Ontario Court Of Appeal Clarifies Tests For Leave To Proceed And Certification In Secondary Market Misrepresentation Class Actions

The Ontario Court of Appeal recently released its decision in Bayens v Kinross Gold Corporation,1 which provides important guidance on class actions for secondary market misrepresentation. The decision addresses the test under section 138.8 of the Ontario Securities Act for leave to proceed on statutory misrepresentation claims, as well as the certification of common law misrepresentation claims under the Class Proceedings Act, 1992 (the CPA).

Important takeaways of the decision include:

The standard for granting leave to proceed under subsection 138.8(1) of the Securities Act is the same as the standard for certification of a class proceeding, namely that there must be a reasonable possibility of success at trial. Importantly, however, the evidentiary record against which this standard is applied is different at the leave motion, on which the court may consider affidavit and cross-examination evidence, than it is at the certification stage, where the facts pleaded are assumed to be true. On a motion for leave, scrutiny of expert evidence to determine its reliability is appropriate and necessary in cases where the asserted claim depends on such evidence. Only claims that have been properly pleaded may be considered for certification on a motion for leave. Determination of the merits of statutory misrepresentation claims has no place in the analysis of certification criteria with respect to common law misrepresentation claims, although the denial of leave for the statutory claims is a relevant factor in the preferable procedure segment of the certification analysis. Facts

The appellants were the representative plaintiffs in a class proceeding against Kinross Gold Corporation and four of its current or former directors. The appellants had purchased shares in Kinross between February 2011 and January 2012, and claimed damages of $4 billion for alleged common law and statutory misrepresentations in relation to mines owned by Kinross.

Kinross overstated the mines' goodwill value, the appellants argued, by failing to issue a goodwill impairment charge on one of the mines (the Goodwill Impairment Claim), and also wrongly represented that its planned expansion of that mine was on schedule when the schedule was unrealistic (the Expansion Claim). The appellants brought a motion for an order granting them leave to proceed with the statutory action under subsection 138.8(1) of the Securities Act, as well as an order certifying the action as a class...