In its recent decision in Rooney v. ArcelorMittal S. A., the Ontario Court of Appeal clarified the scope of the civil cause of action for misrepresentations in a takeover bid circular, codified as section 131 of the Ontario Securities Act. That section provides a civil cause of action for security holders against the offeror, pursuant to which the claimant can seek rescission or damages. Section 131 also provides a cause of action for damages to security holders against, inter alia, the offeror's directors. 

The Court made two key holdings that define the scope of the statutory cause of action:

  1. while security holders must elect between seeking rescission or damages against the offeror, they do not need to make an election as between suing the offeror and suing the offeror's directors, but rather can claim against both; and
  2. the cause of action is not available to security holders who sold their securities on the secondary market, but rather only to those who tendered to the offer. 

The result is therefore mixed, expanding the scope of potential defendants but limiting the scope of potential plaintiffs. With respect to secondary market participants, the Court clearly found the legislature intended secondary market causes of action to be subject to the leave, limitation and liability cap provisions in Part XXIII.1 of the Securities Act

This decision will be of interest to all issuers and their directors and officers. It will also be of interest to civil litigators generally for the Court's comprehensive summary of the rules of statutory interpretation.