- with Inhouse Counsel
- with readers working within the Aerospace & Defence, Insurance and Law Firm industries
Overview
In Larouche v PGM ResidualCo Holdings Inc., 2026 BCSC 674, the BC Supreme Court refused leave to bring secondary market claims under the BC Securities Act for alleged misrepresentations. The court found that deficient pleadings, insufficient and inadmissible evidence, expired limitations periods, and the petitioner’s inaction left the claim with no reasonable prospect of success.
The decision highlights the stricter gatekeeping function courts exercise over secondary market claims under the Securities Act relative to other class action claims. The court also clarified the scope of the Class Proceedings Act in tolling limitation periods before certification.
Background
Pure Gold owned and operated an underperforming gold mine in Ontario. In 2022, Ms. Larouche brought a class action against Pure Gold, including primary and secondary market misrepresentation claims. In Larouche v Pure Gold Mining Inc., 2024 BCSC 1889, the court struck Ms. Larouche’s secondary market claim because she had not sought leave as required by BC’s Securities Act. The primary market claim remained as a proposed class action pending certification. Ms. Larouche then filed a separate petition for the secondary market claim against PGM ResidualCo Holdings Inc. (“PGM”), which had assumed Pure Gold’s unwanted assets and liabilities through a reverse vesting order following insolvency proceedings. The petition for leave in the secondary market claim was the subject of this decision.
Petitioners cannot simply refer to evidence in other proceedings
The petitioner sought to rely on the affidavits filed in the class action, instead of filing fresh affidavits. The court rejected this approach and held the evidence inadmissible because it was not properly before the court. The Securities Act requires affidavits be “filed in the proceeding” in which leave is sought. The court found there is no general rule permitting a party to import evidence from another action absent consent, court order, attaching them to an affidavit, or re-swearing them.
Even if the affidavits had been attached, the court held them inadmissible because they contained double and triple hearsay. The court held it was inappropriate to adjourn the application to allow the petitioner to correct the deficiencies; the petitioner had had more than a year to do so after PGM brought it to their attention. As a result, the only admissible evidence before the court was several public disclosures issued by Pure Gold. The court found this evidence did not satisfy either branch of the leave test, which requires the claim to have a reasonable prospect of success and be brought in good faith.
No Reasonable Prospect of Success
Turning to whether the claim met the preliminary merits test, the court confirmed that the function of the leave requirement in secondary market claims is to weed out claims that have little prospect of success.
The court was highly critical in its assessment of the petitioner’s pleaded misrepresentations:
[91] In summary, the pleading utterly fails to state what material facts (as opposed to opinion) in this document are alleged to have been untrue and material to the market. The pleading itself contains a misrepresentation of what the document actually says. Finally, the pleading ignores clear references to matters in the document—such as operational issues, shortfalls in gold production and liquidity issues—that the petitioner says were “omitted”.
The court also found the admissible evidence lacking. The petitioner pointed to Pure Gold’s March 2022 announcement about an imminent liquidity crisis, which precipitated a sharp drop in its share price, as evidence that the announcement was a “corrective disclosure” and Pure Gold had been withholding material information. The court found the petitioner’s argument conflated a possible consequence of a misrepresentation with a misrepresentation. The court found that the price drop did not establish that Pure Gold had omitted material facts or could have disclosed those facts sooner. On the contrary, the documents showed Pure Gold had repeatedly disclosed its liquidity issues and production shortfalls. The court held that the alleged “corrective disclosure” in a press release did not speak for itself—it did not reveal what a non-expert (versus a mining company) would have known at the outset.
Effect of the Class Proceedings Act on Limitation Periods
The court concluded most of the claim was statute-barred. The Securities Act imposes a three-year limitation period from the date of the misrepresentation. Pure Gold issued five of the six documents before November 2021. Since the original secondary market claim was declared a nullity, the petition was not brought until November 2024, outside the three year period.
The petitioner argued s. 38.1 of the Class Proceeding Act suspended the limitation period for any claim the petitioner might assert at certification, including the secondary market claim. The court rejected this reasoning. Section 38.1 suspends limitation periods for class members once a plaintiff applies for certification. It ensures class members’ claims do not expire while awaiting certification, the same right a plaintiff enjoys. It does not preserve claims the plaintiff fails to advance. The petitioner’s interpretation would undermine the defendant’s right to certainty and a plaintiff’s obligation to diligently pursue their claims.
The court also refused the petitioner’s request to to grant leave retroactively to avoid the limitation period because the problem was of the petitioner’s own making. PGM had informed her the secondary market claim was a nullity and the petitioner declined to act.
Good Faith
Without an affidavit from the petitioner, the court also found there was no evidence that Ms. Larouche had purchased her shares on the secondary market or was bringing the claim in good faith. The court noted that the petitioner’s class action affidavit would have satisfied this part of the test.
To view the original article click here
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]
