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CIVIL PROCEDURE - Class or representative actions - Certification

Wednesday, March 04, 2020 @ 9:28 AM  

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Appeal by the plaintiff LBP Holdings (LBP) from the decision declining to certify LBP’s negligent misrepresentation claim. The proposed class was composed of investors who, in a second public offering, acquired shares of the defendant Hycroft Mining Corporation directly from the defendant underwriters. On consent of Hycroft and two of its executives, the certification judge certified a statutory misrepresentation claim against them comprised of the same class that LBP sought to have certified against the underwriters. LBP’s claim against the Hycroft defendants arose from its statutorily mandated certificate in its prospectus that it constituted full, true and plain disclosure of all material facts. LBP alleged that the prospectus contained misrepresentations. LBP’s claim against the underwriters was that it was a misrepresentation for the underwriters to state in its statutorily mandated certificate that disclosure in the prospectus was true, to the best of their knowledge, information and belief. The certification judge found that a class proceeding was not the preferable procedure for advancing LBP’s claim against the defendants Cormack Securities Inc. and Dundee Securities Inc. The certification judge found that the individual issues that would have to be determined (reliance, causation and damages) would very substantially diminish the productivity of the common issues at trial and would introduce significant concerns about manageability.

HELD: Appeal allowed. The certification judge fell into legal error on matters central to a proper application of s. 5 of the Class Proceedings Act (CPA), and that displaced the deference usually paid to decisions on certification motions. The certification judge erred by failing to interpret the CPA in a broad and purposive manner in accordance with the objectives of class actions, namely access to justice, judicial economy and behaviour modification. His reasons did not set out a comparative analysis of the relative advantage of a class action suit over individual actions in achieving those objectives. That was an error in principle. Whether Hycroft violated its disclosure obligations had to be proven for both claims. Damages could overlap. It was not synergistic or conducive to judicial economy to require the class members to bring individual actions against the underwriters.

LBP Holdings Ltd. v. Hycroft Mining Corp., [2020] O.J. No. 25, Ontario Superior Court of Justice - Divisional Court, N.L. Backhouse, D.L. Corbett and F.L. Myers JJ., January 6, 2020. Digest No. TLD-March22020006