Supreme Court Of Canada Considers The Meaning Of "Material Change" In Canadian Securities Law And Clarifies The Test For Leave To Proceed With A Secondary Market Securities Class Action

On November 28, 2025, the Supreme Court of Canada released its highly anticipated decision Lundin Mining Corporation v. Markowich,¹ addressing the meaning of "material change" in Canadian securities law. The Supreme Court determined that the definition of a "material change" is broad and contextual, and involves a consideration of both the nature and the magnitude of the change. The Supreme Court also clarified the test for leave to proceed with a securities class action under s. 138.8 of the Ontario Securities Act (the Act), finding that a plaintiff seeking leave under s. 138.8(1) of the Act must establish a reasonable or realistic chance of success based on a plausible analysis of the legislation and some credible evidence.

Background

Lundin Mining Corporation (Lundin) is a Toronto Stock Exchange (TSX) issuer that held an 80% ownership interest in an open-pit copper mine in Chile (the Mine). On October 25, 2017, a pit wall instability was detected and all personnel were evacuated from that area of the Mine. On October 31, 2017, the pit wall instability failed, causing a rockslide which restricted access to parts of the Mine. The Court noted that: (i) Lundin regularly warned investors of the risks of pit wall instability and rockslides, which are common in the mining industry; and (ii) there was no direct evidence of the immediate impact of the rockslide on the Mine's operations.

Lundin's first disclosure of the instability or the rockslide occurred in its news release on November 29, 2017. The news release provided an update on Lundin's operations for the next three years and on its ten-year guidance for the Mine, with expected copper production to be 20% less than the previous outlook for 2018. The next day after this disclosure, the price of Lundin's shares on the TSX fell from CA$8.96 to CA$7.52, representing a 16% decline, or a reduction of over CA$1 billion in market capitalization. Lundin's second disclosure also occurred on November 30, 2017, in which it included detailed information regarding the pit wall instability and rockslide and the impact on the Mine's operations.

The claim

Markowich was a Lundin shareholder who commenced an action against Lundin and its directors on behalf of all persons who acquired Lundin securities between the date the pit wall instability was detected (October 25, 2017) and the date it and the rockslide were disclosed (November 29, 2017). Markowich alleged that Lundin failed to make timely disclosure, contrary to the requirements of s. 75(1) of the Act and equivalent legislation in other provinces.

Lower court decisions

The motion judge dismissed the motion for leave under s. 138.8(1) of the Act.² While the motion judge determined that the action was brought in good faith (thereby satisfying the first element of the test for leave under s. 138.8(1) of the Act), the motion judge was not satisfied that there was a reasonable possibility that Markowich could succeed at trial by establishing that the pit wall instability and rockslide resulted in a "material change" under the Act.³ In considering the definition of a "material change", the motion judge defined a "change" as a shift in the issuer's core aspects that put it in a "different position, course, or direction." The motion judge also explained that "business" constituted what a company does, that the term "operations" was a reference to the activities of the company, and the term "capital" referred to the corporation's share structure and rights of shareholders. Despite competing expert evidence as to whether the pit wall instability or rockslide would have affected the Mine, the motion judge concluded there was no basis for finding that there had been a "change" in Lundin's business, operations or capital. The motion judge noted that the pit wall instability and rockslides were common occurrences in open-pit mining. These events did not affect Lundin's ability to continue its mining operations, its line of business, or cause any changes in its capital. The motion judge acknowledged, however, that if the pit wall instability and rockslide constituted a "change", they would be "material".

The Court of Appeal for Ontario allowed the appeal.⁴ The Court of Appeal held that the motion judge erred by interpreting "change", "business", "operations", and "capital" narrowly, especially on a motion for leave under s. 138.8(1) of the Act. Markowich was only required to demonstrate a reasonable possibility of success based on a "plausible interpretation" of the statute and evidence. Had the motion judge applied a generous interpretation to "change in the business, operations or capital," and appropriately examined the evidence on the leave motion, there was a reasonable possibility of success that Markowich could demonstrate that the pit wall instability and rockslide constituted a change in Lundin's operations. There was uncontested evidence that Lundin had to modify its scheduled operations, resulting in an expected decrease in production, with further evidence of any changes possibly available at discoveries.

Issues on appeal

The following issues were addressed on appeal:

1. What is the test for a "material change" and how does it differ from a "material fact" under the Securities Act?
2. What is the test for leave under s. 138.8(1)?

Supreme Court of Canada decision

The Supreme Court dismissed the appeal.

Definition of "material change"

Justice Jamal, writing for the majority, concluded that determining whether a material change has occurred is a contextual exercise. There is no bright line test. Rather, the determination is "a matter of judgment and common sense applied to the unique circumstances of each case." The Court further noted that "[p]roper 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 of information between investors and issuers, and preventing and deterring informational asymmetry between investors and issuers is essential to the integrity of the securities system and the public interest," further noting that "investors pay enormous amounts of money to strangers for completely intangible rights, whose value depends entirely on the quality of the information that the investors receive and on the sellers' honesty."

The Court explained that the difference between a "material fact" and a "material change" is that the former is static while the latter is dynamic. A material fact is static since it provides a snapshot of an issuer's affairs at a particular point in time, whereas a material change is dynamic since it compares an issuer's affairs at two points in time. Further, a material fact is defined more broadly than a material change. For there to be a material change, the change must be in the issuer's business, operations or capital. A material fact can be unrelated to those as long as it can be reasonably expected to have a significant effect on the market price or value of the issuer's securities.

In determining whether a material change has occurred, the Court noted that issuers should take a two step approach. The first step is qualitative in that it involves evaluating the nature of the change. The second step is assessing the magnitude of such change and that "materiality is objectively determined from the perspective of a reasonable investor, and the applicable standard is defined in strictly economic terms." As such, the Court rejected the argument that concepts like "core", "fundamental" or "key" should inform whether an event is a change—such concepts should be considered by issuers when considering the materiality of the change.

The Court reiterated that a material change must be internal to the issuer. External developments cannot give rise to a material change unless they result in a change in the business, operations or capital of the issuer, and that change is material. The internal-external distinction is policy based. It relieves reporting issuers of the obligation to continually interpret external developments as they affect the affairs of the issuer unless those external developments result in a change in its business, operations or capital. It also balances the information asymmetry between issuers and investors as internal developments are not usually in the public domain. Notably, negotiations and internal deliberations, without more, are insufficient to amount to a change in the business, operations or capital of the issuer, even if they are material.

Finally, the terms "business", "operations" and "capital" should not be interpreted restrictively. These terms are undefined under the Act, which allows courts and regulators to apply the legislation broadly and flexibly as the context and circumstances require given the wide number of industries subject to securities legislation.

Ultimately, the Court determined that disclosure decisions are a matter of legal obligation and not subordinate to the business judgment of the directors and officers of the issuer, noting that "[i]t is for the legislature and the court, 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." If the motion judge had 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 s. 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 s. 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

The Court's decision provides securities litigants and reporting issuers with important lessons:

• A "material fact" is a static snapshot of the affairs of an issuer at a relevant point in time, while a "material change" is a comparison of the business, operations and capital of an issuer at two points in time.
• Whether a development is a "material change" depends on the facts and the context, including industry norms.
• A "material change" must be internal to the issuer. External developments will not be a "material change" unless they result in a change of the issuer's business, operations or capital.
• Negotiations and internal deliberations, without more, will not amount to a change in the business, operations or capital of the issuer, even if they are material.
• A "material change" does not need to be "important and substantial" or constitute a "significant disruption or interference" in an issuer's business. If there is a change in an issuer's business, operations or capital, it must be disclosed forthwith if it is material.
• On a motion for leave under s. 138.8(1) of the Act, a plaintiff must offer a plausible analysis of the applicable legislative provisions and some credible evidence to support the claim. The exercise of statutory interpretation remains the same (i.e., the meaning of a "material change" is not less stringent on a leave motion).

For reporting issuers, it will be important to consider whether a development, even if it is external, has resulted in a "change" to its business, operations or capital. The Court is clear that a "change" does not need to rise to the level of significantly disrupting or interfering with an issuer's business. That does not mean, however, that reporting issuers will need to disclose every change. It will still be necessary to consider whether the change is "material".

For shareholders seeking leave under s. 138.8(1) of the Act, although a plaintiff does not need to prove its case on a balance of probabilities, it must be prepared to put forward a plausible analysis and some credible evidence to establish a reasonable possibility of success. The meaning of a "material change" will not be less stringent on a motion for leave, and the plaintiff must still establish a plausible analysis to meet its burden.

Footnotes

1. 2025 SCC 39.

2. Markowich v. Lundin Mining Corporation, 2022 ONSC 81.

3. 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."

4. 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.