Supreme Court of Canada confirms broad interpretation of “material change”

On January 15, 2025, the Supreme Court of Canada (Supreme Court) heard the appeal in Lundin Mining Corporation, et al. v. Dov Markowich. In this landmark decision, the Supreme Court determined that, for purposes of continuous disclosure under the Securities Act (Ontario) (Act), the concept of a “material change” must be interpreted broadly and flexibly.

Before the Supreme Court’s decision, Canadian issuers faced uncertainty in navigating disclosure standards driven by the definition of a material change. That uncertainty made it challenging for issuers to manage disclosure standards, where excessive information can undermine investor confidence, while insufficient disclosure poses legal risks in the secondary market.

Why this decision matters

The Supreme Court provides authoritative guidance on:

• the distinction between a “material change” and a “material fact”,


• the proper interpretation of “change in the business, operations or capital”, and


• the requirements for a court to allow a claim to go forward for breach of disclosure obligations 

In its decision, the Supreme Court clarified that a “material change” must be internal to the issuer. There must be a change in the issuer’s  business, operations, or capital that is reasonably expected to have a significant effect on the market price or value of the issuer’s securities. Such changes must be disclosed immediately.

In contrast, a “material fact” may be internal or external to the issuer. Material facts need only be disclosed periodically under the Act.  However, the practical impact of this decision on disclosure requirements is limited, as stock exchange rules require immediate disclosure of any material information, which includes both material facts and material changes.

Background

In 2017, Lundin Mining Corporation (Lundin), a Canadian mining company, experienced pit wall instability at its largest Chilean mine, which led to a rockslide. The event reduced Lundin’s global copper production by approximately 5% in 2018. Lundin disclosed the event about a month after it occurred, following which its share price fell 16%, erasing more than $1 billion in market capitalization.

A shareholder sought leave to bring an action against Lundin for failing to immediately disclose a “material change” in Lundin’s “business, operations or capital,” as required under the Act. The motion judge dismissed the case, concluding that pit wall instability and rockslides are common in mining and did not constitute a material change in Lundin’s business, operations, or capital.

The Court of Appeal for Ontario (Court of Appeal) overturned the motion judge’s decision, holding that the motion judge interpreted “material change” too narrowly. Relying on Kerr v. Danier Leather Inc., 2007 SCC 44, the Court of Appeal clarified that a material change does not need to be extraordinary and can include operational disruptions. It rejected the view that only significant or immediate impacts qualify as material changes, emphasizing that a change can occur gradually and become apparent once it crosses a meaningful threshold. Lundin appealed to the Supreme Court.

The Supreme Court’s majority decision

How the Supreme Court reached its conclusion

In an 8-1 decision, the Supreme Court dismissed Lundin’s appeal and granted the respondent, Mr. Markowich, leave to pursue an action against Lundin and several of its officers and directors for alleged breaches of its timely disclosure obligations. The Supreme Court rejected a narrow interpretation of “material change” and “material fact” under Canadian securities law. The majority grounded its conclusion in a step-by-step statutory analysis.

First, the Supreme Court asked whether there was a change in the issuer’s business, operations, or capital. This is a qualitative inquiry that applies the ordinary, commercial meanings of those terms in context, measured against the issuer’s actual activities and internal decision-making at the relevant times.

Second, if there was a change, the Supreme Court asked whether it was material. This is a magnitude inquiry that considers whether the change would reasonably be expected to significantly affect the price or value of the issuer’s securities.

Re-setting the definitions to their ordinary meaning

The Act deliberately leaves “change,” “business,” “operations,” and “capital” undefined. The Supreme Court emphasized that the legislature chose broad, ordinary terms to preserve flexibility across industries and fact patterns, and cautioned against relying on dictionary-driven constraints.

Material facts are static snapshots; Material changes are dynamic shifts

A material fact is static. It captures a snapshot of the issuer’s affairs at a particular point in time. Material facts may be internal or external. They include information that would reasonably be expected to affect an investor’s decision to buy, sell, or hold, even if the information does not reflect any internal change at the issuer. Under the Act, material facts must be disclosed at regular intervals, such as in annual and quarterly financial statements, annual information forms, and information and proxy circulars.

A material change is dynamic. It reflects an internal development that alters the issuer’s business, operations, or capital, and it requires a before-and-after comparison. Once identified, the change must meet the statutory materiality threshold, which triggers a duty to disclose immediately and to file a material change report within ten calendar days. The majority’s ruling confirmed that “change,” “business,” “operations,” and “capital” retain their ordinary meanings and should not be narrowed by qualifiers such as core, fundamental, or key.

The analysis is two-step:

• identify an internal change in business, operations, or capital; and


• determine whether that change would reasonably be expected to have a significant effect on the market price or value of the issuer’s securities.

If both are met, the issuer must immediately disclose and file a material change report within ten (10) calendar days.

Drawing the boundary lines

A material change must be internal. External developments, such as weather events, commodity price swings, or third-party actions, are not material changes unless they lead to internal changes. Negotiations and routine regulatory steps usually do not qualify until they crystallize into an internal change, such as a board or senior management decision to implement a new plan.

There is no bright-line test. The analysis is contextual and rooted in the purpose of continuous disclosure, which is to reduce informational asymmetry by ensuring that internal developments affecting how the business will be carried on are disclosed immediately.

Clarifying the leave standard

Leave under section 138.8(1) of the Act requires good faith and a reasonable or realistic chance of success. This is demonstrated by:

• a plausible application of the properly interpreted statute to the facts, and


• some credible evidence supporting the claim.

At the leave stage, courts conduct a qualitative merits test without turning the motion into a mini-trial and may weigh competing affidavits and expert opinions to assess whether the case has a realistic prospect of success. The majority emphasized that the rigor of statutory interpretation is not relaxed at the leave stage. What is tempered is the evidentiary record before discovery.

Key takeaways for reporting issuers

• Two-step test analysis. Determine first whether there is a change in the business, operations, or capital using ordinary meanings, then assess materiality; do not add “core, fundamental,” or “key” qualifiers at the change stage.


• Internality and operational impacts control the analysis. External events are not material changes unless they cause internal changes at the issuer. When internal changes lead to concrete operational consequences (for example, guidance reductions or cost increases) that are material, the issuer must disclose immediately and file a material change report.


• Leave threshold. Courts will conduct a qualitative screen, not a mini-trial, to assess whether the leave threshold has been met. Plaintiffs must show good faith and a reasonable or realistic chance of success based on a plausible application of the correctly interpreted statute and some credible evidence.


• Engage securities counsel early when a potentially material event occurs to help ensure compliance with timely disclosure obligations.

For assistance navigating disclosure obligations in light of the Supreme Court’s decision, please contact a member of our Equity Capital Markets team.