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Catheryn Derker

471-023079
Carom v. Bre-X Minerals Ltd., 1998
CanLII 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. erred
in restricting the Plaintiff class to those investors who held Bre-X shares on March 26 1997, the date of
public disclosure of possible fraud. In order to succeed in negligent misrepresentation the plaintiff must
prove reliance and causation. They must prove that each of them relied on one or more particular
misrepresentation 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. (4
th
) 626. The alleged negligent
misrepresentation includes 160 or more Bre-X press releases over a four-year period beginning May 10
1993. The representations were different in content and made at different times by different people for
different reasons. The Bre-X representations were not necessarily consistent with the representations of
the brokerage houses that are no longer in the action. The plaintiffs bought their stock at different times
through different brokerage houses in reliance on different representations, some of which might not
have emanated from Bre-X. There is a complex, overlapping, differing and sometimes inconsistent tissue
of representations made by different people at different times. As Winkler J. pointed out, the case of
each individual plaintiff requires an individual inquiry as to what representations he or she relied upon
and 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 dismissed
on consent. The only remaining defendants are the Bre-X insiders. The brokers are out of the case. Their
departure 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 to
support 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 the
significant impact which the proposed amendments could have to certain of the issues on certification
as a class proceeding, namely the issues of preferable procedure, common issues, representative
plaintiffs and description of the identifiable class, to mention but a few, the certification motions were
adjourned to await the disposition of this motion.
Catheryn Derker
471-023079
All counsel concedes that the disposition of this motion is within the unfettered discretion of this court. I
agree. These amendments, if granted, would, as stated, add a "fraud on the market" theory to the claim
and could impact in a significant way on the size of the classes and thus necessitate the addition of
parties 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 issues
requirement, which was significant in furthering the acceptance of the fraud in the market theory in the
United States is not present here as an obstacle to a class proceeding. I note also that the position of the
plaintiffs in argument on the prior pleadings motions, and in their pleadings, has been that reliance is
not 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 the
fraud 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 advance
this litigation in any manner as it relates to the claim in negligent misrepresentation". It is not helpful to
parse 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 the
supervising 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 change
in the representative plaintiffs that results from the taking out of the brokers.
For these reasons, the appeal is dismissed.