In Baldwin v Imperial Metals Corporation, 2021 ONCA 838 (Baldwin), the Ontario Court of Appeal considered the scope of ‘public corrections’ in secondary market misrepresentation claims under Ontario’s Securities Act (the Securities Act) and followed the reasoning of its previous decision this year in Drywall Acoustic Lathing and Insulation, Local 675 Pension fund v Barrick Gold Corporation, 2021 ONCA 104 (Barrick Gold).
In Barrick Gold, the Court held that a public correction did not have to specifically identify prior incorrect or omitted information. This most recent decision in Baldwin stands for a more expansive view of ‘public correction’, which potentially widens the scope of liability for disclosures made in the secondary market.
Facts and Procedural History
The plaintiff in Baldwin brought a motion for leave to pursue a proposed securities class action for secondary market misrepresentation against a mining company under the Securities Act. The company had issued a press release regarding a water-related breach at one of its storage facilities which had damaged the mine and its surrounding environment. In the wake of falling share prices, the plaintiff alleged that the company had misrepresented the integrity of the mining facility and that the press release announcing the breach was an actionable ‘public correction’ within the meaning of the Act as it had ‘corrected’ the company’s earlier failure to adequately disclose risks at the mine.
Justice Belobaba dismissed the plaintiff’s motion for leave to commence proceedings on the basis that the company’s news release was not an actionable ‘public correction’ as it did not directly correspond to a discrete misrepresentation in any prior public disclosures issued by the company. Justice Belobaba emphasized that the press release merely summarized the events surrounding the breach, stated that the cause of the breach was unknown, and outlined the steps the company was taking to address the breach – all of which were general comments rather than corrective disclosures directed at specific misrepresentations.
Justice Belobaba’s reasons in the leave motion, which were released prior to the Court of Appeal’s decision in Barrick Gold, accorded with the state of the law at the time.
The Court of Appeal’s Decision
Armed with the benefit of the Court of Appeal’s decision in Barrick Gold, Chief Justice Strathy, writing for the Court, stated that Justice Belobaba had “set the bar too high by requiring that the public correction be express and directly linked to a specific misrepresentation.” The Court elaborated that “the public correction need not be a ‘mirror-image’ of the alleged misrepresentation” and that there only needs to be “some linkage or connection between the pleaded public correction and the alleged misrepresentation.”
The Court concluded that ‘public corrections’ should not be evaluated through purely textual readings of the purported public correction and that a “proper analysis would also require an examination of the context in which the alleged public correction was made and how the alleged public correction would have been understood in the secondary market.” This approach, the Court reasoned, is consistent with one of the core purposes of the statutory framework: to incentivize fair and accurate public disclosure. To allow public issuers to escape liability by making vague or general corrective disclosures would be inconsistent with that purpose and would undermine confidence in public markets.
The Court allowed the appeal and remitted the motion for leave back to the Superior Court for redetermination.
A Question Regarding ‘Public Correction’ Remains
Noteworthy for its clarification of what constitutes a ‘public correction’ within the meaning of the Act, the Baldwin decision did however leave one stone unturned: the Court did not address the question of whether a ‘public correction’ is an “element of the statutory cause of action or simply a time-post to identify and delimit the members of the class.” As a result, the more fundamental issue of whether a ‘public correction’ is a necessary ingredient for a statutory secondary misrepresentation claim will have to be addressed in a future case.
 Baldwin at para 54.
The authors thank Jacob Medvedev for his contribution to this article.