SNC wins Appeal re. Non-divulgation of non material change
SNC-Lavalin
On the other hand, the Court of Appeal upheld the Superior Court's decision to deny leave in the companion case.2 Here, Justice Perrell of the Superior Court had applied a much broader interpretation of the word "change," essentially deciding that it could mean anything depending on the facts. Nevertheless, he ruled that the PPSC's phone call with SNC-Lavalin had simply maintained the status quo, and as such could not be a "change." Before the call, SNC faced a pending criminal prosecution that a remediation agreement could have avoided. During the call, the PPSC said they remained open to further input from SNC, so the agreement remained possible. It was only a month later when the PPSC advised SNC in writing that there would be no agreement and would not discuss the matter further. SNC issued a press release the next day, and SNC's share price declined by over 13%.
In upholding Justice Perell's decision, the Court of Appeal made an important distinction between the market's reaction to an event and whether the event itself truly changed anything. As the Court wrote in its decision: "It is not appropriate to reason backwards from the market reaction in determining whether an event constitutes a material change."
In other words, to the extent the market may have perceived a greater possibility of SNC avoiding prosecution than actually existed and was disclosed, there was no material change when the market came to terms with reality.