Executive Summary: Key Legal and Evidentiary Issues

• Scope of primary and secondary market misrepresentation claims under the Ontario Securities Act and their suitability for class treatment.
• Distinction between misstatements/omissions in Anaergia’s financial disclosure (including intersegment sales and officer certifications) and the separate “financial outlook” or guidance allegations.
• Whether denial of leave for a secondary market “financial outlook” claim should, as a matter of certification law, undermine similar primary market claims.
• Application of the “preferable procedure” test under the Class Proceedings Act, 1992, including the role of merits-based considerations and prior case law such as Bayens and Pineo.
• Proper form and content of the certification and leave orders, including class period dates, subclass definitions, and common issues, without importing reasons into the formal order.
• Characterization of “success” for costs in a securities class action context, and whether partial narrowing of claims amounts to mixed success warranting reduced or no costs.

Background and parties

This case arises from investor claims against Anaergia Inc., a public company, and two of its senior officers, Andrew Benedek and Hani El-Kaissi. The representative plaintiff, Mohammad Reza Kamrani-Ghadjar, alleges that Anaergia’s public disclosure contained misrepresentations affecting both primary and secondary market investors. The action was structured as a proposed class proceeding, with overlapping but distinct groups of investors pursuing statutory and related claims under Ontario’s Securities Act and the Class Proceedings Act, 1992.

Alleged misrepresentations and investor subclasses

The litigation centres on several categories of alleged misrepresentation in Anaergia’s disclosure around its initial public offering (IPO), a secondary offering, and subsequent continuous disclosure. The court recognized three subclasses of investors. The “IPO Subclass” consists of investors who purchased Anaergia’s shares in the IPO. The “Second Distribution Subclass” consists of investors who acquired shares in a secondary offering. Together, these two groups form the “Primary Market Subclass.” A third group, the “Secondary Market Subclass,” is composed of investors who bought Anaergia shares on the secondary market rather than directly in the offerings.

The Primary Market Subclass alleges that Anaergia’s prospectus misrepresented its financial position in two main ways: first, by failing to disclose intersegment sales; and second, by providing a financial outlook that allegedly contained misstatements. In addition, they challenge the accuracy of officers’ certification statements that accompanied or related to the disclosure documents. The Secondary Market Subclass advances claims based on the same core misrepresentations—financial misstatements, intersegment sales omissions, and certification misstatements—together with additional alleged misstatements in Anaergia’s continuous disclosure after listing.

Leave motion, certification, and safe harbour findings

The Securities Act requires leave of the court before secondary market misrepresentation claims can proceed. In a 2025 decision, Justice Agarwal found that Kamrani-Ghadjar had shown a reasonable chance of success on the Secondary Market Subclass’s claims relating to Anaergia’s financial misstatements, its failure to disclose intersegment sales, and its certification misstatements. Leave to proceed on those statutory secondary market claims was therefore granted, and the action was certified as a class proceeding for those claims, with three subclasses defined to reflect the different investor groups.

However, the plaintiff’s secondary market “financial outlook” claim met a different fate. In 2021 Anaergia had provided investors with guidance concerning projected revenues and adjusted EBITDA for 2022 and 2023, based on a series of stated assumptions. The company subsequently revised this outlook downwards several times between June 2021 and November 2022. The plaintiff argued that the assumptions underpinning the guidance were unreasonable and rendered the outlook an actionable misrepresentation. Justice Agarwal rejected this argument in the leave decision, holding that the assumptions were reasonable when made and that there was no realistic prospect of proving the outlook itself was a misstatement for secondary market purposes.

In addition, the court relied on the statutory “safe harbour” defence for forward-looking information as an independent barrier to the later financial outlook claims in subsequent disclosure. In the earlier reasons, the judge concluded that, based on the safe harbour, the plaintiff had no realistic chance of success in proving that later-adopted financial outlooks contained misstatements. In the present endorsement, the court refused to “clarify” or reopen those factual and legal findings in the context of settling the form of order, emphasizing that the order-settling process is not a vehicle for revisiting findings or creating new factual confirmations.

Certification of the primary market financial outlook claim

Because primary market statutory claims under section 130 of the Securities Act do not require leave, the Primary Market Subclass’s financial outlook misstatement claim was certified in the 2025 decision along with its other primary market claims. After the reasons were released, the defendants argued that certification of this primary market financial outlook claim should be revisited in light of the court’s refusal of leave on the matching secondary market outlook claim. Their core position was that a class proceeding was not the preferable procedure for the primary market outlook claim when the secondary market version of that claim had been found to have no reasonable prospect of success.

The plaintiff responded that the certification stage focuses on procedural suitability, not on the likely merits of the claim, and that denial of leave in the secondary market context should not automatically dictate the certification outcome for a different statutory route. He relied on jurisprudence such as AIC Limited v Fischer and Bayens v Kinross Gold Corporation, which emphasize that certification is not meant to involve a merits-based assessment beyond the pleadings test and that denial of leave is only one factor in the preferability analysis.

In this 2026 endorsement, Justice Agarwal agreed with the plaintiff and left certification of the Primary Market Subclass’s financial outlook misstatement claim undisturbed. He held that the defendants’ approach risked importing a de facto leave test into primary market claims whenever primary and secondary market claims are joined in a single proceeding. The court noted key distinctions from cases such as Bayens and Pineo: those cases involved the same investor group suing over identical factual matrices, typically on reliance-based common law misrepresentation theories that courts have found difficult to manage on a class basis. By contrast, this case involved separate primary and secondary subclasses, the surviving primary market claims were statutory and not reliance-based, and courts have repeatedly recognized primary market misrepresentation class actions as well-suited to certification.

The judge further stressed that the overall class action was continuing for multiple claims and subclasses, that the parties had not fully briefed the full preferability analysis beyond their arguments about Bayens, and that the more appropriate route for the defendants—if they wished to attack the outlook claim’s viability—would be a later motion to decertify that particular claim or to seek summary judgment. Against that backdrop, and given the fairness owed to the Primary Market Subclass, the court concluded that the previously certified primary market financial outlook misstatement claim would remain certified.

Settlement of the formal order and class definitions

The parties also disagreed on the precise wording and structure of the formal order implementing the 2025 reasons. Justice Agarwal emphasized that a formal order should record the court’s operative disposition rather than re-state or embed the reasoning behind it. Consistent with the Class Action Bench-Bar Liaison Committee Model Order and Rule 59.04 of the Rules of Civil Procedure, he rejected the defendants’ effort to add detailed references in the certifying paragraph to the Securities Act provisions, the specific alleged misrepresentations, and paragraph-by-paragraph citations to the statement of claim. Such detail already appeared in the separate portions of the order outlining causes of action and common issues, and importing further specificity into the primary certifying paragraph would improperly merge the reasons with the order.

Similar disputes arose over the temporal boundaries of the class and subclass definitions. The defendants argued for truncating the class period at August 2, 2022, the date Anaergia announced that it was revisiting its interpretation of accounting standards that ultimately led to restatements. The plaintiff’s draft order extended the relevant period to November 9, 2022, the day before Anaergia’s November 10 interim financial statements, which revised its financial outlook for 2022 and 2023. Because the financial outlook misstatement claim remained certified for the Primary Market Subclass, the judge held that November 9, 2022 should remain within the class period, aligning the temporal scope with the allegations and the earlier reasons.

The defendants also sought to limit the Secondary Market Subclass definition to trading on August 2, 2022, rather than include the broader period proposed by the plaintiff (encompassing, among other things, a March 25, 2022 date linked to an alleged public correction). Having not contested the subclass definition at the original hearing, the defendants were effectively attempting to re-argue the issue through the order-settling process. The court refused this change as inconsistent with the reasoning and class definitions previously approved, adopting the plaintiff’s draft language as properly reflecting the original judgment.

Common issues wording and safe harbour clarification

On the framing of common issues, the defendants proposed re-wording a certified common issue to refer only to “Certified Misrepresentations,” thereby embedding within the issue the exclusion of any claims for which leave had been denied (such as the secondary market financial outlook misrepresentation). The court declined to adopt this revision. Justice Agarwal pointed out that the parties had not disputed the common issues at the original hearing and that it was unnecessary to tailor a common issue merely to restate that claims without leave cannot proceed. The plaintiff could not sensibly litigate unapproved claims in any event, so the existing formulation—focusing on whether the IPO prospectus, second prospectus, or continuous disclosure material contained misrepresentations under the Ontario Securities Act and potentially other securities legislation—was left intact.

The plaintiff also asked the court to confirm, in the process of settling the order, that no findings had been made on the reasonableness of Anaergia’s assumptions for any post-IPO financial outlook. Justice Agarwal refused to provide such confirmation, reiterating that settling an order is not a forum for revisiting or clarifying findings of fact or law set out in the reasons. The endorsement therefore left the prior safe harbour and outlook findings in place, without additional gloss.

Costs ruling and overall outcome

Before the 2025 decision was released, the parties reached a framework agreement on costs: if there was “full success” on leave and certification, costs of $900,000 would be payable; if the defendants succeeded entirely on their summary judgment motion, they would receive up to $50,000; and in the event of mixed success, the court would set costs within those outer parameters after hearing submissions. Once the leave, certification, and summary judgment rulings were delivered, the plaintiff argued that he was, in substance, fully successful: he obtained leave to proceed on key secondary market claims, secured certification of the action (including primary and secondary subclasses) as a class proceeding, and defeated the defendants’ summary judgment motion.

The defendants contended that there was “mixed success” because they succeeded in defeating the Secondary Market Subclass’s financial outlook claim and in narrowing the scope of the litigation, and therefore no costs should be awarded on the motions. Justice Agarwal applied the general principle that costs are determined by overall, not issue-by-issue, success. He distinguished securities cases in which no costs were awarded after partial leave was granted but where certification was not at issue or where there was genuine divided success between different parties. He also cited class action authorities treating a granted certification motion—even if narrowed—as a “total success” for the plaintiff.

On that basis, the court held that Kamrani-Ghadjar was the successful party overall. He achieved the core relief he sought (leave and certification), and the defendants’ summary judgment motion was dismissed in its entirety. The partial loss on the secondary market financial outlook claim did not convert the outcome into true divided success. Pursuant to the parties’ costs agreement and the usual 30-day payment rule, the court ordered the defendants to pay the plaintiff’s costs fixed at a total of $950,000. No damages on the underlying misrepresentation claims have yet been determined; the case now moves forward to subsequent procedural and merits steps, with the plaintiff as the successful party to date and costs in the amount of $950,000 ordered in his favour.