Burden of proof and defences

140.4 (1) In an action under section 140.3 in relation to a misrepresentation in a document that is not a core document, or a misrepresentation in a public oral statement, a person is not liable, subject to subsection (2), unless the plaintiff proves that the person

(a) knew, at the time that the document was released or public oral statement was made, that the document or public oral statement contained the misrepresentation,

(b) at or before the time that the document was released or public oral statement was made, deliberately avoided acquiring knowledge that the document or public oral statement contained the misrepresentation, or

(c) was, through action or failure to act, guilty of gross misconduct in connection with the release of the document or the making of the public oral statement that contained the misrepresentation.

(2) A plaintiff is not required to prove any of the matters set out in subsection (1) in an action under section 140.3 in relation to an expert.

(3) In an action under section 140.3 in relation to a failure to make timely disclosure, a person is not liable, subject to subsection (4), unless the plaintiff proves that the person

(a) knew, at the time that the failure to make timely disclosure first occurred, of the change and that the change was a material change,

(b) at the time or before the failure to make timely disclosure first occurred, deliberately avoided acquiring knowledge of the change or that the change was a material change, or

(c) was, through action or failure to act, guilty of gross misconduct in connection with the failure to make timely disclosure.

(4) A plaintiff is not required to prove a matter set out in subsection (3) in an action under section 140.3 in relation to

(a) a responsible issuer,

(b) an officer of a responsible issuer,

(c) an investment fund manager, or

(d) an officer of an investment fund manager.

(5) A person is not liable in an action under section 140.3 in relation to a misrepresentation or a failure to make timely disclosure if that person proves that the plaintiff acquired or disposed of the issuer's security

(a) with knowledge that the document or public oral statement contained a misrepresentation, or

(b) with knowledge of the material change.

(6) A person is not liable in an action under section 140.3 in relation to

(a) a misrepresentation if that person proves that

(i) before the release of the document or the making of the public oral statement containing the misrepresentation, the person conducted or caused to be conducted a reasonable investigation, and

(ii) at the time of the release of the document or the making of the public oral statement, the person had no reasonable grounds to believe that the document or public oral statement contained the misrepresentation, or

(b) a failure to make timely disclosure if that person proves that

(i) before the failure to make timely disclosure first occurred, the person conducted or caused to be conducted a reasonable investigation, and

(ii) the person had no reasonable grounds to believe that the failure to make timely disclosure would occur.

(7) In determining whether an investigation was reasonable under subsection (6), or whether any person is guilty of gross misconduct under subsection (1) or (3), the court must consider all relevant circumstances, including

(a) the nature of the responsible issuer,

(b) the knowledge, experience and function of the person,

(c) the office held, if the person was an officer,

(d) the presence or absence of another relationship with the responsible issuer, if the person was a director,

(e) the existence, if any, and the nature of any system designed to ensure that the responsible issuer meets its continuous disclosure obligations,

(f) the reasonableness of reliance by the person on the responsible issuer's disclosure compliance system and on the responsible issuer's officers, employees and others whose duties would in the ordinary course have given them knowledge of the relevant facts,

(g) the period within which disclosure was required to be made under the applicable law,

(h) in respect of a report, statement or opinion of an expert, any professional standards applicable to the expert,

(i) the extent to which the person knew, or should reasonably have known, the content and medium of dissemination of the document or public oral statement,

(j) in the case of a misrepresentation, the role and responsibility of the person in the preparation and release of the document or the making of the public oral statement containing the misrepresentation or the ascertaining of the facts contained in that document or public oral statement, and

(k) in the case of a failure to make timely disclosure, the role and responsibility of the person involved in a decision not to disclose the material change.

(8) A person is not liable in an action under section 140.3 in respect of a failure to make timely disclosure if

(a) the person proves that the material change was disclosed by the responsible issuer in a report filed on a confidential basis with the commission under section 85 (b),

(b) the responsible issuer had a reasonable basis for making the disclosure on a confidential basis,

(c) in the case where the information contained in the report filed on a confidential basis remains material, disclosure of the material change was made public promptly when the basis for confidentiality ceased to exist,

(d) the person or responsible issuer did not release a document or make a public oral statement that, due to the undisclosed material change, contained a misrepresentation, and

(e) where the material change became publicly known in a manner other than the manner required under this Act, the responsible issuer promptly disclosed the material change in the manner required under this Act.

(9) A person is not liable in an action under section 140.3 for a misrepresentation in forward-looking information if the person proves that

(a) the document or public oral statement containing the forward-looking information contained, proximate to that information,

(i) reasonable cautionary language identifying the forward-looking information as such, and identifying material factors that could cause actual results to differ materially from a conclusion, forecast or projection in the forward-looking information, and

(ii) a statement of the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection set out in the forward-looking information, and

(b) the person had a reasonable basis for drawing the conclusions or making the forecasts and projections set out in the forward-looking information.

(10) The person is deemed to have satisfied the requirements of subsection (9) (a) with respect to a public oral statement containing forward-looking information if the person who made the public oral statement

(a) made a cautionary statement that the oral statement contains forward-looking information,

(b) stated that

(i) the actual results could differ materially from a conclusion, forecast or projection in the forward-looking information, and

(ii) certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information, and

(c) stated that additional information about

(i) the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information, and

(ii) the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information,

is contained in a readily available document or in a portion of such a document and has identified that document or that portion of the document.

(11) For the purposes of subsection (10) (c), a document filed or otherwise generally disclosed is deemed to be readily available.

(12) Subsection (9) does not relieve a person of liability respecting forward-looking information in a financial statement required to be filed or forward-looking information in a document released in connection with an initial public offering.

(13) A person, other than an expert, is not liable in an action under section 140.3 with respect to any part of a document or public oral statement that includes, summarizes or quotes from a report, statement or opinion made by the expert in respect of which the responsible issuer obtained the written consent of the expert to the use of the report, statement or opinion, if the consent had not been withdrawn in writing before the document was released or the public oral statement was made, if the person proves that

(a) the person did not know and had no reasonable grounds to believe that there had been a misrepresentation in the part of the document or public oral statement made on the authority of the expert, and

(b) the part of the document or oral public statement fairly represented the report, statement or opinion made by the expert.

(14) An expert is not liable in an action under section 140.3 with respect to any part of a document or public oral statement that includes, summarizes or quotes from a report, statement or opinion made by the expert, if the expert proves that the written consent previously provided was withdrawn in writing before the document was released or the public oral statement was made.

(15) A person is not liable in an action under section 140.3 in respect of a misrepresentation in a document, other than a document required to be filed, if the person proves that, at the time of release of the document, the person did not know and had no reasonable grounds to believe that the document would be released.

(16) A person is not liable in an action under section 140.3 for a misrepresentation in a document or a public oral statement, if the person proves that

(a) the misrepresentation was also contained in a document filed by or on behalf of another person, other than the responsible issuer, with the commission or any other securities regulatory authority or an exchange and was not corrected in another document filed by or on behalf of that other person with the commission or that other securities regulatory authority or exchange before the release of the document or the public oral statement made by or on behalf of the responsible issuer,

(b) the document or public oral statement contained a reference identifying the document that was the source of the misrepresentation, and

(c) when the document was released or the public oral statement was made, the person did not know and had no reasonable grounds to believe that the document or public oral statement contained a misrepresentation.

(17) A person, other than the responsible issuer, is not liable in an action under section 140.3 if the misrepresentation or failure to make timely disclosure was made without the knowledge or consent of the person and if, after the person became aware of the misrepresentation before it was corrected, or the failure to make timely disclosure before it was disclosed in the manner required under this Act,

(a) the person promptly notified the board of directors of the responsible issuer or other persons acting in a similar capacity of the misrepresentation or the failure to make timely disclosure, and

(b) no correction of the misrepresentation or no subsequent disclosure of the material change in the manner required under this Act was made by the responsible issuer within 2 business days after the notification under paragraph (a), the person, unless prohibited by law or by professional confidentiality rules, promptly and in writing notified the commission of the misrepresentation or failure to make timely disclosure.

Assessment of damages

140.5 (1) Damages must be assessed in favour of a person that acquired an issuer's securities after the release of a document or the making of a public oral statement containing a misrepresentation or after a failure to make timely disclosure as follows:

(a) in respect of any of the securities of the responsible issuer that the person subsequently disposed of on or before the 10th trading day after the public correction of the misrepresentation or the disclosure of the material change in the manner required under this Act, assessed damages must equal the difference between the average price paid for those securities (including any commissions) and the price received upon the disposition of those securities (without deducting any commissions paid in respect of the disposition), calculated taking into account the results of hedging or other risk limitation transactions;

(b) in respect of any of the securities of the responsible issuer that the person subsequently disposed of after the 10th trading day after the public correction of the misrepresentation or the disclosure of the material change in the manner required under this Act, assessed damages must equal the lesser of

(i) an amount equal to the difference between the average price paid for those securities (including any commissions) and the price received upon the disposition of those securities (without deducting any commissions paid in respect of the disposition), calculated taking into account the results of hedging or other risk limitation transactions, and

(ii) an amount equal to the number of securities that the person disposed of, multiplied by the difference between the average price per security paid for those securities (including any commissions) and,

(A) if the issuer's securities trade on a published market, the trading price of the issuer's securities on the principal market for the 10 trading days following the public correction of the misrepresentation or the disclosure of the material change in the manner required under this Act, or

(B) if there is no published market, the amount that the court considers just;

(c) in respect of any of the securities of the responsible issuer that the person has not disposed of, assessed damages must equal the number of securities acquired, multiplied by the difference between the average price per security paid for those securities (including any commissions) and,

(i) if the issuer's securities trade on a published market, the trading price of the issuer's securities on the principal market for the 10 trading days following the public correction of the misrepresentation or the disclosure of the material change in the manner required under this Act, or

(ii) if there is no published market, the amount that the court considers just.

(2) Damages must be assessed in favour of a person that disposed of securities after a document was released or a public oral statement was made containing a misrepresentation or after a failure to make timely disclosure as follows:

(a) in respect of any of the securities of the responsible issuer that the person subsequently acquired on or before the 10th trading day after the public correction of the misrepresentation or the disclosure of the material change in the manner required under this Act, assessed damages must equal the difference between the average price received upon the disposition of those securities (deducting any commissions paid in respect of the disposition) and the price paid for those securities (without including any commissions paid in respect thereof), calculated taking into account the results of hedging or other risk limitation transactions;

(b) in respect of any of the securities of the responsible issuer that the person subsequently acquired after the 10th trading day after the public correction of the misrepresentation or the disclosure of the material change in the manner required under this Act, assessed damages must equal the lesser of

(i) an amount equal to the difference between the average price received upon the disposition of those securities (deducting any commissions paid in respect of the disposition) and the price paid for those securities (without including any commissions paid in respect thereof), calculated taking into account the result of hedging or other risk limitation transactions, and

(ii) an amount equal to the number of securities that the person disposed of, multiplied by the difference between the average price per security received upon the disposition of those securities (deducting any commissions paid in respect of the disposition determined on a per security basis) and,

(A) if the issuer's securities trade on a published market, the trading price of the issuers securities on the principal market (as those terms are defined in the regulations) for the 10 trading days following the public correction of the misrepresentation or the disclosure of the material change in the manner required under this Act, or

(B) if there is no published market, the amount that the court considers just;

(c) in respect of any of the securities of the responsible issuer that the person has not acquired, assessed damages must equal the number of securities that the person disposed of, multiplied by the difference between the average price per security received upon the disposition of those securities (deducting any commissions paid in respect of the disposition determined on a per security basis) and,

(i) if the issuer's securities trade on a published market, the trading price of the issuer's securities on the principal market for the 10 trading days following the public correction of the misrepresentation or the disclosure of the material change in the manner required under this Act, or

(ii) if there is no published market, the amount that the court considers just.

(3) Despite subsections (1) and (2), assessed damages must not include any amount that the defendant proves is attributable to a change in the market price of securities that is unrelated to the misrepresentation or the failure to make timely disclosure.

Proportionate liability

140.6 (1) In an action under section 140.3, the court must determine, in respect of each defendant found liable in the action, the defendant's responsibility for the damages assessed in favour of all plaintiffs in the action, and each such defendant must be liable, subject to the limits set out in section 140.7 (1), to the plaintiffs for only that portion of the aggregate amount of damages assessed in favour of the plaintiffs that corresponds to that defendant's responsibility for the damages.

(2) Despite subsection (1), where, in an action under section 140.3 in respect of a misrepresentation or a failure to make timely disclosure, a court determines that a particular defendant, other than the responsible issuer, authorized, permitted or acquiesced in the making of the misrepresentation or the failure to make timely disclosure while knowing it to be a misrepresentation or a failure to make timely disclosure, the whole amount of the damages assessed in the action may be recovered from that defendant.

(3) Each defendant in respect of whom the court has made a determination under subsection (2) is jointly and severally liable with each other defendant in respect of whom the court has made a determination under subsection (2).

(4) Any defendant against whom recovery is obtained under subsection (2) is entitled to claim contribution from any other defendant who is found liable in the action.