Supreme Court of Canada upholds Ontario Court of Appeal definition of Material Change

In a decision released at the end of November in Lundin Mining Corp. v. Markowich 2025 SCC 39, Canada’s top court upheld the decision of the Court of Appeal for Ontario to reinstate a securities class that had initially been denied leave to proceed based on what both appeal courts both found to be an overly restrictive interpretation of the term “material change” under the Ontario Securities Act. The Litigator article reporting on the Court of Appeal’s 2023 decision can be found here, and our article about the 2022 decision that initially dismissed the motion for leave to proceed with the securities class action under Part XXIII.1 of the Ontario Securities Act can be found here.

So, why has so much ink been spilled on the distinction between “material fact” and “material change” in the Securities Act? Quite simply, it is about whether an event is a material change that a public company is obliged to disclose immediately (i.e. within 10 days) or a material fact that can be disclosed periodically in a public company’s ordinary public disclosure. And why is that distinction so important? In this case and in others relating to a public company’s failure to disclose an event, it means the difference between shareholders being able to bring an action resulting from a failure of a public company to immediately report an event or whether they will be out of luck in their attempt to do so.

The facts of this case involved mining company, Lundin Mining Corporation, detecting pit wall instability in its copper mine in Chile on October 25, 2017 that ultimately led to a rockslide about a week later. The rockslide reduced the mine’s production forecast by 20% and Lundin’s global annual mining operations by 5%. Lundin disclosed all this on November 29, 2017 in its regular news release. The next day Lundin’s shares dropped by 16%, representing a loss of $1 billion of market capitalization. A class action was commenced to claim this shareholder loss. If the pit wall instability was a material change, Lundin would have been about three weeks late in publicly disclosing it and the class action based on this lateness had a chance of success. But if it was only a material fact, the disclosure of this even on November 29th was fine and the class action was doomed to fail.

The analysis of the difference between these two terms has arguably been made more difficult by the very similar language used in each. Section 1(1) of the Securities Act, defines a material fact as “a fact that would reasonably be expected to have a significant effect on the market price or value of the securities”; whereas a material change is: “a change in the business, operations or capital of the issuer that would reasonably be expected to have a significant effect on the market price or value of the securities of the issuer.”

In originally dismissing the plaintiff’s motion for leave to proceed under the Securities Act, Justice Glustein determined that “material change” requires an event that is internal to the public company, such as a restructuring decision. He went on to find that external events, such as a rockslide, could result in a material change only when they are so significant as to impact on the corporation’s ability to operate. In the case of Lundin, a 5% drop in overall revenues could be a “material fact” but it was not enough to be a “material change” requiring immediate disclosure.

Both the Court of Appeal for Ontario and the Supreme Court of Canada disagreed with the above analysis. Both found that the original motions judge had imposed an overly narrow interpretation of “material change”. In the words of Justice Jamal, writing for the majority,

“…[T]he motion judge erred by relying on restrictive definitions of “change”, “business”, “operations”, and “capital”, and then erred by applying those definitions to determine whether there was a reasonable possibility that there had been a material change. The Ontario legislature intentionally left these terms undefined to allow the legislation to be applied flexibly and contextually to a wide range of industries and corporate structures. The disclosure standards in the Securities Act should be applied to promote the statutory purpose of preventing and deterring informational asymmetry between issuers and investors, while recognizing that the statutory terms at issue acquire meaning by being applied in concrete factual circumstances. By contrast, adopting rigid definitions would ossify the Securities Act and would frustrate the statutory purpose.”

 Justice Jamal went on to find that it was not appropriate at the very early stage of seeking leave to proceed  under Part XXX.1 of the Securities Act to foreclose the ability to seek to prove a claim at trial relating to the failure to disclose the pit wall instability and rockslide:

“…the uncontested evidence on the motion was that the pit wall instability and rockslide impacted the company’s operations at its mine. Hence, the evidence showed that these events could have resulted in a “change”. No one challenges the conclusion of the courts below that there is a reasonable possibility these events could be shown at trial to be “material”. Accordingly, a plausible analysis of the applicable legislative provisions and evidence on the motion showed a reasonable or realistic chance that the action could succeed.”

Justice Jamal provided additional guidance on the factors that might be relevant to the distinction between material fact and a material change, including:

(a)           A Material Fact Is Static; A Material Change Is Dynamic – in other words, a change requires a comparison and distinction between an issuer’s affairs at two different points in time;

(b)          A Material Fact Is Defined More Broadly Than a Material Change – a material change requires something to actually change;

(c)           A Material Change Is Internal to the Issuer; A Material Fact Can Be Internal or External to the Issuer – the change must be in “the business, operations or capital of the issuer”. External political, economic or social factors cannot be a material unless and until they affect the issuer’s business;

(d)          A Material Change Generally Requires More Than Mere Negotiations or Internal Deliberations – i.e. it is not enough for a corporation to be thinking about or talking about a change;

Justice Jamal went on to clarify that the word “change” under the Securities Act should not be interpreted restrictively, nor should the words “business, operations or capital” of the issuer.  He further clarified that a development need not be “important and substantial” to constitute a change – it only needs to be material, as determined from the perspective of a reasonable investor.

In summary, Justice Jamal stated “Material changes are dynamic, related to changes in the issuer’s business, operations or capital, internal rather than external to the issuer, and usually involve more than mere negotiations or internal deliberations. They are distinct from the broader category of material facts. Like material facts, however, material changes must be reasonably expected to have a significant effect on the market price or value of securities.”

In the end, the differentiation between material changes and material facts is so context-specific that it is difficult to extract many hard and fast rules from the above analysis – except perhaps that judges hearing future motions for leave to proceed under Part XXIII.1 of the Securities Act should be very reluctant to deny leave to proceed with a class action if there is even a chance that a public company’s failure to disclose related to a material change.