On November 21, 2002, the British Columbia Court of Appeal delivered a significant judgment in the securities class action Pearson et al v. Boliden et al. Madam Justice Newbury's decision, concurred in by Chief Justice Finch and Madam Justice Saunders, is the most recent consideration by an appellate court of the nature, scope and territorial effect for the statutory civil remedies for prospectus misrepresentation in provincial Securities Acts.
The facts underlying the action are that on June 10, 1997, an initial public offering of 60,917,216 of the issued shares of Boliden Limited was made by its parent company Trelleborg International BV which was a wholly-owned subsidiary of Trelleborg, AB. Nesbitt Burns, Inc. was the lead underwriter who organized a syndicate of 13 Canadian and 7 U.S./European investment dealers. A prospectus was prepared and filed in each of the Canadian provinces. Shares were also offered outside Canada by private placement in the U.S. and by an International Prospectus for distribution in Europe. Boliden is a Swedish company engaged in the business of mining and processing minerals and at the time of the offering operated a mine with a tailings dam in Spain. On April 25, 1998, several months after the public offering, the tailings dam ruptured sending 7,000,000 tons of toxic waste into the surrounding area.
The representative plaintiffs purchased Boliden shares in July, 1997. On October 20, 1998 they brought a class action in the B.C. Supreme Court alleging, inter alia, material misrepresentation or omission in the prospectus with respect to the condition of the tailings dam and pleading the statutory cause of action in British Columbia and its provincial counterparts. The defendants included Boliden, the two Trelleborg companies, the directors of Boliden and Nesbitt Burns.
The defendants agreed to certification of the statutory cause of action only and the common issues to be certified in return for the plaintiffs abandoning their common law causes of action. The remaining issues, among other things, were whether certain purchasers of the shares had a cause of action under the statutory prospectus misrepresentation provisions and as a result be included in the class. These purchasers included those who bought shares in the distribution outside of Canada; secondary market purchasers; and those who bought shares in the distribution but sold them prior to the dam failure. The chambers judge declined to decide these questions and deferred them for further summary judgment motions. The defendants appealed the decision.
Madam Justice Newbury, in a comprehensive review of the applicable provisions of the provincial Securities Acts and the case law, allowed the appeal. In particular, she determined that those who purchased shares outside Canada did not have a statutory cause of action in that the provincial Securities Acts had no application. Further, purchasers of shares on the secondary market did not have a statutory cause of action. This is the first appellate court decision in Canada to find that the statutory cause of action cannot be invoked by open market purchasers (except possibly in the Province of Manitoba). Finally, the Judge excluded from the class those persons who had purchased shares on the primary distribution but sold them prior to the failure of the tailings dam. Citing the Ontario decisions in Carom v. Bre-X Minerals et al, she found that any such shareholder's loss was caused by the prior sale and not by the event giving rise to the alleged misrepresentation.
D.G.S. Rae, Q.C. (corporate and commercial litigation, class actions) and A.D. Borrell (corporate and commercial litigation, class actions) of the Vancouver office of Fasken Martineau DuMoulin LLP appeared on behalf of Nesbitt Burns.
Pearson v. Boliden Ltd., 2002 BCCA 624 (CanLII)