The Test For Leave Under Part XXIII.1: Ambiguity Remains

Ontario's statutory regime for secondary market liability came into effect in 2006 as a result of amendments to the Securities Act (Ontario) (OSA), which created a statutory cause of action for deficient market disclosure. Part XXIII.1 of the OSA creates a statutory cause of action against reporting issuers, their officers and directors, and related parties for misrepresentations made in secondary market disclosures. However, before such a claim can be brought, the plaintiffs must obtain leave of the court. The statutory test for leave is that: (1) the action must be brought in good faith, and (2) the plaintiffs must have a reasonable possibility of success at trial. In essence, the legislature granted the courts a gatekeeper function to control litigation and to ensure that only claims with some merit proceed.