Closing the Gate on Ontario's Securities Class Actions

Abstract

Ontario's new securities legislation, Bill 198, closes the gate on securities class actions. Yet the legislation does not make such an ulterior purpose initially evident. Indeed, the new statutory revisions to the Securities Act have thus far been touted as a compromise between the interests of securities class action defendants and plaintiffs. Defendants are leery of American-style strike suits. Plaintiffs are eager to ease the burden of proving reliance as a common issue. Bill 198 hides its politically charged message within layers of new gate keeping procedures that combine with existing class actions legislation to create a procedural mangle for securities class actions. One needs to actually chart the practical ramifications for bringing a securities class action under Bill 198 in order to discern that securities class actions are still unwelcome in Ontario. This paper exposes the logistical problems behind Bill 198's operation, and concludes that no reasonable plaintiff's counsel would take advantage of the new statutory cause of action. The benefits of having securities class actions in Ontario's procedural landscape are actually never realized through this legislation. Bill 198 appears to add a new cause of action which eliminates the traditional common law requirement of proving actual reliance. Such a revision would seem to make a securities class action far easier to litigate. But the layering of procedural deterrence from both Bill 198 and the Class Proceedings Act operate in conjunction to practically prevent securities class actions. Bill 198 adds to any potential securities class action the requirements of proving both good faith and reasonable possibility of success at trial. Damages are also capped. The Class Proceedings Act requires that all potential class actions pass a certification stage, where class plaintiffs must prove they have common issues tying the class together. In addition, all Ontario class actions require judicial approval of settlements. The paper questions the efficacy of Bill 198's targeting of securities class actions as a different kind of class action that should not be brought, for all practical purposes. Why are other class actions, such as products liability or vanishing premium cases, allowed to proceed in Ontario? What is so fundamentally different about a securities class action that it must be regulated to death by mismatched and duplicative procedures? Arguably, nothing.