Honest Weight: Court of Appeal Affirms Threshold for Leave in Secondary Market Securities Class Action

by Blake, Cassels & Graydon LLP

In its recent decision in Mask v. Silvercorp Metals Inc. (Mask), the Court of Appeal for Ontario (Court) dismissed an appeal of the denial of leave and certification to a proposed statutory secondary market securities class action under Part XXIII.1 of the Ontario Securities Act (Act). In so doing, the Court affirmed that it must engage in some weighing of the evidence adduced by both parties when deciding whether to grant leave to proceed with a statutory secondary market class action. The Court also reaffirmed that a common law misrepresentation claim based on the same evidentiary foundation as a statutory claim that is not granted leave is not suitable for certification.


In Mask, the proposed class claimed that Silvercorp Metals Inc. and two of its former executives had misrepresented the quantity and quality of its mineral resources and reserves, understating the quantity and overstating the quality of the minerals it was producing. Concurrent with the alleged misrepresentations, Silvercorp was the target of “short sellers” who were releasing information aimed at reducing Silvercorp’s share price.

On the leave and certification motion, the motion judge weighed the expert evidence adduced by the plaintiff against factual evidence adduced by the defendants and denied leave to proceed under the Act. The motion judge found that the plaintiff’s misrepresentation claim was “so weak or has been so successfully rebutted by the defendants that it has no reasonable possibility of success.” The motion judge further found that the common law misrepresentation claim based on the same factual footprint as the statutory claim was destined to fail and should not be certified.


The plaintiff appealed, arguing that the motion judge applied a higher leave standard than the standard set out by the Supreme Court of Canada in Theratechnologies Inc. v. 121851 Canada Inc. (see our April 2015 Blakes Bulletin: First Secondary Market Class Action to Reach SCC Denied Leave).

The plaintiff argued that it was only required to show “a plausible analysis of the applicable leave provisions, and some credible evidence in support of the claim,” and that the motion judge erred in weighing the plaintiff’s evidence against the defendants’ evidence, improperly turning the leave application into a mini-trial. By weighing the parties’ evidence, the plaintiff argued on appeal, the motion judge in effect imposed an obligation on the plaintiff to fully respond to the evidence advanced by the defendants, which is inconsistent with the purpose and spirit of the leave requirement to screen out only plainly unmeritorious claims.

The Court disagreed. Writing for the Court, Justice G.R. Strathy held that Theratechnologies requires a “reasoned consideration of the evidence to ensure that the action has some merit” and that a “reasoned consideration of the evidence” must include scrutiny of the evidence proffered by both sides, and some weighing of the defence evidence against that adduced by the plaintiff. To do otherwise, Justice Strathy held, would be inconsistent with the leave test being a “robust screening mechanism” for unmeritorious cases. Declining to weigh the parties’ evidence would also render meaningless the provisions of Part XXIII.1 of the Act that contemplate that both parties shall file evidence setting out the material facts upon which they intend to rely on the leave motion, and the provisions that provide each party the right to cross-examine the deponents of the affidavits filed.

Justice Strathy concluded that the motion judge was not limited to a consideration of the plaintiff’s evidence but “was entitled, indeed required, to undertake a critical evaluation of all of the evidence and this necessarily required some weighing of the evidence, drawing of appropriate inferences and the finding of facts established by the record.”

Justice Strathy went on to uphold the motion judge’s dismissal of the plaintiff’s common law misrepresentation claim. Justice Strathy endorsed the motion judge’s reasoning relying on the Court’s earlier decision in Bayens v. Kinross Gold Corporation (see our December 2014 Blakes Bulletin: Court of Appeal for Ontario Clarifies Leave and Certification Standards). In that case, the Court held that a class action is not the preferable procedure where leave to proceed with the statutory misrepresentation claim has been denied and where the common law misrepresentation claim rests on the same evidentiary foundation as the statutory claim.


The decision in Mask has important implications for defendants in securities class action proceedings. First, the decision in Mask affirms that courts must engage in some weighing of the evidence of all parties on leave motions as part of a “reasoned consideration of the evidence.” Second, the decision adds to the line of recent cases wherein defendants have succeeded in defeating leave with a substantial evidentiary record. Third, the Court in Mask continues its trend of denying certification of common law claims based on the same factual footprint as statutory claims that are denied leave, acknowledging again that “[t]o permit a class action to proceed in [these] circumstances would render access to justice more illusory than real and would significantly undercut the goal of judicial economy.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Blake, Cassels & Graydon LLP | Attorney Advertising

Written by:

Blake, Cassels & Graydon LLP

Blake, Cassels & Graydon LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.