LITIGATION UNLEASHED - Stikeman Elliott

WHO CAN BE SUED
A right of action for failure to make timely disclosure exists against:
• the responsible issuer;
• any director or officer of the responsible issuer who authorized, permitted or
acquiesced in the failure;
• any influential person and any director or officer of an influential person who
knowingly influenced the responsible issuer, or any person or company acting on its
behalf, in the failure to make timely disclosure; and
• any influential person and any director or officer of an influential person who
knowingly influenced a director or officer of the responsible issuer to authorize,
permit or acquiesce in the failure to make timely disclosure.
2.2.5 Elements required to establish liability
The plaintiff is required to establish a number of elements in order to establish liability.
These elements will vary depending on the class of possible defendant and the nature of
the claim. The following is a summary of the elements that a plaintiff needs to prove
in order to establish liability for each type of defendant. In each case, potential liability
is subject to the available defences discussed in Section 2.3 (which are also summarized
in Appendix C).
RESPONSIBLE ISSUERS
Core documents and failures to make timely disclosure
The responsible issuer will be potentially liable upon mere proof of the
misrepresentation for any loss caused to an investor who traded securities of the
reporting issuer during the period in which the misrepresentation contained in a
“core document” remained publicly uncorrected. Similarly, it will be potentially
liable upon mere proof of a failure to make timely disclosure of a material change.
Essentially, core documents are those documents that are filed with the securities
regulator in accordance with the issuer’s statutory obligation. These are: a prospectus,
a take-over bid circular, an issuer bid circular, a directors’ circular, a rights offering
circular, management’s discussion and analysis, an annual information form, an
information or proxy circular, annual financial statements, interim financial statements
and (in most cases, with the notable exception of directors) material change reports.
Non-core documents and public oral statements
The requirements for the plaintiff to establish liability of a responsible issuer related to
disclosure in non-core documents and public oral statements are more onerous. The
plaintiff must also demonstrate:
• advance knowledge that the statement or document contained a misrepresentation;
• deliberate avoidance of such knowledge; or
• gross misconduct
14 LITIGATION UNLEASHED STIKEMAN ELLIOTT LLP