through its failure to make full disclosure and instead sent out
a “storm warning”26 that depressed the share price.
[ 148] Finally, Kauf submits that he is not required to lead
expert or other evidence as to the effect on the market of the
December 2016 Press Release. Kauf submits that a court could
conclude, based on common sense inferences arising from the
total mix of information available, that the press release provided
“corrective” information related to the Turcolt Investment which
negatively affected share value.
[ 149] Consequently, Kauf submits that it is reasonably possible
that the December 2016 Press Release was both ( i) a “partial
public correction”, by advising at least some readers that “
something was wrong” about Perrault’s conduct in relation to the Turcolt Investment; and ( ii) a misrepresentation, by not disclosing
“what was wrong” about Perrault’s conduct in relation to the
Turcolt Investment, i.e., that he was not authorized to make the
[ 150] Taking into account the broad and purposive nature of
securities legislation to provide investor protection, and applying
the principles set out in the case law above, I find that there is a
reasonable possibility of success at trial that the court will find
that the December 2016 Press Release constitutes a public correction in relation to the Turcolt Investment.
[ 151] I do not agree with the Defendants that “the public
correction is not pleaded with precision”.
[ 152] The “falsity” pleaded is that the Turcolt Investment was
unauthorized. Colt advised readers of the Q3 2016 Disclosure that
it (through Eurocolt) had made the investment in Turcolt. Until
the January 2017 Press Release, Colt did not advise that Perrault
had made an unauthorized investment.
[ 153] For the purposes of this hearing, the Defendants
acknowledge that it is reasonably possible that a court could find
that the alleged misrepresentation was material and can be supported on the evidence.
[ 154] The pleaded public correction is the December 2016 Press
Release. Kauf pleads that the statements that ( i) Perrault was
being replaced by Gravelle; ( ii) the replacement took place “as the
Company reviews its strategic options”; and ( iii) the “terms and
conditions of [Perrault’s] [transitional] role are currently under
negotiation” constituted corrective information advising the
26 A term used by Kauf in his reply factum.