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Catheryn Derker471-023079

Carom v. Bre -X Minerals Ltd., 1998CanLII 14705 (ON SC)

Analysis

This case is determining whether Winkler J. erred in restricting the common issues to conspiracy and

fraud, and in not certifying negligent misrepresentation as a common issue, as well as if Winkler J. erredin restricting the Plaintiff class to those investors who held Bre-X shares on March 26 1997, the date ofpublic disclosure of possible fraud. In order to succeed in negligent misrepresentation the plaintiff mustprove reliance and causation. They must prove that each of them relied on one or more particularmisrepresentation and that the reliance caused them to incur a loss as the precedent: Queen v. Cognos

Inc., 1993 CanLII 146 (SCC), [1993] 1 S.C.R. 87, 99 D.L.R. (4th

) 626. The alleged negligentmisrepresentation includes 160 or more Bre-X press releases over a four-year period beginning May 101993. The representations were different in content and made at different times by different people fordifferent reasons. The Bre-X representations were not necessarily consistent with the representations ofthe brokerage houses that are no longer in the action. The plaintiffs bought their stock at different timesthrough different brokerage houses in reliance on different representations, some of which might nothave emanated from Bre-X. There is a complex, overlapping, differing and sometimes inconsistent tissueof representations made by different people at different times. As Winkler J. pointed out, the case ofeach individual plaintiff requires an individual inquiry as to what representations he or she relied uponand how he or she was affected by the particular representation. These individual inquiries cannot be

circumvented.

The claims against First Marathon, Kerry Smith, Nesbitt Burns, and Egizio Bianchini have been dismissedon consent. The only remaining defendants are the Bre-X insiders. The brokers are out of the case. Theirdeparture disposes of the appellants' main argument, that the restrictions on the class certification"effectively blocked thousands of Nesbitt Burns customers from seeking justice and compensation for

their losses" and that no "single plaintiff will now feel bold enough to sue Nesbitt Burns and its parent,the Bank of Montreal".

The instant motion for leave to amend the fresh statements of claim by adding factual assertions tosupport the "fraud on the market theory" was brought by the plaintiffs in all seven actions returnable

concurrently with the certification motions. The defendants oppose the amendments sought. Given thesignificant impact which the proposed amendments could have to certain of the issues on certificationas a class proceeding, namely the issues of preferable procedure, common issues, representativeplaintiffs and description of the identifiable class, to mention but a few, the certification motions wereadjourned to await the disposition of this motion.

8/12/2019 Carom v Bre-x

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Catheryn Derker471-023079

All counsel concedes that the disposition of this motion is within the unfettered discretion of this court. Iagree. These amendments, if granted, would, as stated, add a "fraud on the market" theory to the claimand could impact in a significant way on the size of the classes and thus necessitate the addition ofparties to the action. Moreover, the subject matter at issue on this motion is within the power of the

case management judge for the purposes of the CPA as provided for in s. 12 of the Act.

By way of further comparison, as discussed in detail above, the predominance of common issuesrequirement, which was significant in furthering the acceptance of the fraud in the market theory in theUnited States is not present here as an obstacle to a class proceeding. I note also that the position of theplaintiffs in argument on the prior pleadings motions, and in their pleadings, has been that reliance isnot an element of an action under s. 36. The argument relying on the Competition Act fails.

It is clear from an examination of the proposed amendments that they are framed specifically with thefraud on the market theory in mind. In light of my conclusions regarding the theory and resultant

presumption, the amendments can have no other useful purpose and are irrelevant.

Winkler J. said there was "no prospect of a resolution in a trial on common issues which would advancethis litigation in any manner as it relates to the claim in negligent misrepresentation". It is not helpful toparse the use by Winkler J. of the expression "contribute to the case in a legally material way". There is

no difference between "meaningful" and "legally material". They mean the same thing.

Winkler J. did not err in identifying or applying the "move the litigation forward" test. There is therefore

no error in the temporal description of the class.

The identification of representative plaintiffs is an interlocutory decision that can be changed by thesupervising judge if required by changing circumstances. Even if leave to appeal were sought, there is no

reason for this court to deal with that matter. Winkler J. has ample jurisdiction to deal with any changein the representative plaintiffs that results from the taking out of the brokers.

For these reasons, the appeal is dismissed.