Supreme Court of Canada Broadens the Scope of “Material Change”

The Supreme Court of Canada’s much anticipated decision in Lundin Mining Corp. v. Markowich, 2025 SCC 39 clarifies the definition of “material change” under securities law, providing long-awaited guidance on when public issuers must disclose information to the market and adopts a broad interpretation of what constitutes a “material change”. The decision will have broad implications for public companies and their directors and officers attempting to navigate disclosure decisions in real-time.

The Supreme Court also addressed a secondary issue: the test for leave to commence an action (including a proposed class action) for secondary market misrepresentation. The leave test is a “preliminary merits” assessment, requiring the plaintiff to show that the action is brought in good faith and that there is a reasonable possibility of success at trial. As a result, the Supreme Court’s decision is expected to have implications for the viability of secondary market misrepresentation class actions in Canada and may contribute to an increase in secondary market misrepresentation claims.

The Decisions Below

In Lundin, the central issue was whether pit wall instability and a rockslide at a major copper mine operated by Lundin Mining Corporation in Chile was a “material change” requiring prompt disclosure under the Ontario Securities Act. Lundin disclosed the rockslide approximately one month after the incident, as part of a regular news release containing operational updates. Lundin’s disclosure, which was coupled with revised financial forecasting, resulted in an immediate 16% decline in its share price.

The plaintiff, a retail investor, initiated a putative class proceeding, arguing that the rockslide was a “material change” in Lundin’s business and operations. If so, Lundin was required to issue a press release under applicable securities law describing this change “forthwith” and to file a material change report within 10 days of the event.

The plaintiff sought leave to commence a secondary market misrepresentation claim under the Securities Act. At the leave stage, the plaintiff is only required to prove that (a) the claim was brought in good faith; and (b) there is a “reasonable possibility” that the action will be resolved at trial in the plaintiff’s favour.

The motion judge found that, while the rockslide was “material”, it did not constitute a “change” in Lundin Mining’s “business, operations or capital” such that its disclosure was required. The Court determined that there was no reasonable possibility that the plaintiff could succeed in showing that the rockslide was a “material change”. Accordingly, the Court denied leave to bring the action.

On appeal, the Ontario Court of Appeal held the motion judge had applied an overly narrow definition of “material change”. The Court of Appeal held that the pit wall instability and the rockslide could amount to a “material change” in Lundin’s operations and meet the threshold to support granting leave.

Lundin appealed the Court of Appeal’s decision to the Supreme Court of Canada.

The Supreme Court Decision

Broad Interpretation of Material Change

A majority of the Supreme Court dismissed the appeal and adopted a broad interpretation of what constitutes a “material change” under applicable securities law, following the two-step framework applied by the Court of Appeal.

The majority held that a “material change” is comprised of two components:

1. There must be a “change” in the company’s “business, operations or capital”. This involves a qualitative assessment of the nature of the change. A change affecting the company in any one of its business, operations or capital is sufficient.
2. The change must be “material”. A change is material when it is reasonable to expect a “significant effect on the market price or the value of the securities”. This involves considering the magnitude of the change based on the perspective of a “reasonable investor” in strict economic terms.

A disclosure obligation is triggered when both components are met.

As part of its analysis, the Supreme Court discussed and contrasted the different standards in the Securities Act applying to the disclosure of a “material change” (which must be disclosed “forthwith”) and a “material fact” (which need not be disclosed immediately). The Supreme Court acknowledged that the distinction between a “material fact” and a “material change” is one of the more difficult areas of securities law.

The majority decision observed that two rival standards have developed in Canadian case law with respect to the definition of a “material change”. The first approach is a broad, investor-friendly approach that sticks closely to the relevant statutory language and encourages companies to err on the side of disclosing new developments sooner rather than later. The second approach is a narrower, company-friendly standard that gives managers of public companies more scope to delay disclosure of new developments.

The majority decision rejected the second approach as inconsistent with the text and legislative purpose of the Securities Act. Consequently, the majority rejected commentary from previous lower court decisions that a development must be “important and substantial” to constitute a “change” under securities laws, noting that these requirements do not appear in the legislation and risk undermining its objectives.

The Leave Test: Statutory Interpretation is Not Less Stringent at the Leave Stage

The Supreme Court also addressed a secondary issue: the test for leave to commence an action for secondary market misrepresentation. The leave test is a “preliminary merits” assessment, requiring the plaintiff to show that the action is brought in good faith and that there is a reasonable possibility of success at trial.

The Supreme Court clarified that statutory interpretation is not “less [stringent]” at the leave stage. Plaintiffs must demonstrate a plausible application of the relevant statutory provision to the facts, based on the limited evidence available at this early stage. The threshold is more stringent than that for class action certification, but it does not require proof of success at trial, only a reasonable or realistic chance of success.

Looking Forward

In Lundin, the Supreme Court has adopted a broad and expansive definition of “material change”. It has signaled that disclosure decisions must always be made contextually, eschewing a technical or legalistic approach.

The Supreme Court of Canada’s broadened interpretation of “material change” will require boards and management of reporting issuers to be mindful of timely disclosures. The Supreme Court’s flexible and context-driven approach means that disclosure decisions will require prompt consideration and ongoing diligence by companies and boards, especially when all facts may not be immediately available. Proactive engagement by companies and management will be essential to navigating the revised disclosure standards and mitigating regulatory and litigation risks.

Lundin was released in November 2025 and to date, has received limited judicial consideration. There have not yet been any decisions applying the Court’s approach to “material change,” either generally or in the context of applications for leave to commence secondary‑market misrepresentation claims. Nevertheless, the decision seems likely to drive issuers to err on the side of caution and proactively disclose potential material changes. Lundin may also encourage greater scrutiny of issuers’ disclosure decisions and contribute to an increase in secondary market misrepresentation claims, including proposed class proceedings.

If you have further questions about this update or class action litigation more generally, please contact the authors or a member of the Class Action Litigation group.