Questions About Leave Test for Secondary Market Claims Remain Unanswered After Court of Appeal Decision in Rahimi v Southgobi Resources Ltd

• Author: Byron Shaw
• Pages: 5-13

5

QUESTIONS ABOUT LEAVE TEST

FOR SECONDARY M ARKET

CLAIMS REMAIN UNANSWERED

AFTER COURT OF APPEAL

DECISION IN

RAHIMI V

SOUTHGOBI RESOURCES LTD

Byron Shaw

Abstract: This article comments on the Ontario Court of Ap-

peal’s recent decision in Rahimi v SouthGobi Resources Ltd in

which the court reversed a deci sion denying leave under sec-

tion 138.8(1) of the Ontario Securities Act against indiv idual

defendants who were former executives and directors of the

issuer based on the reasonable investigation defence. I argue

that the practical and legal issues that the Supreme Court

failed to adequately address in Theratechnologies Inc v 121851

Canada Inc and Canadian Imperial Bank of Commerce v Green

remain, and are perh aps even murkier, as a result of the Court

of Appeal’s decision in Rahimi. In pa rticular, the court did not

adhere to the thre shold for leave established in Th eratec hnolo -

gies and elided discussion of the standard of appell ate review

and the forensic powers avail able to judges hearing leave mo-

tions under Part XIII.1. I argue that the litigants, the bar, and

lower courts would benef‌it from more direct and def‌in itive

guidance on thes e aspects of the leave test for secondary m ar-

ket securities claims.