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Securities class actions growing in Canada: report

|Written By Kelly Harris
Securities class actions growing in Canada: report

There is more than $14.7 billion in outstanding security class actions in Canada according to the newly released National Economic Research Associates, Inc. study into the claims. 


Report co-author Brad Heys, puts a caveat on the big number saying the CIBC class action related to the sub-prime mortgage fiasco in the United States alone is worth $10 billion. That still means more than $4.7 billion in outstanding securities class actions for a country that only really started seeing cases of this type in 2008, says Heys.

“The number of cases are still small, we are talking about really a handful, or a couple of handfuls, of cases every year,” says Heys. “But the dollar values are significant and I think it is important to Canadian issuers.”

The report looks forward to 2010 saying whether or not the number of filings continues on an upward trend will be based on key factors. These factors include rulings from the courts, changes in corporate governance, and pace and extent of the economic recovery.

“This kind of stuff is so hard to predict because it really depends on what is out there and what happens, what is happening with the economy, which tends to drive securities class actions,” says Jeremy Devereux, a securities law partner with Ogilvy Renault LLP in Toronto. “Because when everything is going well, there is really nothing to sue about.”

Devereux says the decision to grant leave, under the Ontario Securities Act, for the class action in the Silver v. IMAX Corp. case and the common law claims for secondary market misrepresentation, will drive securities class actions in 2010.

The report also points to the Ontario Superior Court decision to establish a relatively low threshold for certifying a secondary market class action in the IMAX case.

“While securities class action litigation is still in its infancy in Canada, the maturation of this type of litigation continued during 2009,” says Mark Berenblut, NERA senior vice president and report co-author.

“Most notable this year, because of their potential impact on future trends in Canadian securities class actions, are the decisions of the Ontario Superior Court of Justice certifying three securities class actions, and the decision in IMAX granting leave for the plaintiffs to pursue claims under Part XXIII.1 of the Ontario Securities Act — the first such ruling on an application to proceed with claims under the new secondary market liability provisions of the provincial securities acts.”

Other findings in the report:

•    There were six new cases in 2009, alleging misrepresentations and/or omissions by issuers,

      including claims brought under the new continuous disclosure provisions. The most in a

      single year.
•    There were no new securities class actions filings related to the credit crisis in 2009.
•    The majority of 2009 filings were brought in relation to securities issued by companies in the

     minerals and financial sectors — two cases against gold mining companies, one against a

     coal mining company, and three against issuers in the financial sector.


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