2021 ONSC 4408.

[x] 0116064 B.C. Ltd. v. Alio Gold Inc., 2022 BCCA 85.

[xi] Graaf c. SNC-Lavalin Group Inc., 2022 QCCS 3727.