Mancinelli et al. v. Barrick Gold Corporation et al.

[Indexed as: Mancinelli v. Barrick Gold Corp.]

Ontario Reports

Ontario Superior Court of Justice,

Divisional Court,

Swinton, Harvision Young and Lederer JJ.

May 21, 2015

126 O.R. (3d) 296 | 2015 ONSC 2717

Case Summary

Civil procedure — Class proceedings — Carriage — Competing class actions brought arising from suspension and shutting down of defendants' Chilean mine operation — KMG action advancing single claim while RGG action advanced three claims which motion judge found were genuinely viable — Motion judge granting carriage to RGG on grounds of nature and scope of causes of action advanced and state of preparation of each action — Motion judge articulating correct test, not erring in law or principle and committing no palpable and overriding factual error.

Competing class actions were brought arising out of the suspension and shutting down of the defendants' Chilean mine operation because of serious environmental violations. KMG acted for the plaintiffs in one of those actions, and RGG acted for the plaintiffs in the other. KMG and RGG each brought a carriage motion under the Class Proceedings Act, 1992, S.O. 1992, c. 6. The motion judge found that the objective in deciding carriage of competing class proceedings is to make the selection that is in the best interests of the class, while being fair to the defendants and consistent with the objectives of the Act. He found that the following considerations did not differentiate between the parties seeking carriage: the representative plaintiffs; the relative priority of the commencement of the class actions; the resources and experience of counsel; conflicts of interest; and funding arrangements. He found that the RGG action advanced three genuinely viable legal claims while the KMG action focused only one claim and that it was in the best interests of the class that the proposed class proceeding not be limited to one claim when three were genuinely available. He also found that RGG had achieved a level of readiness and overall preparation that was genuinely and objectively superior to that of KMG. He granted carriage to RGG. KMG appealed.

Held, the appeal should be dismissed.

The motion judge correctly articulated the test to be applied on a carriage motion. He did not err in law or principle and did not commit any palpable and overriding errors with respect to factual findings or conclusions. There is no rule or principle of law, as asserted by KMG, which dictates that narrower claims must always be preferred in carriage determinations. The motion judge did not err in failing to find that the KMG claim was to be preferred over the RGG claim simply because it asserted fewer causes of action. In considering the state of preparation of the actions, the motion judge did not rely on RGG's trip to Chile and the filing of preliminary expert reports as the single most important determinant. Rather, the trip to Chile was considered as part of the narrative of preparation. The motion judge was entitled to find that the RGG statement of claim dug deeper than the KMG pleading and that it offered a much more informed and sophisticated understanding of the mining project. The motion judge did not violate any "freeze frame" principle in taking into account the Chilean trip, which was made after the carriage motion was scheduled. The scheduling of a carriage motion does not operate to "freeze" preparation in the manner suggested by KMG. Moreover, the trip was part of an ongoing and continuing narrative of preparation that began well before the motion was scheduled. [page297]

The motion judge was entitled to find that the other factors did not provide any differentiation between the parties seeking carriage.

Smith v. Sino-Forest Corp., [2012] O.J. No. 88, 2012 ONSC 24, 34 C.P.C. (7th) 76, 213 A.C.W.S. (3d) 27 (S.C.J.); Whiting v. Menu Foods Operating Limited Partnership, [2007] O.J. No. 3996, 53 C.P.C. (6th) 124, 160 A.C.W.S. (3d) 947 (S.C.J.), consd

Ricardo v. Air Transat A.T. Inc., [2002] O.J. No. 1090, [2002] O.T.C. 205, 21 C.P.C. (5th) 297, 113 A.C.W.S. (3d) 945 (S.C.J.); Setterington v. Merck Frosst Canada Ltd., 2006 2623 (ON SC), [2006] O.J. No. 376, [2006] O.T.C. 97, 26 C.P.C. (6th) 173, 145 A.C.W.S. (3d) 566 (S.C.J.), distd

Other cases referred to

AIC Ltd. v. Fischer, [2013] 3 S.C.R. 949, [2013] S.C.J. No. 69, 2013 SCC 69, 452 N.R. 80, 312 O.A.C. 128, 2013EXP-3985, J.E. 2013-2175, EYB 2013-230429, 366 D.L.R. (4th) 1, 45 C.P.C. (7th) 227; Cassano v. Toronto-Dominion Bank (2007), 87 O.R. (3d) 401, [2007] O.J. No. 4406, 2007 ONCA 781, 47 C.P.C. (6th) 209, 287 D.L.R. (4th) 703; Cloud v. Canada (Attorney General) (2004), 2004 45444 (ON CA), 73 O.R. (3d) 401, [2004] O.J. No. 4924, 247 D.L.R. (4th) 667, 192 O.A.C. 239, 27 C.C.L.T. (3d) 50, [2005] 1 C.N.L.R. 8, 2 C.P.C. (6th) 199, 135 A.C.W.S. (3d) 567 (C.A.); Housen v. Nikolaisen, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, 2002 SCC 33, 211 D.L.R. (4th) 577, 286 N.R. 1, [2002] 7 W.W.R. 1, J.E. 2002-617, 219 Sask. R. 1, 10 C.C.L.T. (3d) 157, 30 M.P.L.R. (3d) 1, 112 A.C.W.S. (3d) 991; Kerr v. Danier Leather Inc., [2007] S.C.J. No. 44, 2007 SCC 44, 286 D.L.R. (4th) 601, 368 N.R. 204, 231 O.A.C. 348, 36 B.L.R. (4th) 95, 48 C.P.C. (6th) 205, J.E. 2007-1969, EYB 2007-124711, 160 A.C.W.S. (3d) 910; Locking v. Armtec Infrastructure Inc., [2013] O.J. No. 531, 2013 ONSC 331, 46 C.P.C. (7th) 427, 303 O.A.C. 299, 225 A.C.W.S. (3d) 614 (Div. Ct.); Mancinelli v. Barrick Gold Corp. (2014), 124 O.R. (3d) 145, [2014] O.J. No. 5925, 2014 ONSC 6516 (S.C.J.); Sharma v. Timminco Ltd. (2009), 2009 58974 (ON SC), 99 O.R. (3d) 260, [2009] O.J. No. 4511, 181 A.C.W.S. (3d) 860 (S.C.J.); Vitapharm Canada Ltd. v. F. Hoffmann-La Roche Ltd., [2000] O.J. No. 4594, [2000] O.T.C. 877, 4 C.P.C. (5th) 169, 101 A.C.W.S. (3d) 472 (S.C.J.)

Statutes referred to

Class Proceedings Act, 1992, S.O. 1992, c. 6

Securities Act, R.S.O. 1990, c. S.5 [as am.]

APPEAL from an order of the motion judge on a carriage motion.

Harvey T. Strosberg, Q.C., Kirk Baert and Celeste Poltak, for plaintiffs/appellants Labourers' Pension Fund of Central and Eastern Ontario.

Joel P. Rochon, Peter Jervis and W.A. Derry Millar, for plaintiffs/respondents DALI and Royce Lee.

Kent E. Thomson and Steven G. Frankel, for defendant Barrick Gold Corporation.

The judgment of the court was delivered by

HARVISON YOUNG J.: —

Overview

[1] This is an appeal, with leave, of a carriage order made by Belobaba J., dated December 10, 2014 [ (2014), 2014 ONSC 6516, 124 O.R. (3d) 145, [2014] O.J. No. 5925 (S.C.J.)]. [page298] That order granted carriage of a proposed shareholders' class action against Barrick Gold Corporation and four of its executives, Aaron W. Regent, Jamie C. Sokalsky, Ammar Al-Joundi and Peter Kinver (collectively referred to as "Barrick") to a consortium led by Rochon Genova ("RGG"), and stayed a competing action led by Koskie Minsky ("KMG").

[2] The RGG action is brought on behalf of two representative plaintiffs: the Trustees of the Drywall Acoustic Lathing and Insulation ("DALI") Local 675 Pension Fund and an individual investor. The individual investor, Royce Lee, had commenced a separate claim represented by the Merchant Law Group (the "Lee action"). This action has now been consolidated with the RGG DALI action as had been agreed pursuant to Belobaba J.'s order.

[3] The KMG action is brought on behalf of the Labourers' Pension Fund et al. ("Labourers"). KMG appeals the carriage order, arguing that the motion judge erred in failing to apply the legal test and misapprehending the evidence led at the hearing of the motion such that this court should allow the appeal and grant the carriage order to KMG.

[4] The actions arise from Barrick's disclosure on April 10, 2013 that a Chilean court had issued an interlocutory order suspending the construction of its Pascua-Lama mine. The following month, Chilean environmental regulators shut down the project because of serious environmental violations. The resulting drop in the company's share price prompted several class actions by Barrick shareholders, alleging that the company and some of its officers violated the Securities Act, R.S.O. 1990, c. S.5 by publicly misrepresenting the progress of the Pascua-Lama mine. The formation of the two prospective plaintiff classes is described in the parties' facta and need not be repeated here. However, it will be useful to set out a brief summary of the actions and the relevant timelines.

The KMG Labourers' Claim

[5] The Labourers' statement of claim ("LSC") was filed in the Superior Court on April 24, 2014.

[6] The LSC alleges that Barrick issued misleading public statements and failed to disclose significant problems and delays at Pascua-Lama, thus causing financial loss to investors who relied on their representations. In particular, Barrick allegedly concealed the risks arising from their failure to comply with the environmental conditions imposed by the Chilean government; risks which, as the allegations go, finally caught up with Barrick in the spring of 2013. The Labourer plaintiffs seek $3 billion in [page299] general and special damages for negligent misrepresentation; simple negligence; and statutory liability arising from the offering memorandum and the secondary marketing of Barrick securities.

The RGG DALI Claim

[7] RGG commenced the DALI claim on September 5, 2014. The Lee action was commenced on April 15, 2014. The proposed DALI action seeks damages of $3 billion for "negligent misrepresentation and conspiracy", along with declarations of special circumstances, fraudulent concealment and/or continuing misrepresentations.

[8] RGG says that such declarations would either extend the limitation periods in the Securities Act or render them inapplicable. The DALI statement of claim ("DSC") alleges that Barrick "knew or ought to have known that the adverse facts specified herein were being concealed from the public and that the representations being made were materially false and misleading". The DSC emphasizes the 2010 "paradigm shift" in Chilean environmental regulation, which replaced the "lax" regime under which Barrick had operated since 1994 with rigorous inspection and enforcement. The DSC claims that Barrick knowingly violated the environmental conditions imposed by the Chilean government, risking the shutdown of operations at Pascua-Lama.

[9] According to the DSC, Chilean authorities first moved against Pascua-Lama in October 2012 (not spring of 2013, as stated in the LSC). Barrick subsequently "issued a misleading press release" announcing a "voluntary" pause in construction. The DSC further alleges that

(a) the May 2014 suspension order "was foreseeable and known as a significant risk throughout the class period";

(b) the defendants "made a continuing series of misrepresentations"; and

(c) the defendants concealed the ballooning cost of Pascua-Lama long after the company knew that its original budget was much too low.

[10] After the truth about Pascua-Lama became public, the DSC says that Barrick continued to mislead investors even as its share price slid.

The Carriage Motion

[11] On May 1, 2014, KMG applied to Perell J. to appoint a case management judge and Belobaba J. was appointed. [page300] Belobaba J. held a case management conference on September 8, 2014 to deal with the question of carriage. RGG filed a motion to certify the DALI class on September 22, 2014. On October 20, 2014, KMG moved for a carriage order and a stay of the DALI action. RGG brought a similar motion against KMG on the same day. The carriage motion was heard on November 12 and 13, 2014.

The Undertaking

[12] Before the carriage motion was heard, Barrick sought an undertaking from both counsel groups that they would respect and abide by the court's carriage decision and not seek to circumvent that decision directly or indirectly. The request was made by letter dated October 31, 2014, and was reiterated in Barrick's factum on the carriage motion. Lead counsel for both competing groups made this undertaking in open court and it was reflected by the following endorsement made by Belobaba J. [reasons, at para. 52]:

[The Koskie Minsky Group and the Rochon Genova Group] are directed to take all necessary steps to permanently stay or dismiss any parallel Canadian proceeding that they or their local agents have commenced and not to commence, instruct local agents to commence or otherwise permit, facilitate or encourage the commencement of any other parallel Canadian proceedings. The defendant requested this undertaking at the outset of the hearing and both sides agreed.

[13] Following the release of the reasons, an issue arose concerning the scope of the undertaking given by KMG and whether their undertaking extended to law firms outside Ontario and was intended by all parties to mean the law firms listed in Schedule "A" to the October 31, 2014 letter. The October letter is appended to Barrick's factum on this appeal as Schedule "B". On December 18, 2014, Belobaba J. issued a written endorsement confirming that the term "local agents" in the requested undertakings did, in fact, extend to law firms outside Ontario and was intended by all parties to mean the various law firms listed in the schedule to the October 31, 2014 letter. He therefore declared that the direction contained, at para. 52 of his reasons, "is clarified to mean 'local agents' as described in the Schedule 'A' listing".

[14] Counsel for the defendants appeared at this appeal for the sole purpose of asking that the undertaking be maintained. At the beginning of the hearing of the appeal, counsel for both plaintiff groups reiterated their agreement to this undertaking. Accordingly, it is to continue to apply as clarified by the motion judge's endorsement of December 18, 2014. [page301]

The Issues

[15] The parties agree that the motion judge correctly articulated the test to be applied on a carriage motion as follows [reasons, at paras. 8-9]:

The applicable law is not in dispute. In deciding carriage of competing class proceedings, the court's objective is to make the selection that is in the best interests of the class, while being fair to the defendants and consistent with the objectives of the Class Proceedings Act, 1992. The objectives of a class proceeding are access to justice, behaviour modification, and judicial economy for the parties and for the administration of justice.

Courts have generally considered seven non-exhaustive factors in determining which action should proceed: (1) the nature and scope of the causes of action advanced; (2) the theories advanced by counsel as being supportive of the claims advanced; (3) the state of each class action, including preparation; (4) the number, size and extent of involvement of the proposed representative plaintiffs; (5) the relative priority of the commencement of the class actions; (6) the resources and experience of counsel; and (7) the presence of any conflicts of interest.

[16] From this point on, however, KMG submits that the motion judge erred in law and principle by completely failing to apply this test, and by misapprehending the facts and evidence to which he purportedly applied the test, thus committing palpable and overriding error.

The Standard of Review

[17] There is no dispute as to the applicable standard of review. The Class Proceedings Act, 1992, S.O. 1992, c. 6 ("CPA") gives judges broad discretion. Reviewing courts should defer to their decisions, especially when the motion judge is a member of "the small group of judges across the province" with expertise in class proceedings, unless an error of law is established: see Cloud v. Canada (Attorney General) (2004), 2004 45444 (ON CA), 73 O.R. (3d) 401, [2004] O.J. No. 4924 (C.A.); Cassano v. Toronto-Dominion Bank (2007), 87 O.R. (3d) 401, [2007] O.J. No. 4406, 2007 ONCA 781.

[18] The court's primary concern on a class action carriage motion is to determine which of the competing actions is more, or most, likely to advance the interests of the class. The task, in other words is to find a solution that is in the best interests of the putative class members, promotes the objectives of the CPA and is fair to the defendants: see Sharma v. Timminco Ltd. (2009), 2009 58974 (ON SC), 99 O.R. (3d) 260, [2009] O.J. No. 4511 (S.C.J.), para. 14; Setterington v. Merck Frosst Canada Ltd., 2006 2623 (ON SC), [2006] O.J. No. 376, 26 C.P.C. (6th) 173 (S.C.J.), para. 13; Ricardo v. Air Transat A. T. Inc., [2002] O.J. No. 1090, 21 C.P.C. (5th) 297 (S.C.J.), para. 31; and Vitapharm Canada Ltd. v. F. Hoffmann-La Roche Ltd., [2000] O.J. No. 4594, 4 C.P.C. (5th) 169 (S.C.J.), para. 48. [page302]

[19] In determining which of the competing actions is most likely to advance the interests of the class, the motion judge must first determine the test to be applied. This is a question of law and the motion judge is required to be correct: Housen v. Nikolaisen, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, 2002 SCC 33; Locking v. Armtec Infrastructure Inc., [2013] O.J. No. 531, 2013 ONSC 331 (Div. Ct.), para. 6.

[20] The second issue to be considered is the motion judge's analysis and conclusions in deciding which party should have carriage. If the motion judge has identified and applied the correct test, the motion judge's discretion in deciding which party should have carriage is entitled to considerable deference: Locking, para. 6.

[21] At this point, it will be useful to summarize the motion judge's reasons for decision.

The Motion Judge's Reasons for Decision

[22] Having set out the considerations to be applied, as set out above, the motion judge found that the non-exhaustive considerations were sufficient to determine the carriage issue before him (reasons, para. 11). He also found, however, that the following considerations did not differentiate between the parties seeking carriage (reasons, para. 13):

(i) the representative plaintiffs;

(ii) the relative priority of the commencement of the class actions;

(iii) the resources and experience of counsel;

(iv) conflicts of interest; and

(v) funding arrangements.

[23] As will be discussed later in these reasons, KMG strongly disputes the motion judge's statement, at para. 13, that there was "little to no dispute" that the above factors provided no differentiating value of any significance and were basically neutral.

[24] After setting out the factors which he considered to be non-differentiating, the motion judge then turned to examine the two considerations which, in his view, did make the difference [reasons, at para. 14]:

This carriage motion turns on two points of comparison: the causes of action or claims being advanced, and the state of preparation. As discussed in detail below, when one compares the competing actions and law groups on the basis of these factors -- the claims being advanced and the state of readiness -- one has no difficulty deciding the motion in favour of RGG. I will discuss each of these points in turn. [page303]

Analysis

[25] KMG argues forcefully that the motion judge erred in misapprehending the evidence and essentially applying the wrong test with respect to the first five considerations, and also with respect to the two considerations which he found to be determinative. For its part, RGG submits that the motion judge committed no error of law or principle that would warrant the intervention of this court, arguing that the appellants essentially seek the reweighing of the factors considered by the motion judge.

[26] The motion judge found that two considerations favoured RGG: the claims advanced and the relative state of preparation. I will begin with the grounds raised in relation to these two considerations.

[27] As noted at the outset of these reasons, the parties agree that the motion judge articulated the correct factors. In order to succeed in this appeal, KMG must demonstrate that the motion judge erred in law or principle or committed palpable and overriding error with respect to factual findings or conclusions. The appellants argue that although the motion judge articulated the correct factors, he failed to apply them such that he did err in law and/or principle, and also that he misapprehended the evidence or record so that his findings also fell into palpable and overriding error. I disagree. In my view, KMG's submissions amount to no more than an attempt to convince this court to reweigh the factors applied by the motion judge and do not demonstrate any reversible error in the exercise of his discretion to determine which group should obtain carriage of these class proceedings.

The Claims Advanced

[28] The KMG Labourers' action is advancing a single claim that focuses on the environmental violations. It alleges that Barrick misrepresented that the mining project was in compliance with Chilean environmental regulations and environmental permits. This resulted in material understatements in the cost and time required to make the mine operational and artificially inflated share prices.

[29] The RGG DALI action, on the other hand, is advancing a number of claims:

(i) misrepresentations relating to the environmental violations and specifically the conditions imposed in the 2006 environmental permit, which authorized the construction and operation of the mining project; [page304]

(ii) misrepresentations relating to overall costs and completion time estimates, in particular the understatement of the Capex budget, which was initially pegged at $2.8 to $3 billion but then ballooned to over $10 billion; and

(iii) misrepresentations in Barrick's financial statements, including alleged violations of accounting standards relating to timely impairment writedowns;

(iv) conspiracy and fraudulent concealment.

[30] Before this court, as before the motion judge, the appellants submitted that "leaner and meaner" cases should be preferred. They argued that the motion judge had erred by preferring an "unwieldy unfocussed claim", submitting that this goes against the jurisprudence, which clearly favours lean and focused claims.

[31] I do not agree that the motion judge committed any error of law or principle in finding that this consideration favoured RGG.

[32] First, there is no rule or principle of law, as asserted by the appellants, which dictates that narrower claims must always be preferred in carriage determinations. None of the authorities cited by the appellants support such a principle. In particular, Smith v. Sino-Forest Corp., [2012] O.J. No. 88, 2012 ONSC 24 (S.C.J.) does not support such broad general principles. In that case, Perell J. was critical of the reliance by one of the applicants for carriage on the tort action of fraudulent misrepresentation as one which added needless complexity and costs in the circumstances of that case. Perell J. stated that [at para. 306]

. . . 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 . . . secures the just, most expeditious and least expensive determination of the dispute on its merits.

[33] Perell J. specifically found that the employment of, and reliance on, the tort action of fraudulent misrepresentation did add needless complexity and costs in the circumstances of that case.

[34] The motion judge here carefully considered the claims advanced and concluded that the claims advanced were viable and justified before him. Unlike Perell J. in Sino-Forest, he did not find that the additional RGG claims were "needless" in the circumstances. This conclusion was open to the motion judge on the record before him. There is no support for the suggestion that this consideration requires the court to favour the claim with the fewest causes of action.

[35] Second, the motion judge did not, as the appellants imply, state that "unwieldy unfocused claims" are to be preferred. To [page305] begin with, it is clear that the motion judge did not agree with the appellants' characterization of the RGG claims as "unwieldy and unfocused".

[36] The motion judge specifically rejected KMG's assertion that the two additional claims advanced by RGG were "kitchen sink" claims that would only add years to the proceedings and be more difficult and expensive to prove than the focused KMG claim that would be more likely to obtain certification and more likely to succeed. The motion judge found, on the record before him, that neither additional claim was a "kitchen sink" sort of claim. He stated as follows [reasons, at paras. 20-21]:

On the material before me, I am satisfied that both are viable claims that are supported by the evidence collected to date. RGG has included preliminary expert reports in its motion record. Peter Jones, a senior Canadian mining executive retained by RGG, concludes on the evidence that he has reviewed to date that the defendant knew about the initial inadequacy of its Capex budget and the expected production delays long before it disclosed those problems to the public. Professor Gordon Robertson, the KPMG Chair of Accounting at the Rotman School of Management, also retained by RGG, concludes in his filed report that the defendant misrepresented key information relating to the Mining Project in its financial statements during the class period, failed to take timely impairment write-downs and also failed to identify weaknesses in its internal controls.

The conspiracy claim also has evidentiary support and provides an additional basis of common law liability and damages that are not subject to any statutory caps as set out in the Securities Act. Further, the conspiracy claim may be required to help lift the corporate veil if the defendant decides to draw a distinction between itself and its Chilean subsidiary that owns and operates the Mining Project. I agree with KMG that no one wants to be accused of being part of a civil conspiracy, but that is the risk of being an officer or director of a publicly-traded company whose financial disclosures have been impugned. Some comfort can be found in the fact that conspiracy is a routine pleading in many securities class actions.

[37] The motion judge continued to point out that there was evidentiary support for the conspiracy claim, which provides an additional basis for common law liability and damages that are not subject to any statutory caps as set out in the Securities Act (reasons, para. 21). He also noted that the conspiracy claim may be required to help lift the corporate veil if the defendant decides to draw a distinction between itself and its Chilean subsidiary. He referred to RGG's pleadings with respect to fraudulent concealment (plus special circumstances and discoverability), stating that [reasons, at para. 22]

. . . the RGG pleading makes clear that these doctrines are only intended to address potential limitation problems. These doctrines are important, says RGG, because fraudulent concealment and special circumstances may operate to extend the limitation periods and protect the statutory claims of class members who purchased securities before April 15, 2011 (three years before [page306] the Lee action was commenced). Discoverability, which applies to the common law claims of negligent misrepresentation and conspiracy, would extend the two-year limitation period, and protect class members whose claims relate to the purchase of securities prior to April 2012.

[38] The motion judge noted that RGG had provided a detailed analysis to support these submissions, and concluded that he did not have to adjudicate the validity of RGG's submissions about the need for the conspiracy claims or the limitations-related doctrines. Rather, he stated that [reasons, at para. 23]

It is sufficient for me to find, as I easily do on the material before me, that each of these claims has a strong rationale and is genuinely viable. Indeed, the same can be said about all of the claims being advanced in the RGG action.

[39] In short, the motion judge did not err in failing to find that the KMG claim was to be preferred over the RGG claims simply because it asserted fewer causes of action.

[40] Having found that the RGG claims were viable and justified, the motion judge went on to consider the approach to be taken to distinguishing the actions and choosing the one that is in the best interests of the class. The carriage motion judge is not, the motion judge stated, in a position to decide which claims are more likely to succeed. In his view, KMG was essentially basing its submissions on the likelihood of success. At para. 25, he cited Winkler J.'s statement on this point in Setterington [at para. 19] [reasons, at para. 25]:

The purpose of a carriage motion is not to parse the action finely or overly analyze it for purposes of comparison but rather to scrutinize each for any glaring deficiencies . . . On a carriage motion it is inappropriate for the court to embark upon an analysis as to which claim is most likely to succeed unless one is "fanciful or frivolous."

The motion judge, in arriving at his conclusion that the RGG claims were in the best interests of the class, considered and applied the approaches set out in both Setterington and Locking, beginning with Setterington [reasons, at para. 32]:

I would have concluded, sensibly I think, that in a multi-billion dollar action against the world's largest gold mining company, it is in the plaintiffs' best interest to plead all of the genuinely viable primary claims, and not just one-third of them. It is in the plaintiffs' best interest to plead conspiracy and fraudulent concealment for the limitation-related reasons already discussed. I would have therefore concluded that the RGG actions provided a more comprehensive litigation framework, which is very much to the class members' advantage.

[41] Although he was critical of the suggestion in Locking that a carriage motion judge should do more than simply look for obvious defects, the motion judge acknowledged that he was [page307] bound to do so in the three situations set out in that case. He cited those three situations as follows:

(1) where the two actions are similar in their strengths (Locking, para. 23);

(2) where there is no other way to properly distinguish between the actions and choose the proceeding that is in the best interests of the class (Locking, para. 25); and

(3) where the only difference between two proceedings is the inclusion of a claim in one proceeding that is not in the other -- there must be some critical analysis of the claim and of why it is not included in one of the proceedings (Locking, para. 20).

[42] Having cited those situations, he found that the first did not apply on the basis that the RGG claim advances three genuinely viable claims with evidentiary support, and two minor claims that are arguably valuable and whose absence from the KMG action might in itself constitute a glaring deficiency. He then found that this is not a situation where there is no other way of distinguishing between the actions because there are at least two other ways to distinguish between the actions and choose the proceeding that is in the best interests of the class, namely, the causes of action (as already discussed) and the level of preparation.

[43] The motion judge did provide an analysis of the claims included in the RGG claim and the basis for their inclusion [reasons, at paras. 35-36]:

KMG preferred the single claim action over RGG's three-claim action because, in their view, the latter's Capex and accounting claims would add unnecessary costs and complexity and the single environmental compliance claim is more likely to succeed. It is important to remember, however, that there is nothing inherently wrong with added costs and complexity provided the additional claims are genuinely viable. I have already found that each of the claims in the RGG actions are genuinely viable and are supported with evidence. And the "likelihood of success" of any of the claims being advanced cannot and should not be determined on a carriage motion.

Put simply, RGG decided not to put all its eggs in the environmental violations basket. They pleaded two additional claims, as well as conspiracy, to expand the reach of their action, and fraudulent concealment, discovery and special circumstances for limitation-related purposes.

[44] The motion judge observed that no one at this stage can predict which of the three main claims will ultimately prevail at trial or have the most effect as a settlement lever. Accordingly, he concluded that it is in the best interests of the class that the [page308] proposed class proceeding not be limited to one claim when three are genuinely available, holding that the "cause of action claims advanced" factor clearly favours RGG.

[45] I see no error in law or principle or any palpable and overriding error in the motion judge's treatment of the "cause of action/claims advanced" factor. He considered the viability of the claims and the reasons advanced by the parties. He carefully considered the applicable jurisprudence, including both Setterington and Locking. He applied both and reached the same conclusion in doing so. KMG, while framing the issues as errors of law or principle, is essentially asking the court to reweigh the considerations that the motion judge took into account. This is not our role.

The Differentiating Factors

The state of preparation

[46] KMG submits that the motion judge erred with respect to the "state of preparation" factor. It argues that the motion judge relied on RGG's trip to Chile and the filing of preliminary expert reports as the single most important determinant and that this does not withstand principled scrutiny. There are a number of problems with this argument.

[47] First, the appellants overstate the findings of the motion judge with respect to the state of preparation. In particular, they suggest that the motion judge mistakenly emphasized the RGG trip to Chile as though the trip was determinative. In fact, the trip to Chile is considered as part of the narrative of preparation reviewed by the motion judge that began months before the scheduling of the carriage motion. The motion judge referred to the pleadings, finding that the RGG statement of claim "digs deeper" than the KMG pleading and that it offers a [at para. 42] "much more informed and sophisticated understanding of the Mining Project". He went on to state that [reasons, at para. 43]:

RGG achieved this demonstrably superior understanding of the allegations that drive the environmental compliance claim by doing the following. They began working on the action in May 2013, just after the key disclosures were made public by the defendant. Like KMG, RGG reviewed all of the defendant's disclosures and requisitioned and translated a large volume of Chilean judicial and administrative documents. But they did more. They retained one of the leading environmental lawyers in Chile who prepared a detailed report about the applicable environmental regulations, the shift in approach and enforcement in 2010 and the implications and impact on the Mining Project.

[48] It is in this context that the motion judge referred to the trip to Chile. He continued as follows [reasons, at para. 44]:

They travelled to Chile and met with numerous legal and governmental officials; attended relevant Chilean court proceedings; met with and interviewed [page309] a large number of potential witnesses from environmental NGOs, agricultural groups and indigenous communities, who have long opposed the Mining Project with protests, petitions, and lawsuits; visited the site of the Mining Project and surrounding areas allegedly affected by the mine's pollution; and retained an array of mining and financial experts, several of whom have already completed preliminary reports that were included (with names fully disclosed) in RGG's motion record. It is this hands-on effort on the part of RGG that best explains the detail and the deep understanding of the alleged environmental violations that is found in the DALI statement of claim.

[49] The appellants effectively attempt to trivialize RGG's preparatory work by suggesting that the motion judge's decision sends the message that all one has to do is to take a flight in order to gain the advantage pursuant to this consideration in a carriage motion. However, the trip itself is only one of a number of indicators that fuelled the motion judge's finding that RGG was better prepared. It was a part of a sustained and in-depth pattern of research and preparation that began when they started the action in May 2013. It was not an 11th-hour and isolated attempt to "gazump" KMG for the sole purposes of the carriage motion.

[50] As the passage quoted above indicates, the motion judge found that RGG's preparatory work had also resulted in a "superior level of understanding . . . found in RGG's discussion of the Capex claim and the accounting claim" (reasons, para. 45). He pointed to the fact that RGG had filed a copy of the preliminary report prepared by a mining industry expert to support the Capex claim, and to another expert report prepared in support of the accounting claim, as well as another report by a known shareholders' damages expert.

[51] Second, KMG submits that the trip to Chile should not have been taken into account at all because it violates what they call the "freeze frame" principle for which they cite Lax J.'s decision in Whiting v. Menu Foods Operating Limited Partnership, [2007] O.J. No. 3996, 53 C.P.C. (6th) 124 (S.C.J.), at para. 21.

[52] I do not agree that there is such a principle articulated in that case that assists KMG in the present case. To begin with, there is no suggestion in Whiting that the date of the scheduling of the carriage motion operates as a rule to "freeze" preparation in the manner they assert. In that case, the ultimately unsuccessful applicants for carriage sought to amend their statement of claim well after the scheduling of the motion and shortly before it was to be heard. Lax J. ordered that the carriage motion be heard on the basis of the pleadings filed and on the basis that the Merchant Law Group ("MLG") intended to amend its pleadings if they were given carriage. [page310]

[53] The problem in Whiting was not that there had been preparatory activity since the scheduling of the motion per se, but that the MLG amendments proposed "flow[ed] directly from the benefit of the Whiting pleading", which certainly manifests a directly competing level of activities (Whiting, para. 24). I agree that the courts on carriage motion should be alert to competition or "leap frogging" of claims when a carriage motion is pending, as was Lax J. in Whiting and as was the motion judge in his consideration of this carriage motion.

[54] In the present case, however, the motion judge noted at the outset of his discussion of the level of preparation that the respondents had begun their work as soon as the claim was commenced. While it is true that there were amendments to the statement of claim after the motion was scheduled, and it is also true that the trip to Chile took place after that date, these were parts of an ongoing and continuing narrative of preparation that began well before the motion was scheduled. The motion judge particularly emphasized the expert reports that had been prepared, which is entirely appropriate because this is research that fuels the development and advancement of the case, albeit at this preliminary stage.

[55] Moreover, this is not a case, as in Whiting, where RGG's proposed amendments essentially copied their competitor's pleadings. In short, the motion judge took a thorough look at the level of preparation of both sides. He was, in my view, alive to the concerns about "leapfrogging" or competing after the motion is scheduled, which in my view explains why he reviewed the ongoing pattern of research and preparation in some detail that had started with the commencement of the action and continued even after the motion was scheduled. He found that, from the outset, RGG had done much more than KMG, with results that, in the motion judge's view, would further the interests of the class. This conclusion was amply supported by the record before him. I see no error of law or principle, or palpable and overriding error in his reasons on this issue.

The Factors that Did Not Provide any Differentiation in the Motion Judge's View

Representative plaintiffs

[56] The motion judge found that both parties were proposing [reasons, at para. 13]

. . . institutional investors (such as the Labourers' Pension Fund, the Operating Engineers Pension Fund and the DALI Pension Fund) that are expert and experienced class action warriors, and individual investors (Michael Wiener and Royce Lee) who are sophisticated and committed. [page311]

[57] I see no error in the motion judge's application of this consideration in this case.

Relative commencement of the claims

[58] KMG submits that this factor clearly advantaged them, noting that their action was commenced in April while the DALI action was commenced just before the case conference when a timetable had already been set. The motion judge explained his reasoning on this issue [reasons, at para. 13]:

As I have already noted, two of the competing actions (Labourers and Lee) were commenced in April, and the third (DALI) in September of this year. However, I find on the material before me that all three actions were actually in play at about the same time, in the spring of this year. In any event, Ontario is not a "first to file" jurisdiction. This factor is neutral at best.

[59] In short, the motion judge was alive to this consideration, to the record before him as it related to this consideration, and to the rationale underlying it. His conclusion that this provided no significant differentiation between the groups was open to him. I see no basis for interfering with this conclusion.

Conflicts of Interest

[60] The motion judge noted that no such allegations had been advanced at that time, but stated in a footnote that the defendants had raised a possible conflict issue and then deferred their submissions on this point until after the carriage motion had been decided.

[61] In the course of the hearing of this appeal, Mr. Baert for KMG submitted that this was an issue that should have been dealt with at the carriage motion. The conflict issue arises because Barrick alleges a conflict on the part of one of the Chilean experts, Paulina Riquelme, who had provided an affidavit to the respondents on the legislative and regulatory environmental system in Chile and described changes adopted in 2010.

[62] I do not agree that this potential conflict bears on the issues at play in this appeal. The only relevance of this affidavit at the carriage stage is as evidence of the state of preparation of RGG, and that is clearly how it and other such expert evidence was treated by the motion judge. Its purpose was to educate RGG. The fact that such a report was undertaken and that it canvassed certain topics was only significant for the purpose of the carriage motion and particularly as evidence of the state of RGG's preparation. The fact that it has not been tested by cross-examination is thus of no moment at this stage in these proceedings because the reliability or admissibility at trial of the content of the affidavit is beyond the concerns relevant to a carriage motion. [page312]

The Resources and Experience of Counsel

[63] KMG submitted that the motion judge "gave short shrift to the expertise, resources and depth of the competing consortiums", noting that this factor is an important consideration that may even "tilt the balance significantly" (Setterington paras. 22-24) and arguing that in the present case: "The gulf in experiences and resources between the two counsel groups is wide enough to be a determinative factor in favour of the KMG Consortium."

[64] In my view, KMG has not pointed to any error in law or principle or palpable and overriding error with respect to the motion judge's consideration of this factor. Rather, they simply disagree with the manner in which he treated it, which is at the heart of the discretionary function being exercised. Obviously, the fact that this is a factor that "may" tilt the balance does not mean that it will in every case. Here, the motion judge found that it was not a differentiating factor, stating as follows [reasons, at para. 13]:

Carriage motions are not law firm beauty contests. There is no doubt that KMG (thanks to Siskinds) has been involved in more securities class actions than RGG. But RGG also has a significant track record in this area and has more than enough expertise and experience to do an excellent job as carriage counsel. Indeed, as I stated several times during the hearing of the motion, any one of the elite class action firms involved herein -- Koskie Minsky, Siskinds, Sutts Strosberg, Rochon Genova or Merchant -- have more than enough expertise and experience on their own to do an excellent job as carriage counsel. And if one adds Messrs. Groia or Naster to provide securities law expertise, nothing more is needed. I find on the material before me that the class members would be well served with either KMG or RGG as class counsel.

[65] In essence, the appellants submit that the number of class proceedings and securities cases in which its counsel have acted greatly exceed that of the respondents' counsel. The motion judge considered the experience of counsel and found that it was a neutral factor. The evidence before the court demonstrated that the other members of RGG, in addition to those mentioned by the motion judge, also bring significant securities and class action experience. The record before the motion judge also supported his finding that RGG had the resources and expertise to prosecute this class proceeding. The evidence showed that RGG did have a broad range of experience in class actions generally, and specifically in complex securities class actions, including Kerr v. Danier Leather Inc., [2007] S.C.J. No. 44, 2007 SCC 44 and AIC Ltd. v. Fischer, [2013] 3 S.C.R. 949, [2013] S.C.J. No. 69, 2013 SCC 69, which have proceeded to the Supreme Court. In addition, RGG acted for the Canadian [page313] shareholders in $2 multi-million class actions arising out of Nortel's nondisclosure to shareholders in the secondary market.

[66] While it is true that in Setterington Winkler J. found counsels' experience to be a significant factor on the basis of a comparative assessment of the two groups seeking carriage, that was a case in which one of the groups had no office in Ontario, was not entitled to practice law in Ontario and whose experience did not include the extensive experience in class proceedings possessed by the competing counsel group in that case. In Ricardo v. Air Transat A.T. Inc., supra, Cullity J. also found the expertise of counsel to be a differentiating factor.

[67] However, this is a very different case. Both counsel groups have extensive experience in both class action proceedings and securities actions. I find no basis for the suggestion that a motion judge, in such a case, is compelled to prefer one group or the other on the basis of expertise in such a case.

[68] Nor is there support for the appellants' suggestion that a motion judge is compelled, in effect, to conduct a quantitative tally and find that this factor weighs in favour of the group with the largest number of cases behind it. It is clear that the motion judge was alive to the relative backgrounds and experience of the counsel groups before him. The motion judge concluded that both had significant relevant experience that would serve the class members very well and that this did not provide a differentiating factor. This conclusion was open to him on the record before him.

Funding

[69] The appellants also submit that funding should have been treated as a determinative factor in their favour in the carriage motion because the Labourers had submitted evidence that they had secured a funding agreement with a third party on terms that were favourable to the class, while RGG had adduced no evidence that they had taken any such steps nor had they provided an indemnity to the representative plaintiffs. In their factum (para. 71), they are critical of the motion judge for "assuming" that an indemnity had been provided in the absence of evidence.

[70] In fact, the record demonstrates that RGG has provided an indemnity to the representative plaintiffs through the retainer agreement between DALI and Rochon Genova LLP: see Appeal Book & Compendium, vol. 7, p. 1732. The litigation plan proposed by RGG indicated that if granted carriage, RGG would secure a funding arrangement. The motion judge accepted this, stating [reasons, at para. 13]:

KMG has a third-party funding arrangement already in place to cover costs, but I have no doubt that RGG will be able to do the same in short order. [page314] This is not a significant differentiating factor and KMG has not suggested otherwise.

[71] Again, I do not see any reversible error on the part of the motion judge in his consideration and application of this factor.

Class Definition

[72] KMG submits that the motion judge's failure to consider the DALI action's "fatal and arbitrary" class definition as a factor in the analysis was an error in law. This was not raised by KMG as an issue in the carriage motion below, and I see no basis upon which they should be entitled to raise it on this appeal for the first time.

Conclusion

[73] In summary, I find no basis upon which the carriage order may be set aside. The motion judge articulated and applied the correct test. While KMG disagrees with the motion judge's application of the considerations that comprise the test, the application of the factors to the circumstances of the particular case is an exercise of discretion to which considerable deference is owed. As I have indicated, I find no errors of law or principle, or palpable and overriding error that could justify interfering with the motion judge's decision in this case. The appeal is therefore dismissed.

Appeal dismissed.

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