Summary

Keywords

Evidence — Hearsay — Case splitting — Securities — Whether courts should engage in a meaningful contextual materiality analysis from Sharbern Holding Inc. v. Vancouver Airport Centre Ltd., 2011 SCC 23, [2011] 2 S.C.R. 175, when assessing whether a plaintiff should be granted leave to commence a secondary market misrepresentation case — Whether the Court should develop more nuanced guidelines for the reasonable possibility of success leave test to address the ambiguity that has developed and also takes into account that the statutory provisions at issue embed the various claims and defences with different evidentiary requirements — Securities Act, R.S.B.C. 1996, c. 418, ss. 140.3 and 140.8.

Summary

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

As part of a proposed class action, the respondent/plaintiff Mr. Lee brought a petition under s. 140.8 of the Securities Act, R.S.B.C. 1996, c. 418 (the “Act”), for leave to commence a secondary market claim against the applicants under s. 140.3 of the Act. The plaintiffs in the action allege a scheme whereby certain consultants bought shares issued by private placement at a publicly disclosed share price on the undisclosed condition that the applicants would pay them consulting fees for services that were never rendered. The plaintiffs allege that the total amounts paid to the consultants constituted a significant portion of the proceeds of the private placements and, as a result, the applicants had misrepresented both the price at which the shares were acquired and the proceeds available to the issuers as working capital. The plaintiffs allege they suffered losses by purchasing shares at a price higher than they would have paid but for the scheme, which later eroded in value after the scheme was disclosed. The plaintiffs sought damages or disgorgement of proceeds on the basis of claims of unlawful conspiracy, statutory damages and fraudulent or negligent misrepresentation. The Supreme Court of British Columbia granted leave to bring the statutory claim on the basis that action was being brought in good faith and that there is a reasonable possibility that the action will be resolved in the plaintiffs’ favour. The Court of Appeal for British Columbia dismissed the applicants’ appeal.

Lower Court Rulings