Silver v. IMAX Corporation et al., 2011 ONSC 1035 and Dobbie v. Arctic Glacier Income Fund et al, 2011 ONSC 25

On February 14, 2011, the Ontario Superior Court dismissed a motion by the defendants seeking leave to appeal both the certification and leave decisions of Justice van Rensburg in Silver v. IMAX Corporation et al. (the "IMAX Decision") which, until recently, had been the first and only case to have been both certified and granted leave to commence an action under the provisions of the Ontario Securities Act (the "OSA") enacted just over five years ago which provide for a statutory cause of action for secondary market investors. The motion was of interest as, if successful, it would have allowed the Divisional Court to address the leave and certification issues in this case.

On March 3, 2011, Justice Tausendfreund of the Ontario Superior Court of Justice in Dobbie v. Arctic Glacier Income Fund et al. (the "Arctic Glacier Income Fund Decision") granted both certification and leave to commence an action under the secondary market provisions in what is now the second case to have done so.

Background in the IMAX Decision

The class action commenced against IMAX Corporation ("IMAX") and certain of its officers and directors (collectively the "IMAX defendants"), concerns allegations about the company's revenue and revenue-recognition practices. The plaintiffs, shareholders of IMAX, sued with respect to a decline in the price of their shares that they argue was caused by alleged misrepresentations in IMAX's 2005 Form 10-K, in its 2005 Annual Report and in press releases issued in February and March of 2006. The plaintiffs allege that certain of the IMAX defendants misrepresented the 2005 financial results as having been prepared in accordance with GAAP and, that they knowingly overstated revenues which led to the artificial inflation of the trading price of IMAX securities.

The causes of action asserted included common law claims of negligence, negligent misrepresentation, "reckless" misrepresentation and conspiracy, as well as a statutory cause of action for misrepresentations in the secondary market under the OSA.

On December 14, 2009 Justice van Rensburg of the Ontario Superior Court of Justice handed down two related decisions which were the subject of IMAX's recently refused motion for leave to appeal. The first was the "Leave Decision" granting the plaintiffs leave to proceed with their class action against IMAX and certain individual respondents under section 138.3 of the OSA. The second was the "Certification Decision" which certified the action as a class proceeding, including both the common law and statutory claims. Notably, the class, as certified, is a global class consisting of all persons who acquired securities of IMAX during the defined class period who continued to hold those securities at the close of trading on the last day of the class period.

The Leave Decision

In the Leave Decision Justice van Rensburg granted leave under ss. 138.8(1) to commence an action under ss. 138.3. The provision requires that in order for a plaintiff to be able to commence an action for misrepresentation in the secondary market, two criteria must be met, namely (i) the action must be brought in good faith and (ii) there must be a reasonable possibility that the action will be resolved at trial in favour of the plaintiff.

Justice van Rensburg held that the good faith requirement under ss. 138.8(1) requires plaintiffs to establish that they brought the action with the honest belief that they have an arguable claim for "reasons that are consistent with the statutory cause of action and not for an oblique or collateral purpose." With respect to the second part of the test, Her Honour was of the view that the threshold for a "reasonable possibility" is "something more than a de minimis possibility or chance that the plaintiff will succeed at trial". Her Honour concluded that the Court must consider the entire evidentiary record on the motion, including the defences in determining if there is a reasonable possibility of success at trial.

The Certification Decision

In the Certification Decision, Justice van Rensburg considered issues including, among others, the common law claims of misrepresentation together with issues surrounding the duty of care and reliance, conspiracy, and whether or not a "global class" definition was certifiable.

On the common law misrepresentation claims the plaintiffs alleged that the entire proposed class of plaintiffs relied on the representations in the company's financial statements by virtue of the act of purchasing the IMAX securities alone and that proving individual reliance by each investor was, therefore, not required. The defendants asserted that the plaintiffs' failure to plead individual and direct reliance was fatal to the claim of misrepresentation, as previously held by other Canadian courts. Justice van Rensburg determined that, for the purpose of the certification motion alone, it was arguable that a duty of care may have been owed in the circumstances. Her Honour held that there was a conceivable claim based on the plaintiffs' pleading of the "efficient market theory" to establish reliance.

In respect of the plaintiffs' other common law claims, Justice van Rensburg found that the plaintiffs' conspiracy and reckless (fraudulent) misrepresentation claims had been properly plead but that the negligence simpliciter claim was identical to the negligent misrepresentation claim and therefore improper.

On the issue of whether or not a "global class" definition was certifiable, the IMAX defendants argued that such a class would be over inclusive inasmuch as it would include individuals or entities which did not known about or rely on the misrepresentation and that such a class would create a conflict of laws issue requiring an Ontario court to take jurisdiction over class members residing outside the province. The IMAX defendants also contended that the principles of order and fairness weighed against certification of a global class, particularly in light of a similar class proceeding that had been commenced in the United States. In certifying the global class, Justice van Rensburg found that the issues raised by the pleading had a "real and substantial" connection to Ontario and determined that the fact that a similar proceeding had been commenced in the United States was inconsequential to the Ontario action. Her Honour also held that any concern over conflict of laws issues was premature unless and until the defendants asserted reliance on laws of other jurisdiction in their statement of defence.

Leave to Appeal Refused

The test for leave to appeal is found under Rule 62.02(4)(a) or (b) of the Ontario Rules of Civil Procedure which states that leave may be granted where there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the appeal, or where there appears to the judge hearing the motion, good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

In dismissing the motion for leave to appeal, Justice Corbett accepted the IMAX defendants' arguments that where a decision is open to serious debate the threshold test for doubting the correctness of an order is met and that this includes cases where a decision appears to be a "significant extension of the law", where the reasoning is "novel", or where there is a "lack of clarity in the law." However, His Honour noted that although he accepted these arguments generally, they did not encompass the whole of the exercise of discretion on an application for leave to appeal and that this analysis applies to the decision or the order from which leave is sought, and not to the specific aspects of the reasons for that decision, which is not the subject of the appeal. Justice Corbett found that there was no reason to doubt the correctness of the decisions of Justice van Rensburg and that even if there were concerns about aspects of the reasons of the Certification or Leave Decisions, such concerns were not sufficient to allow leave to appeal.

Leave to appeal the "Certification Decision"

On the motion for leave to appeal, the IMAX defendants argued that Justice van Rensburg erred in refusing to strike the common law claims of misrepresentation because, they said, the defendants owed no duty of care to the plaintiffs and because the plaintiffs failed to plead actual reliance by each class member, which they argued, is necessary to establish causation between the statements and the plaintiffs' alleged losses. The IMAX defendants also argued that the conspiracy claims should have been struck because the pleadings were improper.

Justice Corbett stated, "the relationship between common law and statutory claims of misrepresentation is important, and merits appellate consideration. However, the decision of van Rensburg J. does no more than permit the plaintiffs to proceed to trial. The Court of Appeal will be able to give full consideration to these issues if and when the case is appealed after a trial judgment."

On the issue of the global class, the IMAX defendants argued that the claim should not have been certified to include the plaintiffs in other jurisdictions. Commenting that the IMAX defendants' submissions on this point were significantly undermined by their approach to the class proceedings brought against them in the U.S. where they took the position that Ontario was the proper jurisdiction for all claims respecting the impugned statements, Justice Corbett held that, "it would be wrong, of course, to compel foreign investors to be bound by Canadian proceedings if they prefer to have their claims adjudicated elsewhere. But similarly, it would be wrong to preclude them from participating in Canadian proceedings if they wish their claims to be pursued in Ontario." His Honour went on to state that "as a matter common sense, there is integration of the Canadian and American capital markets, and there are legitimate bases for enforcement to be possible in both Canada and the U.S.A., both by regulatory action and by civil claims. The manner in which this integration takes place will vary from case to case. Certainly integration does not imply a prohibition on overlapping class proceedings in different jurisdictions."

Leave to appeal the "Leave Decision"

In the motion for leave to appeal, the IMAX defendants argued that Justice van Rensburg had set too low a threshold for leave and for establishing good faith by the plaintiffs under ss. 138.8(1) and that the legislature had intended a more substantial "gatekeeper" role for the courts that required more rigorous scrutiny of the sufficiency of each aspect of the claim. The IMAX defendants also argued that Justice van Rensburg had erred by reversing the onus respecting statutory defences, by refusing to consider whether there was evidence (i) to satisfy statutory criteria to establish recovery beyond the statutory damages cap, or (ii) to establish liability for "non-core documents", and, by misinterpreting and misapplying the expert reliance evidence.

Justice Corbett, however, was of the opinion that on the facts, as found by Justice van Rensburg, "this was not a close call that turned on the precise test used to grant leave." On the issue of the "good faith" requirement His Honour held that to go down the route argued by the IMAX defendants would restrict the class of plaintiffs to those that were sophisticated in the law and that plaintiffs are entitled to rely upon their expert counsel to frame their claims. His Honour also found that with respect to the "reverse onus" issue on affirmative statutory defences, there was no reason to doubt the correctness of Justice van Rensburg's decision stating that "whether the standard of proof is that required on a motion for summary judgment to defeat a claim, or whether it is something less, to negative the "reasonable possibility of success" is a question of importance that is "debatable"." With respect to IMAX's arguments regarding the statutory damages cap and liability for "non-core documents" Justice Corbett held that it was neither important nor desirable to grant leave to appeal in respect of these issues on an interlocutory basis when on the facts available there was the possibility of establishing the requisite elements.

His Honour stated that, in his view, there was no reason to push the interesting questions raised by the IMAX defendants to the appellate level where there is no good reason to doubt the correctness of the decision and also noted that although Justice van Rensburg's decision is the first word on the test for leave under ss. 138.8(1) of the OSA, it is not the last. His Honour's prediction in this regard rang true merely two weeks later when Justice Tausendfreund of the Ontario Superior Court of Justice granted the plaintiffs both certification and leave to commence an action under ss. 138.3 in the Arctic Glacier Income Fund Decision.

The Arctic Glacier Income Fund Decision

On March 3, 2011, Justice Tausendfreund granted the plaintiffs leave to proceed (the "Leave Decision") with their class action against Arctic Glacier Income Fund and certain individual defendants (collectively, the "Arctic Glacier defendants") under ss. 138.8 of the OSA and certified the action, including both statutory and common law claims, as a class proceeding (the "Certification Decision").


The plaintiffs are residents of Ontario who purchased units of the defendant, Arctic Glacier Income Fund ("Income Fund") over the Toronto Stock Exchange during the defined "Class Period" of March 13, 2002 to September 16, 2006 and who held some or all of those units on September 17, 2008. The Income Fund is an unincorporated mutual fund trust and is a reporting issuer in ten provinces, including Ontario, the purpose of which is to market Arctic Glacier Inc. ("Arctic") as an Income Fund for public trading on the Toronto Stock Exchange. The other defendants include certain Officers, Directors and/or Trustees of Arctic and/or the Income Fund (the "Individual Defendants") and Arctic itself, a producer, marketer and distributor of packaged ice to consumers in both Canada and the United States.

The trading value of the Income Fund's units was based entirely on the financial and business results of Arctic because, at the time it was created, the Income Fund's sole assets were all the shares of Arctic. Between 2002 and 2008, the Income Fund stated in public disclosures that the packaged ice industry was very competitive and represented that the Income Fund and its subsidiaries were good corporate citizens operating lawfully in a very competitive market. However, in March 2008, the Income Fund announced that it had become aware that the United States Department of Justice ("the DOJ") was conducting an anti-trust investigation on the packaged ice industry and that it was cooperating fully with the DOJ in this regard. In September 2008, the Income Fund suspended its income trust distributions. In 2009, Arctic Glacier International Inc. ("Arctic International"), a wholly-owned subsidiary of Arctic and the principal operating subsidiary of the Income Fund and Arctic in the United States, pleaded guilty to a charge of participating, during the proposed Class Period, in a criminal, anti-competitive conspiracy in the United States.

The plaintiffs alleged that as a result of the Arctic Glacier defendants' published misrepresentations relating to the sale of publicly traded securities in both the primary and secondary market, those securities experienced a substantial market value decline. The plaintiffs commenced a proposed class action and brought a motion seeking both leave to pursue the alleged secondary market misrepresentations and certification of the proposed class action. The Arctic Glacier defendants brought a motion challenging several of the causes of action alleged and remedies sought by the plaintiffs and requested an order that they be struck from the pleadings. The only material filed in the proposed action was the Statement of Claim.

The Arctic Glacier Defendants' Motion to Strike

The Arctic Glacier defendants moved under Rules 21.01(1) and 25.11 of the Ontario Rules of Civil Procedure to strike certain parts of the plaintiffs' statement of claim including (i) the common pleading against the Income Fund; (ii) the pleading of an underlying anti-trust conspiracy; (iii) the pleading under s. 130 of the OSA; (iv) the pleading of negligence; and (v) the pleading of negligent misrepresentation.

Justice Tausendfreund noted that on a motion to strike he must afford the claims a generous interpretation, and dismissed all of the Arctic Glacier defendants' requests to strike except for the motion to strike the common law pleadings against the Income Fund, which His Honour granted.

The Common Law Pleading Against the Income Fund

His Honour struck the common law pleadings, including negligence, negligent misrepresentation and breach of trust, against the Income Fund because as an unincorporated, open-ended mutual trust fund, the Income Fund lacked a legal personality and could therefore not be named as a defendant to a common law cause of action and, because the proper parties in an action against a trust are the trustees. His Honour noted, however, that the pleadings against the Income Trust with respect to the statutory cause of action under s. 130 of the OSA would stand because that right of action is available against an "issuer" and the OSA definition of "issuer" included "person" which is defined to include "a trust." His Honour also upheld the pleading of an underlying anti-trust conspiracy because His Honour found that conspiracy was not pleaded as a cause of action but rather used as a "moniker" to describe an alleged course of conduct and so, contrary to the defendant's arguments, it was unnecessary that all the requisite elements of the tort of conspiracy be plead.

The Pleading under s. 130 of the OSA

With respect to the s. 130 claims, the defendants asserted what they claimed were two fatal deficiencies in the pleading, namely (i) that neither proposed representative could advance the s. 130 claim as a personal cause of action because neither had purchased their units in the primary market, and (ii) that the pleading must be limited to persons who purchased in Ontario and, reliance on the fund prospectuses should be within three years of the issuance of the Notice of Action as contemplated by the limitation period set out in ss. 138.14(b)(ii) of the OSA.

His Honour held that since each of the proposed representative plaintiffs had asserted at least one cause of action against each of the defendants they could also assert causes of action that were not their personal causes of action but which were asserted by them on behalf of class members.

The Arctic Glacier defendants submitted arguments with respect to territorial restrictions and limitations periods arguing that the class must be limited to those persons who purchased securities in Ontario because each province has different legislation. To decide the issue, Justice Tausendfreund examined two divergent lines of authority in Ontario on this issue. The first was Coulson v. Citygroup, where Justice Perell of the Ontario Superior Court of Justice agreed with the defendants that the class should be limited to purchasers who acquired common shares pursuant to the prospectus as a result of distribution in Ontario where the plaintiffs had proposed a national class yet pleaded only s. 130 of the OSA. The second was McKenna v. Gammon Gold Inc., in which Justice Strathy of the Ontario Superior Court of Justice followed the IMAX Certification Decision finding it unnecessary at the certification stage to make a determination of the law applicable to the claims of non-resident class members of the class who purchased their securities from underwriters in other provinces.

In the immediate case, Justice Tausendfreund stated that he preferred the "more permissive and less technical approach" taken by Justice Strathy in McKenna v. Gammon Gold Inc. and permitted the national class on the condition that the plaintiffs amend their statement of claim to plead the relevant provisions of the securities acts for those other provinces which the plaintiffs proposed to include in the class proceeding. His Honour also required the plaintiffs to amend their statement of claim in respect of the limitation period, noting that the plaintiffs' cause of action under s. 130 of the OSA was limited to the two fund prospectuses issued after September 25, 2005.

The Pleading of Negligence Simpliciter

With respect to the plaintiffs' pleading of negligence simpliciter based on the Income Fund representations to the primary market during the class period through the fund prospectuses, the Arctic Glacier defendants asserted that there was no common law duty of care owed by public issuers and their officers, directors and/or trustees through the publication of their prospectuses and, as such, the plaintiffs' duty of care analysis was flawed for three separate reasons: (i) there is no such duty of care owed by the Income Fund at common law as it has been replaced by s. 130 of the OSA; (ii) the duty of care owed by the directors and trustees is to the Income Fund and not to the unit holders; and (iii) in any event, the claim of negligence is subsumed by the pleading of negligent misrepresentation and is therefore duplicative.

Justice Tausendfreund stated that, in his view, s. 130 of the OSA does not create a duty but rather provides a remedy; that the statutory duty is found in s. 56 of the OSA which provides that "a prospectus shall provide full, true, and plain disclosure of all material facts relating to the securities issued or proposed to be distributed and shall comply with the requirements of Ontario securities law"; and, that rather than replacing the common law duty of care, s. 56 of the OSA informs that duty. On the Arctic Glacier defendants' second point, His Honour found that at this stage of the proposed class proceeding it was not "plain and obvious" that the pleading of negligence against the directors of the company and trustees of the Fund would fail. And, finally, on the defendants' third point, His Honour found that the claim of negligence simpliciter advanced by the plaintiffs focused specifically on the theory that the prospectuses would not have been issued, or would have been issued showing a reduced offering price for the units, but for the negligence of the defendants, and that it therefore relied on a materially different theory than the negligent misrepresentation allegation and so the former was not subsumed by the latter.

The Pleading of Negligent Misrepresentation

On the issue of negligent misrepresentation, for the purposes of the motion to strike, Justice Tausendfreund held that the positions advanced by the defendants (including the argument that imposing a duty of care at common law could create requirements above and beyond those codified in the OSA) and any residual policy concerns should be left for trial and not resolved at such an "embryonic stage of the action."

The Leave Decision

The Leave Decision focused on whether the plaintiffs should be granted leave to proceed with their statutory misrepresentation claim. Section 138.8 of the OSA requires that the Court grant leave to bring a statutory claim pursuant to Part XXIII.1 where it is satisfied that (i) the plaintiffs have brought the claim in good faith; and (ii) there is a reasonable possibility that the plaintiffs will be successful at trial. Justice Tausendfreund adopted the comments of Justice van Rensburg in the IMAX Leave Decision wherein Her Honour stated, ".the leave test prescribed by the legislature should be interpreted so as to permit access to the courts by shareholders with legitimate claims."

Justice Tausendfreund addressed the limitation period under s. 138.14 of the OSA as it applies to claims for secondary market liability. His Honour noted that the class period proposed by the plaintiffs was March 13, 2002 to September 18, 2008 but that Part XXIII.1 of the OSA, under which the secondary market liability provisions fall, did not come into force until December 31, 2005. His Honour stated that it is common ground that a three-year limitation period applies, but what was at issue was the retrospective effect, if any, of Part XXIII.1 of the OSA. The defendants asserted that Part XXIII.1 is not retroactive and therefore the limitation period in s. 138.14 precluded the plaintiffs from relying on any core documents prior to September 26, 2005.

Justice Tausenfruend found that Part XXIII.1 applied prospectively in the face of a repeated misrepresentation and therefore, beginning with the Income Fund Prospectus of March 13, 2002, the plaintiffs could rely on the disclosure documents in support of their position that those documents contained misrepresentations.

Good Faith

Relying on the IMAX Leave Decision, Justice Tausendfreund stated that the first test under s. 138.3 - whether the action is brought in good faith - is not to be presumed but must be established by the plaintiffs on a balance of probabilities.

Each of the plaintiffs in their affidavits stated that they had commenced the action to "ensure that the defendants are held accountable for their behaviour and to deter similar conduct by others" and that they had "no ulterior motive, nor any improper or collateral purpose in commencing the action." The plaintiffs also noted that the proposed defendants, Gary D. Cooley ("Cooley") and Frank Larson ("Larson") had pleaded guilty in the United States to conspiracy of a commercial nature involving some of the Arctic Glacier defendants. The plaintiffs relied on these guilty pleas as evidence of their belief that they had a chance of success against Larson and Cooley in the proposed class action.

Neither the Arctic Glacier defendants nor the proposed defendant Larson challenged the plaintiffs' assertion that the action was brought in good faith. However, one remaining proposed defendant, Cooley, stated that there was no evidence that he knowingly influenced the Income Fund with respect to the alleged misrepresentations and accordingly there was no evidence from which the plaintiffs could establish good faith with regards to the claims advanced against him.

Noting that the good faith inquiry involves an analysis of the objective evidence within the context of the legislative scheme, Justice Tausendfreund again adopted the comments of Justice van Rensburg in the IMAX Leave Decision which interpreted "good faith" in the context of s. 138.8 to require the plaintiffs to establish that they are bringing their action "in the honest belief that they have an arguable claim, and for reasons that are consistent with the purpose of the statutory cause of action and not for an oblique or collateral purpose." In addition, the Court in IMAX held that "good faith" involves "a consideration of the subjective intentions of the plaintiffs in bringing their action, which is to be determined by considering objective evidence."

Finding that the objective evidence was sufficient to establish, for the purposes of the good faith determination, that Cooley was an officer of a responsible issuer and might be liable under s. 138.3, Justice Tausendfreund held that the plaintiffs had met the first criteria of good faith.

Reasonable Possibility

With respect to the second branch of the leave test, Justice Tausendfreund again saw no reason to depart from Justice van Rensburg's analysis in the IMAX Leave Decision where Her Honour held that "reasonable is used instead of "mere" to denote that there must be something more than a de minimis possibility or chance that the plaintiff will succeed at trial." Justice Tausendfreund went on to comment that in his view, in assessing the existence of a reasonable possibility of success at trial, he must consider the relevant evidence, within the context of the motion at hand. His Honour stated, "the applicable standard is more than a mere possibility of success, but is a lower threshold than a probability."

His Honour held that to demonstrate that they have a reasonable possibility of success at trial, the plaintiffs must do so in respect of each element of s. 138.3 and in respect of each defendant. Ultimately, Justice Tausendfreund found that there was a reasonable possibility of success at trial as against the Income Fund, Arctic as an "influential person" (but not as a "responsible issuer"), and the trustees as "directors" and "influential persons". His Honour also held that there was a reasonable possibility of success at trial with respect to various of the Individual Defendants as either officers or directors, influential persons, or both. His Honour also found "at least" a reasonable possibility of success at trial on the issue of whether the Income Fund knew or acquiesced to the alleged anti-competitive conduct from 2002-2008.

The Certification Decision

Seeking certification, the plaintiffs asserted that their pleadings disclosed at least four valid causes of action: a claim under s. 130 of the OSA that provides for a remedy for purchasers for misrepresentations in a prospectus; negligence simpliciter, negligent misrepresentation, and breach of trust. Justice Tausendfreund held that all four causes of action were valid and that the claims raised common issues. His Honour also held that there was an identifiable class of two or more persons that would be represented by the representative plaintiffs, that class action was the preferable procedure and finally, that there was a representative plaintiff who had produced a workable litigation plan, had no conflicts of interest with the other class members on the common issues, and, would fairly and adequately represent the interests of the class.

Identifiable Class  

The proposed class definition was, "All persons and entities, wherever they may reside or be domiciled, other than Excluded Persons, who acquired Units of [the Income Fund] during the period from March 13, 2002 to September 16, 2008." The Arctic Glacier defendants argued that the proposed class was too large and unworkable because it included all those who purchased units during the Class Period and not just those who held the units at the end of the Class Period in September 2008. These unit holders, the Arctic Glacier defendants argued, were unaffected by the alleged misrepresentations as they sold prior to the fall in market price triggered by the DOJ investigation. Justice Tausendfreund however, held that "although 'early sellers' may eventually be found not to have suffered a loss as a result of the alleged misrepresentations, it is arbitrary at this stage to so conclude and this issue should be left for trial." His Honour also noted that the lack of territorial limitations to the proposed class was not a barrier to certification, relying on the IMAX Certification Decision and Pysznyj v. Orsu Metals Corp., 2010 ONSC 1151.

Common Issues

The plaintiffs asserted 15 common issues, all of which they claimed would substantially advance the case of the class. The plaintiffs characterized the misrepresentations throughout the class period as a single ongoing misrepresentation and argued that as a result, the effect of the misrepresentation on the unit prices over time was an issue common to every Class Member. The Arctic Glacier defendants conceded all but 5 of the common issues challenging the issues of negligence (including whether a duty of care was owed and if owed, whether it was breached), negligent misrepresentation and punitive damages. Justice Tausendfreund held that all 15 proposed common issues were, in fact, common to the Class.

On the contentious issue of negligent misrepresentation, the Arctic Glacier defendants asserted that reliance is inherently individual and thus cannot be a common issue. The plaintiffs, however, suggested that reliance could be inferred using the efficient market theory which presumes that misrepresentations in the market are reflected in the unit price and thus any purchaser could be deemed or inferred to have relied on such statements through the act of purchasing units.

Noting that although "it is generally accepted that a cause of action in negligent misrepresentation requires proof of reliance" and "for that reason, courts have concluded that negligent misrepresentation claims are unsuitable for certification" Justice Tausendfreund reviewed some of the decisions in this area and stated that it appeared that "the case law on this issue is in a "state of evolution". His Honour stated, "I recognize that depending on the type and number of alleged misrepresentations in a particular case, these could in certain circumstances overwhelm the common issues and would, as such, not be suitable to be resolved as a class proceeding. I find that the alleged misrepresentations made in this case in core documents are consistent and repetitive and can easily be treated as one."


Justice Tausendfreund largely followed the IMAX Leave Decision on most of the contentious issues in respect of both the test for leave, and certification. It remains to be seen whether subsequent courts will diverge from the test for leave which arose from IMAX.