Secondary Market Liability in Ontario: Interpreting the Leave Test Before and After Theratechnologies

This article reviews the evolution of the leave test for securities class actions for secondary market misrepresentations under Part XXIII.1 of Ontario’s Securities Act. The article will explore whether the courts’ current application of the test adequately meets the legislative purposes of this Part of the Act in securing the dual goals of access to justice for aggrieved investors while preventing unmeritorious claims from being launched to pressure defendants into settlement. Given the legislative purposes underlying Part XXIII.1, this article will analyze the courts’ historical application of the leave test, the challenges to secondary market class actions that the test creates for litigants, and the ways that the test may be applied in future cases to prevent such challenges. The article argues that important lessons from cases applying a low threshold burden to the leave test can still serve courts in adjudicating leave motions in ways that are fair to participants, and that meet the legislative goals of Part XXIII.1 of the OSA.