Clean Sweep: B.C. Supreme Court Dismisses Secondary Market Claims on Multiple Grounds

On April 16, 2026, in Larouche v. PGM ResidualCo Holdings Inc., the British Columbia Supreme Court (Court) denied leave to commence secondary market claims under the B.C. Securities Act (Act) in a proposed class action alleging misrepresentations in public disclosure documents by a public issuer. The Court found that the petitioner failed to meet the statutory leave requirements in section 140.8 of the Act on multiple independent grounds, including insufficient pleadings, fundamental evidentiary defects, no reasonable prospect of success and applicable limitation defences.

The decision provides significant guidance on the procedural and substantive requirements for leave to bring secondary market claims and reinforces the gatekeeping function of the test. It also provides clear guidance on when the B.C. Class Proceedings Act (CPA) tolls limitation periods.

Background

In April 2022, the petitioner commenced a proposed class proceeding against defendants, including Pure Gold Mining Inc. (Pure Gold), seeking to advance primary and secondary market misrepresentation claims under the Act for alleged misstatements and omissions in public disclosure documents.

In October 2024, the Court largely granted an application by director and officer defendants to strike parts of the petitioner’s claim. This included the secondary market misrepresentation claims, requiring the petitioner to seek leave to pursue the secondary market claim under the Act through a petition proceeding.

In November 2024, the petitioner commenced a petition proceeding seeking leave to advance secondary market claims against PGM ResidualCo Holdings Inc. (PGM), which was the successor in liability to Pure Gold following an insolvency proceeding. The proposed claim alleged misrepresentations in six “core documents” released between March and November 2021.

The B.C. Supreme Court Decision

The Court dismissed the petition for leave in its entirety and awarded costs to PGM. In doing so, it reaffirmed that the requirement for leave under section 140.8 of the Act serves an important gatekeeping function and involves a preliminary merits test. The Court addressed its requirements in detail.

In considering whether there was a reasonable prospect of success for the secondary market claims, the Court found the pleading insufficient, including because it inaccurately described the disclosure documents alleged to contain misrepresentations. There were insufficient material facts pleaded regarding why statements were untrue and what information was improperly omitted from disclosure. Many of the petitioner’s allegations also related to statements of opinion, which are not actionable, rather than statements of fact.

Consistent with the Court’s review of the proposed pleading, it concluded that the evidence was insufficient to support granting leave for four reasons:

1. The petitioner sought to rely on evidence filed in the proposed class action instead of filing the requisite evidence in the petition. No affidavit from the petitioner was filed in the petition, and there was no basis to conclude that the petitioner could have a claim for purchasing shares on the secondary market.
2. Even reviewing the petitioner’s inadmissible evidence did not disclose a reasonable chance of success. Much of it consisted of double or triple hearsay. Many of the impugned public documents contained disclosures of the nature that were alleged to have been improperly omitted.
3. The petitioner was engaging in a “purely hindsight-based analysis” by pointing to a drop in share price and subsequent events to show that there must have been insufficient public disclosures previously. The Court rejected this “backward reasoning” as inappropriate.
4. The Court was critical of the absence of expert evidence to address some of the issues raised by the allegations. For example, without expert evidence, certain technical concepts could not be tied to what was alleged to be a “corrective disclosure.”

Finally, the Court concluded that limitation defences under section 140.94 of the Act, which imposes a three-year limitation period from the date of a misrepresentation, were a “complete bar” to most of the claim. The Court rejected the argument that sections 38.1 and 39 of the CPA tolled any limitation period, finding that tolling requires a certification application. The Court would have declined to grant leave backdated to before the expiry of limitation periods because the limitation defences arose from the petitioner’s own strategic choices.

The authors were counsel to the directors and officers of Pure Gold in the related proposed class proceeding and acted as counsel to PGM in this petition proceeding.

For more information, please contact the authors or any other member of our Securities Litigation or Class Actions groups.