Securities & Capital Markets – Brokers Report (January 2006)

On December 15, 2005 the Ontario Court of Appeal released its reasons in Kerr v. Danier Leather Inc ("Danier Leather") reversing the trial judge’s award of approximately $15 million in damages to investors who alleged that Danier misrepresented material facts in its prospectus related to its fourth quarter forecast.

On appeal, Justices Laskin, Goudge and Blair found that:

1. although Danier had an obligation to disclose material changes, it did not have a continuing obligation pursuant to section 130(1) of the Securities Act (Ontario) to disclose material facts prior to closing;
2. the law does not require financial forecasts to be "objectively reasonable" and there was no implied representation that the forecast was objectively reasonable; and