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

This article comments on the Ontario Court of Appeal’s recent decision in Rahimi v SouthGobi Resources Ltd in
which the court reversed a decision denying leave under section 138.8(1) of the Ontario Securities Act against individual 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 perhaps even murkier, as a result of the Court of Appeal’s decision in Rahimi. In particular, the court did not adhere to the threshold for leave established in Theratechnologies and elided discussion of the standard of appellate review
and the forensic powers available to judges hearing leave motions under Part XIII.1. I argue that the litigants, the bar, and lower courts would benefit from more direct and definitive guidance on these aspects of the leave test for secondary market securities claims.