Joseph Mancinelli v. Barrick Gold Corporation

CITATION: Joseph Mancinelli v. Barrick Gold Corporation, 2014 ONSC 7431

DIVISIONAL COURT FILE NO.: 594/14

DATE: 20141223

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Proceeding under the Class Proceedings Act, 1992

BETWEEN:

JOSEPH S. MANCINELLI, CARMEN PRINCIPATO, DOUGLAS SERROUL, LUIGI CARROZZI, MANUEL BASTOS, JACK OLIVEIRA and COSMO MANELLA, in their capacity as THE TRUSTEES OF THE LABOURERS’PENSION FUND OF CENTRAL AND EASTERN CANADA, MIKE GALLAGHER, JOE REDSHAW, RICK KERR, ALEX LAW, BRIAN FOOTE, RON MARTIN, JOHN HARTLEY, NICK DEKONING and JOE KEYES, in their capacity as THE TRUSTEES OF INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL 793, MEMBERS PENSION BENEFIT TRUST OF ONTARIO and MICHAEL WIENER

Plaintiffs/Moving Parties

– and –

BARRICK GOLD CORPORATION, AARON REGENT, JAMIE SOKALSKY, AMMAR AL-JOUNDI and PETER KINVER

Defendants

H. T. Strosberg Q.C., K. Baert & J. Sayce, for the moving parties

L. Sarabia & S. Frankel, for the defendants

AND BETWEEN:

THE TRUSTEES OF THE DRYWALL ACOUSTIC LATHING AND INSULATION LOCAL 675 PENSION FUND and ROYCE LEE

Plaintiffs/Responding Parties

– and –

BARRICK GOLD CORPORATION, AARON W. REGENT, JAMIE C. SOKALSKY, AMMAR AL-JOUNDI and PETER KINVER

Defendants

W.A.D. Millar & P. Jervis, for the responding parties

L. Sarabia & S. Frankel, for the defendants

HEARD at Toronto: December 22, 2014

NORDHEIMER J.:

[1] The moving parties seek leave to appeal from the order of Belobaba J. dated December 12, 2014 that stayed the first titled proposed class action (the “Labourers Action”) while permitting the second titled proposed class action (the “DALI Action”) to proceed. The effect of the order was to give carriage of this class action litigation to the firms of Rochon Genova, Rosen Naster and the Merchant Law Group, who act for the plaintiffs in the DALI Action, rather than to Koskie Minsky, Sutts Strosberg, Groia & Company and Siskinds LLP who act for the plaintiffs in the Labourers Action. The defendants, who are common to both actions, appeared on the motion but, given the question at issue, they did not make any submissions.

[2] For the reasons that follow, I have concluded that leave to appeal ought to be granted. In so concluding, I am cognizant of the fact that decisions on carriage motions will generally involve the exercise of discretion. However, in this instance, I believe that serious issues are raised regarding the appropriate principles to be applied in the course of the exercise of that discretion.

Background

[3] For the purposes of this motion, the background facts can be stated briefly. In the spring of 2013, and in the months that followed, Barrick Gold disclosed that its mining operations at its Pascua-Lama mining project in Chile had been suspended by orders of the local court and environmental regulator. The company’s share prices dropped dramatically following various public disclosures. A number of class proceedings in Ontario were then commenced, grounded in the common law and Part XXIII.1 of the Securities Act, R.S.O. 1990, c. S.5, alleging misrepresentations relating to the development and operation of the Mine.

[4] The Merchant Law Group commenced an action related to this matter on April 15, 2014. Koskie Minsky, Sutts Strosberg and Groia & Company commenced a different action on April 24, 2014. Siskinds LLP commenced a third class action a few days later on behalf of an individual class member.

[5] In early June 2014, the Labourers Pension Fund and the Operating Engineers Pension Fund were added as plaintiffs to the action that had been commenced by Koskie Minsky and others. On June 20, 2014, that action was consolidated with the separate action that had been commenced by Siskinds LLP and became what I am now referring to as the Labourers Action. At that time, Siskinds LLP formally joined with Koskie Minsky, Sutts Strosberg and Groia & Company (hereinafter collectively referred to as “KSGS”) as counsel for the representative plaintiffs in the Labourers Action.

[6] On August 19, 2014, KSGS wrote to the case-management judge, Belobaba J., requesting a case conference to set a timetable for the certification motion and the Securities Act motion for leave to proceed with the Part XXIII.1 claims. A case conference was scheduled for September 8, 2014.

[7] On September 5, 2014, Rochon Genova and Rosen Naster commenced an action against the same defendants on behalf of the Trustees of the Drywall Acoustic Pension Fund. This is the action that I am referring to as the DALI Action. The action commenced by the Merchant Law Group was then consolidated with the DALI Action and the Merchant Law Group joined with Rochon Genova and Rosen Naster (hereinafter collectively referred to as “RRM”) as counsel to the representative plaintiffs in the DALI action. The statement of claim in the DALI Action was extensively amended on October 20, 2014.

[8] On September 8, 2014, the dates of November 12 and 13, 2014 were set for the hearing of the carriage motion to decide which of the Labourers Action or the DALI Action would be permitted to proceed.

[9] By reasons dated December 12, 2014, Belobaba J. granted carriage of the proposed class action to the plaintiffs in the DALI Action. RRM was appointed as class counsel. The Labourers Action was stayed.

Analysis

[10] In order to obtain leave to appeal, the moving parties must satisfy one of the two tests set out in r. 62.02(4) of the Rules of Civil Procedure that reads:

Leave to appeal shall not be granted unless,

(a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or

(b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

The moving parties submit that they satisfy both of these tests.

[11] There are a number of factors that are supposed to be considered by the court in deciding a carriage motion. The early case law on this subject identified seven factors that were to be considered. Those factors were summarized by Perell J. in Sharma v. Timminco Ltd. (2009), 2009 58974 (ON SC), 99 O.R. (3d) 260 (S.C.J.) at para. 17:

(i) the nature and scope of the causes of action advanced;

(ii) the theories advanced by counsel as being supportive of the claims advanced;

(iii) the state of each class action, including preparation;

(iv) the number, size and extent of involvement of the proposed representative plaintiffs;

(v) the relative priority of commencing the class action;

(vi) the resources and experience of counsel; and

(vii) the presence of any conflicts of interest.

[12] Subsequently, however, in Smith v. Sino-Forest Corporation, 2012 ONSC 24, [2012] O.J. No. 88 (S.C.J.), Perell J. added six additional factors to this list. Those six additional factors are:

(viii) funding;

(ix) definition of class membership;

(x) definition of class period;

(xi) joinder of defendants;

(xii) the plaintiff and defendant correlation; and,

(xiii) prospects of certification.

[13] In addition to the consideration of these factors, there is an overarching principle that applies to carriage motions. That principle is that the primary consideration on such a motion is arriving at a solution that is in the best interests of all class members, is fair to the defendants and is consistent with the policy and objectives of the Class Proceedings Act, 1992, S.O. 1992, c. 6: Vitapharm Canada Ltd. v. F. Hoffman-Laroche Ltd., [2000] O.J. No. 4594 at para. 48 (S.C.J.).

[14] While there is some argument over which factors, from the above list, are in issue in this case, it is clear that some factors are of more significance than others. However, it is neither necessary to the proper determination of the motion for leave to appeal, nor is it my role, to resolve any underlying issues as to the correctness of the order from which leave to appeal is sought. Rather, it is only my role to determine whether either of the tests for leave to appeal have been met. In this case, I am satisfied that the moving parties have met both tests.

Conflicting decisions

[15] In terms of conflicting decisions, I begin with the reality that the motion judge has, in his own reasons, set up a conflict between his decision and others. In his reasons, the motion judge refers to the principle out in Setterington v. Merck Frosst Canada Ltd., 2006 2623 (ON SC), [2006] O.J. No. 376 (S.C.J.) at para. 19 to the effect that, on a carriage motion, it is inappropriate for the Court to embark upon an analysis as to the likely success of any claim advanced unless a particular claim is “fanciful or frivolous”. The motion judge then considered the subsequent decision of this court in Locking v. Armtec Infrastructure Inc. 2013 ONSC 331, [2013] O.J. No. 531 (Div. Ct.) where Molloy J. commented on the principle from Setterington and said, at para. 20:

If the analysis goes no further than to consider whether the claim advanced is “frivolous”, then the advantage will always be to the action that includes the most claims. That would result in the process becoming a quantitative, rather than qualitative, one, and is not desirable. Depending on the circumstances, some additional analysis may therefore be required.

[16] While I would have taken this comment in Locking as adding a necessary and appropriate refinement to the principle set out in Setterington, the motion judge took a decidedly different view of it. The motion judge said, at para. 30:

With respect, this proposition is a clear departure from the test established by Winkler J. in Setterington. It takes us down the wrong road. Once the carriage motion judge goes beyond obvious defects and embarks upon “a more detailed and nuanced analysis” of the competing actions, she is in essence assessing a claim’s likelihood of success, which everyone agrees is not permitted at this stage of the proceeding.

[17] Two problems arise from this observation by the motion judge. One is that it sets up, on its face, an asserted conflict between the decision in Locking and the decision in Setterington. Assuming that this conflict exists, it is important that it be resolved by the Divisional Court. The fact that the motion judge purported to apply Locking in reaching his decision does not change the fact that his reasons reveal a fundamental disagreement with the basic principle of that decision.

[18] There is a second problem that arises from this segment of the motion judge’s reasons. His statement, that a claim’s likelihood of success is not to be assessed on the carriage motion, is put forward in more absolute and broader terms than I believe the prevailing case law would sustain. It seems that the motion judge’s preferred approach is, as long as a claim is not “frivolous”, that should be the end of the inquiry regarding the comparative analysis of the competing statements of claim. I am reinforced in my conclusion as to the motion judge’s approach to this issue by his subsequent comment at para. 32:

…it is in the plaintiffs’ best interest to plead all of the genuinely viable primary claims, and not just one-third of them.

and his further comment at para. 35:

It is important to remember, however, that there is nothing inherently wrong with added costs and complexity provided the additional claims are genuinely viable.

[19] The motion judge’s approach to this factor appears to be in conflict with a number of other decisions. Indeed, there are many decisions on carriage motions where the complexity of claims has been one of the determining factors in denying carriage to the party attempting to advance the action with the more complicated claims. For example, this was a significant factor in Setterington itself at para. 18; in Whiting v. Menu Foods Operating Limited Partnership, [2007] O.J. No. 3996 (S.C.J.) at para. 29; in Sharma at para. 91 and in Smith at para. 309.

[20] As was observed in Locking, there can be a need for some limited evaluation of the various claims advanced in the competing actions because, contrary to the motion judge’s view, there is something “inherently wrong” with added costs and complexity. Multiple or broader or more complicated claims will likely prolong the proceeding by increasing the length and breadth of the discovery process and the time necessary to get to trial and, thus, delay any recovery that the members of the class may ultimately achieve. The presence of such claims may make certification more complicated and, indeed, possibly reduce the chances of gaining certification. Some types of claims, especially those founded in fraud, may also inhibit the ability to reach a resolution of the core complaint of the class. All of these potential difficulties means that the ultimate objective of the Class Proceedings Act, 1992 is not achieved by the broader and more complicated claim. This point was well-stated by Perell J. in Smith where he said, at para. 306:

And it also seems obvious that all other things being equal, it would be in the best interests of class members and fair to the defendants and most consistent with the policies of the Class Proceedings Act, 1992 to grant carriage to the action that, to borrow from rule 1.04 of the Rules of Civil Procedure secures the just, most expeditious and least expensive determination of the dispute on its merits.

[21] None of these considerations are reflected in the motion judge’s analysis. Indeed, the only reference to the complications that might arise from the breadth of the DALI action is the above reference to there being nothing wrong with added costs and complexity. The attempt by the responding parties to justify the conclusion of the motion judge, by arguing that the additional claims are necessary as the environmental claim, that is common to both actions, might not succeed, is itself inconsistent with the repeated emphasis, by the motion judge, that a carriage motion is not the place to determine the “likelihood of success” of any claim being advanced.

[22] There is a fundamental clash between the approach taken by the motion judge and the approach taken in these other cases. I am, therefore, satisfied that the decision of the motion judge conflicts with these other decisions and it is, in my view, desirable that leave to appeal should be granted.

Good reason to doubt the correctness of the order in question

[23] On this test, I will say that my conclusions above, regarding the proper approach to the consideration of the various factors on a carriage motion, also provide reason to doubt the correctness of the motion judge’s order. There are, however, other considerations that bear on this test.

[24] The motion judge said, in his reasons at para. 38, that the factor of the state of preparation was “the single most important determinant”. In the analysis that follows, however, it appears that the two facts that drove the motion judge’s conclusion that RRM was “demonstrably more prepared” were (i) that RRM, through their significant amendments to the statement of claim in the DALI action, had showed a “demonstrably superior understanding” of the underlying allegations and (ii) that counsel from RRM had travelled to Chile and had met with people there regarding the claim, something that KSGS had not done.

[25] The motion judge’s analysis on this point raises certain concerns. It raises a question as to whether steps taken, after it is known that there is going to be a carriage motion, should properly be considered in assessing the relative positions of the competing proposed class actions. In his analysis, the motion judge does not comment on the fact that the two main attributes upon which he relies, for his finding that RRM was better prepared, were steps taken after the carriage motion had been set for hearing. The motion judge’s approach to this issue appears to be in conflict with the approach taken by Lax J. in Whiting (at para. 21) where she declined to consider amendments made to one of the conflicting claims after the carriage motion had been scheduled. The concern expressed in Whiting, which I share, is that, if consideration is given to steps taken after the carriage motion is known, it sets up somewhat of a “moving target” for the hearing of that motion. It also encourages each side to try and leapfrog over the other by taking additional steps (or copying steps taken by the other side) in an effort to gain the upper hand.

[26] Further, the motion judge’s approach to the preparation factor appears to be at odds with his approach to the funding factor. Assuming that there is actually a significant benefit to be gained from a trip to Chile, in terms of preparation for the advancement of this litigation, the motion judge does not appear to have made any allowance for the fact that KSGS can, presumably, make the same trip. However, when he came to the funding factor, his approach was decidedly different. The evidence was that KSGS had a third-party funding agreement in place to cover the costs of advancing the claims. RRM did not. Funding would, I assume, be a significant factor in this case given that this will be rather costly litigation. Rather than finding that that was a significant difference that favoured KSGS, the motion judge dismissed this difference by saying that he had no doubt that RRM would be able to arrange funding “in short order”. The same could be said about travelling to Chile. It is not clear, therefore, why the trip to Chile accords such an advantage to RRM in the overall analysis while the funding arrangements do not accord a corresponding advantage to KSGS.

[27] Another issue that gives rise to doubt, about the correctness of the order, is the motion judge’s treatment of the resources and experience of counsel factor. The motion judge found that all of the law firms involved had “more than enough expertise and experience” to handle this proceeding. While that may be a fair observation, it appears to treat the “resources and experience of counsel” as a minimum standard factor as opposed to a comparative factor. In other words, the motion judge appears to treat this factor as only requiring a showing of a baseline of experience as opposed to requiring an analysis of the relative experience of counsel. The motion judge’s approach to this factor differs from the approach taken in other cases, for example, Setterington, at para. 23, and Ricardo v. Air Transat A.T. Inc., [2002] O.J. No. 1090 (S.C.J.) at para. 28, where a comparative analysis was done. This is of some importance in the overall analysis given that the motion judge had already found that KSGS had “been involved in more securities class actions” than RRM.

[28] Before concluding, I should add that it is not necessary for me to address each and every concern that the moving parties have identified with respect to the decision of the motion judge. For example, there is an issue raised regarding the class definitions as between the two claims. I am told that this issue was not argued before the motion judge and, consequently, I do not see how it can provide a basis for granting leave to appeal. Similarly, the motion judge’s musings about using a reverse auction process as a final route to differentiate between competing claims, I am again told, was not raised by the parties. It was not, in any event, a route taken by the motion judge in this case. Again, I do not see how that issue can provide a reason to grant leave to appeal. Whether these issues are ones that the panel hearing the appeal may wish to address is, of course, an entirely different matter and one that is for the panel to decide.

[29] For the purposes of the question that is before me, it is sufficient for me to say, based on all of the above, that I am satisfied that there is good reason to doubt the correctness of the decision. The issue of who obtains carriage of a class proceeding is one that has, to date, been the subject of only one decision by the Divisional Court. It is a matter of importance to the law of class proceedings generally. This is especially so in a case, such as this, that the motion judge described as “one of the largest securities class actions in Canada”.

[30] For these reasons, I have concluded that leave to appeal should be granted. Given that the progress of these claims will effectively be stayed until the carriage issue is resolved, the appeal in this matter should be expedited. Counsel can speak to the Divisional Court office in order to obtain the earliest available date for the hearing. Should there be any issues in that regard, counsel can contact me.

[31] None of the parties sought costs of the motion and therefore none are awarded.

NORDHEIMER J.

Date of Release:

CITATION: Joseph Mancinelli v. Barrick Gold Corporation, 2014 ONSC 7431

DIVISIONAL COURT FILE NO.: 594/14

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BETWEEN:

JOSEPH S. MANCINELLI and others

Moving Parties

– and –

THE TRUSTEES OF THE DRYWALL ACOUSTIC LATHING AND INSULATION LOCAL 675 PENSION FUND and another

Responding Parties

REASONS FOR DECISION

NORDHEIMER J.

Date of Release: