Imagine losing millions because a company failed to disclose critical information promptly. That's the harsh reality for many investors, and it's why the Supreme Court of Canada's recent ruling on "material change" in securities law is a game-changer. But here's where it gets controversial: What exactly constitutes a "material change," and how much leeway do companies have in deciding what to disclose? Let's dive in.
On November 28, 2025, the Supreme Court of Canada (SCC) delivered its much-anticipated judgment in Lundin Mining Corporation v. Markowich, a case that clarifies the meaning of "material change" under Canadian securities regulations. This decision significantly impacts how companies disclose information to investors and sets a precedent for securities class actions. The core takeaway? The definition of "material change" is broad, contextual, and demands careful consideration of both the nature and the extent of the change. The SCC also refined the test for obtaining leave (permission) to proceed with a secondary market securities class action under section 138.8 of the Ontario Securities Act (the "Act"). To succeed in getting this permission, a plaintiff must demonstrate a reasonable and realistic chance of winning the case, supported by a plausible interpretation of the relevant laws and credible evidence.
Background: The Rockslide and the Stock Drop
Lundin Mining Corporation, a company listed on the Toronto Stock Exchange (TSX), owned 80% of a copper mine in Chile. On October 25, 2017, instability was detected in the pit wall of the mine, leading to an immediate evacuation of personnel from the affected area. Six days later, on October 31, a rockslide occurred, restricting access to certain parts of the mine. Now, and this is the part most people miss, the court acknowledged two crucial details: (i) Lundin had consistently warned investors about the inherent risks of pit wall instability and rockslides, common occurrences in the mining industry; and (ii) there was no direct evidence showing the immediate impact of the rockslide on the mine's operations.
Lundin didn't disclose the instability or the rockslide until November 29, 2017, in a news release that provided an update on the company's operations for the next three years and its ten-year outlook for the mine. The release projected a 20% decrease in expected copper production for 2018 compared to previous forecasts. The market reacted swiftly. The very next day, Lundin's share price on the TSX plummeted from CA$8.96 to CA$7.52 – a 16% drop, wiping out over CA$1 billion in market capitalization. Lundin issued a second disclosure on November 30, providing more detailed information about the pit wall instability, the rockslide, and their impact on the mine's operations.
The Shareholder's Claim
Markowich, a Lundin shareholder, filed a class action lawsuit against Lundin and its directors on behalf of everyone who purchased Lundin securities between October 25, 2017 (when the pit wall instability was first detected) and November 29, 2017 (when the company finally disclosed the event). Markowich argued that Lundin had failed to make timely disclosure, violating section 75(1) of the Act and similar legislation in other Canadian provinces. This section mandates prompt disclosure of material changes in a company's business.
The Lower Court Rulings: A Tale of Two Interpretations
The initial motion judge dismissed Markowich's request for leave to proceed with the class action. While the judge agreed that the lawsuit was brought in good faith, he wasn't convinced that Markowich had a reasonable chance of proving that the pit wall instability and rockslide constituted a "material change" under the Act. The judge defined a "change" as a shift in the issuer's core aspects, putting it in a "different position, course, or direction." He also narrowly interpreted "business," "operations," and "capital." Despite conflicting expert opinions on the impact of the events on the mine, the judge concluded that there was no basis for finding a "change" in Lundin's business, operations, or capital. He emphasized that such events are common in open-pit mining and didn't affect Lundin's ability to continue its mining operations or its line of business, nor did they cause any changes in its capital. However, the judge conceded that if the events did constitute a "change," they would be considered "material."
The Court of Appeal for Ontario overturned this decision. It held that the motion judge had erred by interpreting "change," "business," "operations," and "capital" too restrictively, particularly at the leave stage of the proceedings. The Court of Appeal emphasized that Markowich only needed to demonstrate a reasonable possibility of success based on a "plausible interpretation" of the statute and the evidence. Had the motion judge adopted a more generous interpretation of "change in the business, operations or capital" and properly assessed the evidence, he would have found a reasonable possibility that Markowich could prove that the pit wall instability and rockslide constituted a change in Lundin's operations. The Court highlighted uncontested evidence that Lundin had to modify its scheduled operations, resulting in an expected decrease in production. Further evidence of these changes might be uncovered during the discovery process.
The Supreme Court's Decision: Context is King
The Supreme Court of Canada dismissed Lundin's appeal, reinforcing the importance of timely and accurate disclosure in securities law.
Definition of “Material Change”
Justice Jamal, writing for the majority, stated that determining whether a material change has occurred is a contextual exercise. There is no simple formula. Instead, the determination requires judgment and common sense applied to the unique circumstances of each case. He underscored that proper disclosure is vital to an effective securities regime. Disclosure maintains a level playing field for information between investors and issuers, preventing informational asymmetry, which is essential to the integrity of the securities system and the public interest. He emphasized that investors entrust large sums of money to strangers for intangible rights, whose value depends entirely on the quality and honesty of the information they receive.
The Court clarified the difference between a "material fact" and a "material change." A material fact is a static snapshot of an issuer's affairs at a specific moment, while a material change is dynamic, comparing an issuer's affairs at two different points in time. Furthermore, a material fact is defined more broadly than a material change. For a material change to exist, the change must affect the issuer's business, operations, or capital. A material fact, however, can be unrelated to these aspects as long as it can reasonably be expected to significantly affect the market price or value of the issuer's securities.
The Court outlined a two-step approach for issuers to determine whether a material change has occurred. The first step is qualitative, evaluating the nature of the change. The second step assesses the magnitude of the change. Materiality is objectively determined from the perspective of a reasonable investor and is defined in strictly economic terms. The Court rejected the argument that concepts like "core," "fundamental," or "key" should dictate whether an event is a change; these concepts should be considered when assessing the materiality of the change.
The Court emphasized that a material change must be internal to the issuer. External developments cannot trigger a material change unless they result in a change in the business, operations, or capital of the issuer, and that change is material. This internal-external distinction is policy-based, relieving issuers of the obligation to constantly interpret external developments unless those developments directly impact their business, operations, or capital. It also balances the information asymmetry between issuers and investors, as internal developments are not usually public knowledge. Negotiations and internal deliberations, on their own, are insufficient to constitute a change in the business, operations, or capital of the issuer, even if they are material.
Finally, the Court stated that the terms "business," "operations," and "capital" should not be interpreted narrowly. These terms are undefined in the Act, allowing courts and regulators to apply the legislation broadly and flexibly depending on the context and circumstances, considering the wide range of industries subject to securities legislation.
Ultimately, the Court determined that disclosure decisions are a legal obligation and not subject to the business judgment of the directors and officers of the issuer. It is up to the legislature and the courts, not business management, to set the legal disclosure requirements.
Application to the Facts
The Court largely agreed with the Court of Appeal's analysis. The motion judge erred by applying a narrow interpretation to define "change" and "business, operations or capital" under the Act and by considering whether a "change" was "important and substantial." Had the motion judge correctly interpreted those terms and applied that interpretation to the evidence on the motion, he would have concluded that there was a reasonable possibility that Markowich could show that the pit wall instability and rockslide resulted in a change in Lundin’s operations, and that change was material. There was competing and credible expert evidence, and uncontested evidence that the pit wall instability and rockslide impacted Lundin’s operations by requiring it to revise its production forecasts downwards, to use lower grade ore, and to adjust the phasing of the Mine. The majority also found that additional evidence going to the impact of the duration of the shutdown and the effect on Lundin’s operations was presumably available later in productions or discovery.
Test for Leave Under Section 138.8(1) of the Act
The Court explained that under section 138.8(1), a plaintiff must show that the action is brought in good faith and that there is a reasonable possibility of success at trial. This involves a preliminary merits test. For an action to have a reasonable possibility of success, there must be a "reasonable or realistic chance that it will succeed." A plaintiff must "offer both a plausible analysis of the applicable legislative provisions, and some credible evidence in support of the claim." The Court disagreed with the Court of Appeal that a plaintiff needed to show a "plausible interpretation" of the legislative provisions, remarking that statutory interpretation is not conducted less stringently on a motion for leave. Instead, a plaintiff is required to show a plausible application of the relevant legislative provisions to the limited evidence available. This standard does not require the plaintiff to prove its case on a balance of probabilities. Notably, the standard for a leave motion under section 138.8(1) is more stringent than the test for authorization or certification of a class action since it involves a preliminary merits test.
Key Takeaways: What This Means for Companies and Shareholders
This decision offers crucial guidance for both securities litigants and reporting issuers:
- A "material fact" is a static view of an issuer's affairs at a specific time, whereas a "material change" compares the issuer's business, operations, and capital at two different points in time.
- Whether a development constitutes a "material change" depends on the specific facts and context, including industry norms. So, something considered material in one industry might not be in another.
- A "material change" must be internal to the issuer. External events only trigger a "material change" if they cause a change in the issuer's business, operations, or capital.
- Negotiations and internal discussions alone do not constitute a change in the business, operations, or capital of the issuer, even if they are material.
- A "material change" doesn't need to be "important and substantial" or a "significant disruption or interference" in the issuer's business. If a change occurs in an issuer's business, operations, or capital, it must be disclosed immediately if it's material. Don't wait until it becomes a crisis.
- On a motion for leave under section 138.8(1) of the Act, a plaintiff must provide a plausible analysis of the applicable laws and some credible evidence to support their claim. The interpretation of "material change" is not less stringent during a leave motion, and the plaintiff must still provide a plausible analysis to meet their burden.
For reporting issuers, it's crucial to assess whether a development, even if external, has led to a "change" in their business, operations, or capital. The Court makes it clear that a "change" doesn't need to significantly disrupt or interfere with the issuer's business. However, this doesn't mean that issuers need to disclose every minor change. They must still determine whether the change is "material."
For shareholders seeking leave under section 138.8(1) of the Act, while they don't need to prove their case definitively, they must be prepared to present a plausible analysis and credible evidence to establish a reasonable possibility of success. The meaning of "material change" remains consistent, and the plaintiff must provide a plausible analysis to meet their burden.
The Big Question: Did Lundin Do Enough?
The Lundin Mining case raises important questions about corporate responsibility and investor protection. Do you think Lundin acted appropriately in disclosing the rockslide? Should companies be held to a higher standard of disclosure, even when events are common in their industry? Where do you draw the line between a "material change" and a routine operational challenge? Share your thoughts in the comments below! This is a complex area of law, and your perspective matters.
For further information on this topic, please reach out to Matthew Fleming, Brandon Barnes Trickett, Ben Iscoe, and Janson Fu.
[Footnotes]
- 2025 SCC 39.
- Markowich v. Lundin Mining Corporation, 2022 ONSC 81.
- The definition of “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 any of the securities of the issuer.”
- Markowich v. Lundin Mining Corporation, 2023 ONCA 359. See also the previous Dentons insight on the Court of Appeal decision: Ontario Court of Appeal clarifies the meaning of “material change” and discusses disclosure obligations in context of securities class actions.
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