December 2, 2025
"Ch-Ch-Changes, turn and face the strain” -- The latest on “Material Change"
The Background
The Supreme Court of Canada has released its long-awaited decision in Lundin Mining Corp. v. Markowich, 2025 SCC 39, a putative class action involving secondary market misrepresentation allegations in the context of a global mining operation. In the decision, the Court both clarifies the meaning of “material change” and confirms the test for leave under relevant securities legislation. The decision is expected to have wide-reaching impacts on how and when businesses disclose information to the market.
What the Court Decided
Writing for the majority, Justice Jamal considered the distinction between the definitions of a “material fact” and a “material change” in the Ontario Securities Act[1]. The Court concluded that the motions judge erred by relying on restrictive definitions of “change”, “business”, “operations” and “capital”. The Court further noted that these terms were intentionally left undefined by the Ontario legislature so that the terms could be applied flexibly and contextually to a wide range of industries and corporate structures. Disclosure standards are to be applied in a manner that prevents and deters informational asymmetry between issuers and investors, while also recognizing that the statutory terms acquire meaning by being applied in concrete factual circumstances.
In addressing the test for leave under s. 138.8(1) of the Ontario Securities Act, the Court concluded that a “plausible analysis” is not a plausible statutory interpretation, but rather a plausible application of the legislation to the facts. The plausible analysis must also account for the limited evidence available on a motion for leave, which is brought before there has been documentary production or oral discovery.
The underlying issue was a localized rockslide in an open pit mine, resulting from pit wall instability. The pit wall instability and rockslide were not disclosed to investors immediately. Instead, about a month later and as part of a regular news release, Lundin Mining described the rockslide and provided a revised 2018 forecast that was down 20% from a prior outlook. The day after the news release, Lundin Mining’s shares dropped 16% from the prior day’s closing price, representing a loss of more than $1 billion in market capitalization. An investor, Dov Markowich, then commenced a class action, alleging that the pit wall instability and rockslide each resulted in a “material change” in Lundin Mining’s “business, operations or capital” and therefore ought to have been disclosed “forthwith”.
The Court observed that the integrity of the market for securities depends on the quality of the information disclosed by issuers to investors. Proper disclosure is the heart and soul of the securities regulations across Canada and is pivotal for an effective securities regime. Disclosure helps maintain a level playing field. Preventing and deterring informational asymmetry is essential “to maintain the integrity of the securities system and protect the public interest”. Further, the Securities Act is “remedial legislation and is to be given broad interpretation”.
The statutory definition of a “material change” has two components. First, there must be a change in the business, operations or capital of the issuer. Second, the change must be material, meaning that it “would reasonably be expected to have a significant effect on the market price or value of the securities of the issuer”. Both components are required to trigger an obligation of timely disclosure. Negotiations and internal deliberations, without more, will not usually amount to a change in the business, operations or capital of the issuer, even if they are material.
The Court noted that a material fact is static, because it provides a snapshot of an issuer’s affairs at a particular point in time. A material change is dynamic because it necessarily compares an issuer’s affairs at two points in time. A material fact is defined more broadly than a material change. A material change is internal to the issuer (i.e., a change in the business, operations or capital of the issuer). A material fact may be internal or external. Internal developments are usually not in the public domain and investors cannot reasonably be expected to discover them on their own. The Court further stated that “requiring timely disclosure of a material change thus helps level the informational playing field between issuers and investors”.
A “change” should not be interpreted restrictively. “Change” was left undefined by the legislature and therefore ought to have flexibility to apply to widely varying factual scenarios. A rigid definition of “change” could limit the effectiveness of the legislation across a broad range of industries or corporate structures. The Court echoed the observation of the Ontario Court of Appeal that a “change is a change”. The Court added that a development need not be “important and substantial” to constitute a “change”.
To determine whether a material change has occurred, a two-step analysis is used. The first step is qualitative and involves evaluating the nature of the change. The second step is magnitude, to be objectively determined from the perspective of a reasonable investor, with the applicable standard defined in strictly economic terms.
The Court confirmed that determining whether there has been a material change in a given case is a highly contextual question of mixed fact and law -- there is no bright line test and this determination is not a science, but rather a matter of judgment and common sense applied to the unique circumstances of each case. However, disclosure decisions are a matter of legal obligation, and are “not to be subordinated to the exercise of business judgment”.
As far as the test for leave, the Court provided a reminder that the action must be instituted in good faith and there must be a “reasonable possibility” that the action will be resolved at trial in favour of the plaintiff. The application of the test for leave should not involve lapsing into a “mini-trial”.
The standard on a leave motion involves a preliminary merits test, which is more stringent than the test for authorization of a class action (i.e., “some basis in fact”). The preliminary merits test involves a “relatively low merits-based threshold” that does not require proof on the balance of probabilities that the action will succeed at trial. The plaintiff’s supporting evidence must not only be “credible”, but must also demonstrate a realistic or reasonable chance that the action will succeed at trial. Inevitably, this will require a limited weighing of the evidence of both parties, and the motions judge must also consider to some extent the comparative strength of the competing evidence tendered by the parties. The motions judge must also be mindful that the motion will be decided before the plaintiff has had the benefit of documentary production or oral discovery. There must be a “plausible analysis”, or a plausible application, of the relevant legislative provisions based on the limited evidence available at the early stage of proceedings.
In a Nutshell
- “change”, “business”, “operations” and “capital” are not defined in the Ontario Securities Act [or similar provincial legislation];
- A “change” should not be interpreted restrictively;
- A “material change” is dynamic and related to internal factors;
- A “material fact” is static and may be either internal or external;
- A development need not be “important and substantial” to constitute a “change”;
- Disclosure levels the playing field between issuer and investor and reduces informational asymmetry;
- Determining whether there has been a “material change” is a highly contextual question of mixed fact and law -- there is no bright line test; and
- Disclosure is a legal obligation and not subordinated to the exercise of business judgment.
Key Takeaways
The Supreme Court’s broad interpretation of “material change” means that issuers are likely going to need to be more attentive when it comes to assessing and disclosing whether there has been a material change to the issuer’s business, operations or capital. Practically speaking, they are best served by taking an “err on the side of disclosure” approach. There is no bright line assessment, or a one size fits all approach. Context matters and the focus going forward will be, from the issuer’s point of view, attempting to, as best as possible, eliminate informational imbalances or asymmetry between issuers and investors.
[1] As the Court noted these terms also appear in equivalent legislation across Canada
Please note that JSS Barristers insights are provided for informational purposes only. They are not intended as legal advice or a legal opinion. Please contact authors or JSS Barristers if you would like to obtain legal advice on this or other legal issues.