Bayens et al. v. Kinross Gold Corp. et al., 2014 ONCA 901

• Judge: Hoy, A.C.J.O., Cronk and Pepall, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: June 11, 2014
• Jurisdiction: Ontario
• Citations: 2014 ONCA 901;(2014), 327 O.A.C. 156 (CA)

Bayens v. Kinross Gold Corp. (2014), 327 O.A.C. 156 (CA)

MLB headnote and full text

Temp. Cite: [2014] O.A.C. TBEd. DE.039

E. Eddy Bayens, John Sinclair, Luc Fortin, Pierre Racicot and Stanley Shortt, in their capacity as Trustees of the Musicians' Pension Fund of Canada (appellants) v. Kinross Gold Corporation, Tye W. Burt, Paul H. Barry, Glen J. Masterman and Kenneth G. Thomas (respondents)

(C57988; 2014 ONCA 901)

Indexed As: Bayens et al. v. Kinross Gold Corp. et al.

Ontario Court of Appeal

Hoy, A.C.J.O., Cronk and Pepall, JJ.A.

December 17, 2014.

Summary:

The plaintiffs were representative plaintiffs in a putative class proceeding against Kinross Gold Corp., a Toronto-based international mining company, and four of its current or former officers (the defendants). Kinross' shares traded on the Toronto and New York Stock Exchanges. The plaintiffs purchased Kinross shares, in their capacity as trustees of a pension fund. In 2012, they commenced a class action against the defendants on their own behalf and on behalf of other specified persons who had acquired Kinross shares during the period February 16, 2011 to January 16, 2012, claiming $4 billion damages for alleged common law and statutory misrepresentations pertaining to two gold mines owned by Kinross. The plaintiffs sought an order granting them leave under s. 138.8(1) of the Securities Act to proceed with the statutory action and an order certifying their action as a class proceeding under the Class Proceedings Act (CPA).

The Ontario Superior Court, in a decision reported at [2003] O.T.C. Uned. 6864, dismissed the leave and certification motion. The court ruled that there was no possibility, let alone a reasonable possibility, that the plaintiff's goodwill impairment claim would succeed at trial because the expert accounting evidence relied on by the plaintiffs to support this claim was fatally flawed. As a result, there was no factual basis for this claim. The court declined to consider the plaintiff's claim regarding an expansion project because it had not been pleaded. The court also refused to certify the statutory or common law misrepresentation claims under the CPA. In light of these rulings, all that remained of the appellants' claims was their uncertified action for common law damages. The plaintiffs appealed from the motion judge's leave and certification rulings.

The Ontario Court of Appeal dismissed the appeal.

Company Law - Topic 5765

Sale of shares - Valuation - Goodwill - Section 138.8(1)(b) of the Securities Act provided that "No action may be commenced under s. 138.3 without leave of the court ... . The court shall grant leave only where it is satisfied that, ... (b) there is a reasonable possibility that the action will be resolved at trial in favour of the plaintiff." - A motions judge refused to grant leave under s. 138.3, finding that the requirement of s. 138.8(1)(b) had not been met - The plaintiffs appealed - On appeal, the plaintiffs asserted, inter alia, that the defendant corporation's (Kinross') public disclosure concerning certain mines was misleading because Kinross overstated the value of goodwill for the mines by failing to record a goodwill impairment charge relating to one mine on a timely basis - The Ontario Court of Appeal rejected the allegation - Based on deficiencies he found in the Mak opinion, the motion judge held that "[t]here is, therefore, no factual basis for [the appellants' Goodwill Impairment Claim] and no reasonable possibility that [this] claim could succeed at trial." - While the motion judge made no adverse credibility finding regarding Mak and accepted him as a believable and honest witness, he also evaluated the reliability of the Mak opinion, as he was entitled to do, and found that it was infected by three critical flaws - The motion judge did not overstep his proper role on the leave motion by examining the factual underpinnings of Mak's opinion - This type of scrutiny of expert evidence was both required to determine its reliability and common place where an asserted claim depended, as here, on expert evidence - See paragraphs 60 to 69.

Company Law - Topic 5765

Sale of shares - Valuation - Goodwill - A motions judge refused to grant leave to commence an action under s. 138.3 of the Securities Act because he found that the requirement under s. 138.8(1)(b) that there be "a reasonable possibility that the action will be resolved at trial in favour of the plaintiff" had not been met - The plaintiffs appealed, asserting, inter alia, that the defendant corporation's (Kinross') public disclosure concerning certain mines was misleading because Kinross overstated the value of goodwill for the mines by failing to record a goodwill impairment charge relating to one mine on a timely basis - They submitted that the motion judge erred, inter alia, by "assuming" that all relevant information about Kinross' 2011 drilling program was before the court on the leave motion, notwithstanding that discoveries and documentary production had not yet occurred - The Ontario Court of Appeal rejected the submission - See paragraphs 70 to 75 - The court also rejected the plaintiffs' argument that the motion judge mischaracterized the nature of the goodwill impairment claim and, consequently, erred by holding that it was unnecessary for the purpose of the leave motion to assess Kinross' explanation for its 2012 goodwill write down - See paragraphs 76 to 82.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Certification - Considerations (incl. when class action appropriate) - The plaintiffs were representative plaintiffs in a putative class proceeding - They commenced a class action against the defendants on their own behalf and on behalf of other specified persons who had acquired shares in the corporate defendant (Kinross) during the period February 16, 2011 to January 16, 2012, claiming $4 billion damages for alleged common law and statutory misrepresentations pertaining to two gold mines owned by Kinross - The plaintiffs sought an order granting them leave under s. 138.8(1) of the Securities Act to proceed with the statutory action and an order certifying their action as a class proceeding under the Class Proceedings Act (CPA) - The motions judge dismissed the leave motion - The court also refused to certify the statutory or common law misrepresentation claims under the CPA because it had denied leave to proceed with the statutory claims and it "necessarily follow[ed] that both the statutory claim and the common law negligence claim fail[ed] to satisfy the certification criteria of the [CPA]" - The Ontario Court of Appeal disagreed - "The fact that the court, on a leave motion, has determined that the statutory claims have no reasonable possibility of success and that the evidence supporting the statutory and common law actions would essentially be the same does not mean that there is not some basis in fact: 1) that 'there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant' (the class definition criterion at s. 5.1(b)); or 2) that the 'claims or defences of the class members raise common issues' (the common issues criterion at s. 5.1(c)). The court's determination of the merits of the statutory claims has no place in the analysis of these certification criteria. However, ... in cases like this one, the denial of leave for the statutory claims is a relevant factor in the preferability analysis." - See paragraph 99.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Certification - Considerations (incl. when class action appropriate) - The plaintiffs were representative plaintiffs in a putative class proceeding - They commenced a class action against the defendants on their own behalf and on behalf of other specified persons who had acquired shares in the corporate defendant (Kinross) during the period February 16, 2011 to January 16, 2012, claiming $4 billion damages for alleged common law and statutory misrepresentations pertaining to two gold mines owned by Kinross - The plaintiffs sought an order granting them leave under s. 138.8(1) of the Securities Act to proceed with the statutory action and an order certifying their action as a class proceeding under the Class Proceedings Act (CPA) - The motions judge dismissed both the leave and the certification motions - The plaintiffs appealed - The Ontario Court of Appeal held that the motion judge erred in his approach to the certification inquiry for the common law claims and his certification analysis failed to comport with Fischer (S.C.C., 2013) - Therefore, the deference normally owed to a motion judge's certification analysis was not engaged and it fell to the Court of Appeal to undertake the necessary evaluation whether the common law claims were appropriate for certification under the CPA - See paragraphs 89 to 107 - The court held that, should liability be found, reliance, causation and damages would still have to be determined on an individual basis - A class proceeding would not represent a fair, efficient and manageable procedure that was preferable to any alternative method of resolving the common law claims - The denial of leave for the statutory claims was relevant in this context - See paragraphs 108 to 139.

Practice - Topic 209.9

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Appeals (incl. leave to appeal) - [See second Practice - Topic 209.3 ].

Practice - Topic 1335

Pleadings - The issues - Issues to be raised must be pleaded (incl. time for) - [See third Securities Regulation - Topic 5 ].

Securities Regulation - Topic 5

General principles - Civil action for breach of statute - [See both Company Law - Topic 5765 ].

Securities Regulation - Topic 5

General principles - Civil action for breach of statute - Section 138.8(1)(b) of the Securities Act provided that "No action may be commenced under s. 138.3 without leave of the court ... . The court shall grant leave only where it is satisfied that, ... (b) there is a reasonable possibility that the action will be resolved at trial in favour of the plaintiff." - The Ontario Court of Appeal discussed the test for leave under s. 138.8(1)(b) - See paragraphs 33 to 57 - The court stated that "... in sum, the reasonable possibility requirement of the leave test is a relatively low threshold, merits-based test. The determination whether a plaintiff's statutory action will have a reasonable possibility of success at trial requires some critical evaluation of the merits of the action, based on all the evidence proffered by the parties on the leave motion. Further, the standard applied to the evidentiary record is the same standard applicable to a certification determination under s. 5(1)(a) of the CPA [Class Proceedings Act] or on a motion to strike. However, the standard is applied to different records, in different contexts, for entirely different purposes." - See paragraph 49.

Securities Regulation - Topic 5

General principles - Civil action for breach of statute - A motions judge refused to grant leave under s. 138.8(1) of the Securities Act to commence an action under s. 138.3 of the Act - The plaintiffs appealed - They complained that the motion judge erred by, inter alia, failing to consider a claim because the plaintiffs had failed to plead it - The plaintiffs maintained that this was an overly "technical" and erroneous basis on which to deny leave to proceed with the claim - The Ontario Court of Appeal disagreed - As the court had consistently emphasized, it was central to the litigation process that issues in a civil action be decided within the boundaries of the pleadings - Fundamental fairness and the efficacy of the civil litigation process demanded no less - This foundational principle applied with no less force to a leave motion in a class action involving statutory securities market claims - Indeed, the s. 138.8(1) leave requirement was premised on an assessment of the good faith and reasonable possibility of success of the action, as framed by the plaintiffs - Where the plaintiffs had elected not to plead a potential claim, they could not be heard to complain when a late-breaking claim was not considered on the leave motion - See paragraphs 83 to 87.

Cases Noticed:

Green et al. v. Canadian Imperial Bank of Commerce et al., [2012] O.T.C. Uned. 3637; 29 C.P.C.(7th) 225; 2012 ONSC 3637, affd. in part (2014), 314 O.A.C. 315; 118 O.R.(3d) 641; 2014 ONCA 90, leave to appeal granted, [2014] S.C.C.A. No. 137, consd. [paras. 35, 52].

Rodaro et al. v. Royal Bank of Canada et al. (2002), 157 O.A.C. 203; 59 O.R.(3d) 74 (C.A.), refd to. [para. 84].

Place Concorde East Limited Partnership et al. v. Shelter Corp. of Canada Ltd. et al. (2006), 211 O.A.C. 141; 270 D.L.R.(4th) 181 (C.A.), refd to. [para. 84].

Lewi v. Lewi (2006), 209 O.A.C. 344; 267 D.L.R.(4th) 193; 80 O.R.(3d) 321 (C.A.), refd to. [para. 84].

AIC Limited v. Fischer - see Fischer et al. v. IG Investment Management Ltd. et al.

Fischer et al. v. IG Investment Management Ltd. et al. (2013), 452 N.R. 80; 312 O.A.C. 128; 2013 SCC 69, appld. [para. 98].

Pro-Sys Consultants Ltd. et al. v. Microsoft Corp. et al. (2013), 450 N.R. 201; 2013 SCC 57, refd to. [para. 98].

Hollick v. Metropolitan Toronto (Municipality) et al. (2001), 277 N.R. 51; 153 O.A.C. 279; 2001 SCC 68, refd to. [para. 98].

Western Canadian Shopping Centres Inc. et al. v. Dutton et al., [2001] 2 S.C.R. 534; 272 N.R. 135; 286 A.R. 201; 253 W.A.C. 201; 2001 SCC 46, refd to. [para. 116].

Markson v. MBNA Canada Bank (2007), 224 O.A.C. 71; 85 O.R.(3d) 321; 2007 ONCA 334, leave to appeal denied (2007), 383 N.R. 381 (S.C.C.), refd to. [para. 117, footnote 11].

Chadha v. Bayer Inc. et al. (2003), 168 O.A.C. 143; 63 O.R.(3d) 22 (C.A.), leave to appeal refused (2003), 321 N.R. 396; 191 O.A.C. 397 (S.C.C.), refd to. [para. 117, footnote 11].

Gilbert v. Canadian Imperial Bank of Commerce, 2004 CanLII 34176 (S.C.), refd to. [para. 117, footnote 11].

Carom et al. v. Bre-X Mineral Ltd. et al. (1999), 98 O.T.C. 1; 44 O.R.(3d) 173 (Gen. Div.), affd. (1999), 46 O.R.(3d) 315 (Div. Ct.), revd. (2000), 138 O.A.C. 55; 51 O.R.(3d) 236 (C.A.), leave to appeal refused (2001), 283 N.R. 399; 157 O.A.C. 399 (S.C.C.), dist. [para. 134].

Statutes Noticed:

Ontario Securities Act, sect. 138.3 [para. 1, Appendix]; sect. 138.8(1) [para. 33, Appendix].

Counsel:

Kirk M. Baert, Celeste Poltak and Garth Myers, for the appellants;

Mark A. Gelowitz, Allan D. Coleman and Robert Carson, for the respondents.

This appeal was heard on June 11, 2014, by Hoy, A.C.J.O., Cronk and Pepall, JJ.A., of the Ontario Court of Appeal. Cronk, J.A., delivered the following decision for the court on December 17, 2014.