The Securities Act (Newfoundland and Labrador) provides that where an offering memorandum contains a Misrepresentation, a purchaser has, without regard to whether the purchaser relied on the Misrepresentation, a right of action for damages against the issuer and, subject to certain additional defences, against directors of the issuer and persons who have signed the offering memorandum, and a right of action for rescission against the issuer. Where a right of rescission is exercised, a purchaser shall have no right of action for damages against any other person.
A defendant:
(a)
is not liable if it proves the purchaser had knowledge of the Misrepresentation; and
(b)
in an action for damages, is not liable for all or any portion of the damages that it proves do not represent the depreciation in value of the security as a result of the Misrepresentation.
Further, in an action for damages, the amount recoverable under the right of action shall not exceed the price at which the security was offered.
In addition no person or company, other than the issuer, is liable:
(a)
if the person or company proves that the offering memorandum was sent to the purchaser without the person's or company's knowledge or consent and that, on becoming aware of it being sent, the person or company promptly gave reasonable notice to the issuer that it was sent without the person's or company's knowledge or consent;
(b)
if the person or company proves that on becoming aware of any Misrepresentation in the offering memorandum, the person or company withdrew the person's or company's consent to the offering memorandum, and gave reasonable notice to the issuer of the withdrawal and the reason for it;
(c)
with respect to any part of the offering memorandum purporting to be made on the authority of an expert or purporting to be a copy or extract from a report, opinion or statement of the expert, if the person or company proves they had no reasonable grounds to believe and did not believe that (i) there had been a Misrepresentation, or (ii) the relevant part of the offering memorandum did not fairly represent the report, opinion or statement of the expert, or was not a fair copy of, or an extract from, the report, opinion or statement of the expert, or
(d)
with respect to any part of the offering memorandum not purporting to be made on the authority of an expert, unless the person or company (i) did not conduct an investigation sufficient to provide reasonable grounds for a belief that there had been no Misrepresentation, or (ii) believed there had been a Misrepresentation.
If a Misrepresentation is contained in a record incorporated by reference in, or deemed incorporated into, the offering memorandum, the Misrepresentation is deemed to be contained in the offering memorandum.
The right of action for rescission or damages described herein is conferred by section 130.1 of the Securities Act (Newfoundland and Labrador) and is in addition to and without derogation from any other right the purchaser may have at law.
Pursuant to section 138 of the Securities Act (Newfoundland and Labrador), no action shall be commenced to enforce the rights conferred by section 130.1 thereof unless commenced:
(a)
in the case of an action for rescission, 180 days after the date of the transaction that gave rise to the cause of action; or
(b)
in the case of an action, other than an action for rescission, the earlier of:
(i)
180 days after the plaintiff first had knowledge of the facts giving rise to the cause of action, or
(ii)
3 years after the date of the transaction that gave rise to the cause of action.
This summary is subject to the express provisions of the Securities Act (Newfoundland and Labrador) and the regulations and rules made under it, and a prospective purchaser should refer to the complete text of those provisions.
