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Leave requirement in securities class actions: “More than a speedbump, less than the Matterhorn”?

Author(s): Craig Lockwood, Lipi Mishra

Dec 13, 2021

Over the course of the past year, a series of instructive decisions from the Ontario courts has re-affirmed the role of the statutory leave requirement for secondary market misrepresentation claims as a robust gatekeeping tool. In so doing, the Ontario courts have confirmed their willingness to dispose of unmeritorious secondary market proceedings at a preliminary stage. In particular, the Cronos and Peters decisions illustrate that Ontario courts are increasingly prepared to engage in a meaningful assessment of the viability of proposed class actions seeking relief under Part XXIII.1 of the Securities Act (Ontario) (the Securities Act) at the preliminary leave stage, in contrast to the more reserved approach exhibited in the context of the underlying motions for class certification. Similarly, the Pretium decision illustrates the courts’ willingness to dispose of proposed securities class actions on the basis of a summary judgment motion, even where leave under the Securities Act had previously been granted.

Taken together, these cases confirm that the courts are becoming increasingly interventionist in their role as gatekeepers, particularly in the context of unmeritorious secondary market claims. These trends should be of some comfort to issuers. The courts’ interventionist approach will hopefully deter plaintiffs from commencing plainly untenable claims and demonstrate the benefits to defendants of using available tools, such as the leave requirement or summary judgment, to bring a prompt end to such claims...

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