CITATION: Bayens v. Kinross Gold Corporation, 2015 ONSC 3944

COURT FILE NO.: CV-12-44865100CP

DATE: 20150618

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

E. EDDY BAYENS, JOHN SINCLAIR, LUC FORTIN, PIERRE RACICOT and STANLEY SHORTT, in their capacity as TRUSTEES OF THE MUSICIANS’ PENSION FUND OF CANADA

Plaintiffs

– and –

KINROSS GOLD CORPORATION, TYE W. BURT, PAUL H. BARRY, GLEN J. MASTERMAN and KENNETH G. THOMAS

Defendants

Celeste Poltak, and Garth Myers for the Plaintiffs

Mark Gelowitz, Allan Coleman, and Robert Carson for the Defendants

Proceeding under the Class Proceedings Act, 1992

HEARD: June 17, 2015

PERELL, J.

REASONS FOR DECISION

A. INTRODUCTION

[1] The Plaintiffs, E. Eddy Bayens, John Sinclair, Luc Fortin, Pierre Racicot, and Stanley Shortt are the Trustees of the Musicians’ Pension Fund of Canada. The Defendants are Kinross Gold Corporation (“Kinross”), a Canadian international mining company, and Tye W. Burt, Paul H. Barry, Glen J. Masterman, and Kenneth G. Thomas, who are or were officers or directors of Kinross.

[2] This is an action under the Class Proceedings Act, 1992, S.O. 1992, and this is a consent motion for certification of the action for settlement purposes. The Plaintiffs also seek court approval of the proposed $12.5 million settlement. Court approval of Class Counsel’s fees of $3,437,500 to be paid out of the settlement proceeds is also sought.

[3] For the reasons that follow, I grant the motion.

B. FACTUAL AND PROCEDURAL BACKGROUND

[4] In the spring of 2012, Koskie Minsky LLP was retained by the Board of Trustees of the Musicians' Pension Fund of Canada to prosecute a securities class action against Kinross, Tye W. Burt, Paul H. Barry, Glen J. Masterman and Kenneth G. Thomas.

[5] The Plaintiffs sought to advance claims against these Defendants with respect to alleged misrepresentations and an alleged failure to make timely disclosure of material changes or facts relating to the Tasiast and Chirano mines in Africa. There were common law claims for misrepresentation and also claims under the Securities Act, R.S.O. 1990, c. S.5. The statutory claims require the leave of the court in accordance with a low-threshold merits test.

[6] The Notice of Action was served on March 12, 2012, and the Statement of Claim was served on April 10, 2012.

[7] The action was brought on behalf of persons who purchased the shares of Kinross between February 16, 2011 and January 16, 2012.

[8] On April 5, 2012, the Plaintiffs made an application for funding to the Ontario Class Proceedings Fund.

[9] In September 2012, the Class Proceedings Fund denied the Plaintiffs’ funding application.

[10] Unsuccessful in obtaining funding from the Class Proceedings Fund, Koskie Minsky LLP approached Harbour Fund II, L.P. (“Harbour”) for third-party funding, and on May 30, 2013, the Plaintiffs entered into a formal litigation funding agreement with Harbour.

[11] The funding agreement provided that Harbour would provide an indemnity for adverse cost awards in an amount up to $1 million for the motions for certification and leave, and $5 million afterwards, in respect of any common issues trial. In return, if the action succeeded, Harbour would be repaid any adverse costs it paid and receive a percentage of net recovery to the class (net of class counsel fees, taxes, and disbursements and administration and notice costs). Harbour would receive 7.5% of any net recovery if the action was resolved before the certification hearing or 10% of net recovery if resolved after certification was finally resolved.

[12] In July 2013, the Plaintiffs moved before the court to have the Harbour funding agreement approved. I approved the agreement by order dated July 22, 2013. See Bayens v. Kinross Gold Corporation, 2013 ONSC 4974. In accordance with the terms of that funding agreement, on August 12, 2013, Harbour paid $300,000.00 into Court as security for costs.

[13] On October 2, 2012, the Plaintiffs filed their motions for certification and leave pursuant to Part XXIII.1 of the Securities Act.

[14] On April 15, 2013, the Defendants filed a responding record.

[15] On May 7, 2013, the Plaintiffs filed a reply motion record.

[16] On September 26, 2013, the Plaintiffs filed a sur-reply motion record containing the answers to its Request to Admit.

[17] On October 22 and 23, and 2013, I heard the Plaintiffs’ motions for certification and leave. I dismissed the motions. It is to oversimplify, but essentially because I did not grant leave under the Securities Act, which has a low merits test, I did not certify the class action including the common law claims. See Bayens v. Kinross Gold Corp., 2013 ONSC 6864.

[18] By orders dated November 5, 2013 and December 17, 2013, the Plaintiffs’ action was dismissed, and the Plaintiffs were ordered to pay costs in the amount of $500,000, inclusive of all fees, disbursements and HST, for the unsuccessful leave and certification motions.

[19] On November 28, 2013, the Plaintiffs served a Notice of Appeal to the Court of Appeal for Ontario from the denial of leave to proceed with claims pursuant to Part XXIII.1 of the Securities Act and the same day, the Plaintiffs appealed to the Divisional Court from the denial of certification of the action as a class action.

[20] On December 5, 2013, the Plaintiffs brought a motion, on consent, requesting that the Divisional Court appeal be transferred to the Court of Appeal so that all appeals could be heard together. This motion was granted.

[21] On June 11, 2014, the appeals to the Court of Appeal were heard.

[22] On December 17, 2014, the Plaintiffs’ appeals were dismissed with costs fixed at $85,000.00 all inclusive. See Bayens v. Kinross Gold Corporation, 2014 ONCA 901.

[23] For present purposes, it is important to note that the Court of Appeal did not agree with my approach to the certification criteria in the circumstances of a case where a statutory claim under the Securities Act was being advanced. But for the preferable procedure criteria not having been satisfied, it appears that the Court of Appeal would have certified the common law misrepresentation claims as suitable for a class action.

[24] Following the dismissal of the motions and the appeals, the Plaintiffs owed a total of $585,000.00 in costs.

[25] On January 13, 2015, before the Plaintiffs had filed any application for leave to appeal to the Supreme Court of Canada, the Defendants made an offer to the Plaintiffs to settle this action on the following terms: (a) the costs awards would be waived by the Defendants, including accrued interest; (b) the Plaintiffs would undertake to not commence an application for leave to appeal; (c) the Plaintiffs would deliver a full and final release, in a form satisfactory to the Defendants, releasing the Defendants from any and all claims, asserted or unasserted, known or unknown, up to the date of the release; (d) the parties would both consent to an order dismissing this action without costs; there would be a joint submission that the dismissal order did not require court approval in light of the dismissal of the Plaintiffs’ leave and certification motions; (e) in the event that I declined to sign the dismissal order, the Plaintiffs would bring a motion for court approval of the settlement, with the consent of the Defendants; and (f) Class Counsel would undertake and agree not to provide representation, advice, information, documentation, encouragement or assistance to any person in relation to any other proceedings arising out of or relating in any way to the subject matter of the claims pleaded or that could have been pleaded in this action.

[26] While the Plaintiffs seriously considered the settlement offer, on the instructions of the Plaintiffs, Class Counsel rejected the terms of the offer.

[27] The Plaintiffs proceeded with their application for Leave to Appeal to the Supreme Court. On February 11, 2015, the Plaintiffs perfected their Application Record, including their Memorandum of Argument.

[28] On March 12, 2015, the Defendants filed their Response on the Application for Leave to Appeal.

[29] On March 23, 2015, the Plaintiffs filed their Reply to Response to the Application for Leave to Appeal. The Supreme Court of Canada has not yet made a decision on the Plaintiffs’ Application.

[30] While the Leave to Appeal Application was being perfected, the parties continued their negotiations for a settlement, and a settlement was ultimately reached. The key terms of the Settlement Agreement include:

• the Defendants continue to deny the allegations in the action and any wrongdoing or liability in connection with the Tasiast and/or Chirano mines;

• the Defendants, through their insurers, reinsurers and/or co-insurers, shall pay the all-inclusive sum of $12.5 million;

• the Claims and Distribution Protocol creates a claims-based process for eligible purchasers of Kinross securities to seek compensation from the settlement fund. Once each eligible claimant’s compensable damages are calculated, the net settlement fund will be distributed among claimants on a pro rata basis;

• unless the agreement is terminated in accordance with its terms, the Defendants are not entitled to a reversion of any portion of the settlement amount;

• each of the claimant’s actual compensation shall be the portion of the net settlement fund equivalent to the ratio of one’s Nominal Entitlement to the total Nominal Entitlements of all claimants, multiplied by the net settlement fund, as calculated by the administrator;

• if, after six months from the date upon the administrator distributes the last contemplated payment from the net settlement fund, the settlement fund maintains a positive balance, those funds shall not revert back to the Defendants but shall be donated to Pro Bono Canada;

• Class Counsel fees, repayment of disbursements, administrative costs and notice costs are to be paid from the settlement fund;

• if the opt out threshold is exceeded, the Defendants may terminate the Settlement Agreement;

• all claims that were or could have been asserted arising from this action shall be released; and

• Class Counsel shall request the Supreme Court of Canada not to take any steps to decide the Leave Application unless the Settlement Agreement is terminated.

[31] Following the execution of the Settlement Agreement, on April 27, 2015, on consent of all parties, Class Counsel sent a letter to the Registrar of the Supreme Court of Canada, advising of the proposed Settlement Agreement and asking the Supreme Court not to take any steps to decide the Leave to Appeal Application pending the outcome of the motion to approve the Settlement Agreement.

[32] Koskie Minsky LLP has prosecuted this action on behalf of the Class and without compensation through key motions, appeals, a Supreme Court of Canada application and settlement negotiations. It has acted for close to four years. It has incurred 2,812.60 hours in time in prosecuting this action as of June 1, 2015. The total fees docketed as of June 1, 2015 are $1,430,107.70, exclusive of tax.

[33] Koskie Minsky seeks a multiplier of 2.4 of its docketed time, reflecting 27.5% of the amount recovered in settlement, consistent with the terms of the Retainer Agreement.

[34] Class Counsel has provided notice of this motion in accordance with the Order I made on April 27, 2015.

[35] There were no objections to the settlement or to Class Counsel’s fee request. Class Counsel and the Plaintiffs recommend the Settlement, and the Plaintiffs recommend the Counsel Fee.

C. DISCUSSION AND ANALYSIS

1. Certification for Settlement Purposes

[36] Pursuant to s. 5(1) of the Class Proceedings Act, 1992, the court shall certify an action as a class proceeding if: (a) the pleadings disclose a cause of action; (b) there is an identifiable class; (c) the claims or defences of the class members raise common issues of fact or law; (d) a class proceeding would be the preferable procedure; and (e) there is a representative plaintiff or defendant who would adequately represent the interests of the class without conflict of interest and there is a workable litigation plan.

[37] Where certification is sought for the purposes of settlement, all the criteria for certification must still be met: Baxter v. Canada (Attorney General) (2006), 2006 CanLII 41673 (ON SC), 83 O.R. (3d) 481 (S.C.J.) at para. 22. However, compliance with the certification criteria is not as strictly required because of the different circumstances associated with settlements: Bellaire v. Daya, [2007] O.J. No. 4819 (S.C.J.) at para. 16; National Trust Co. v. Smallhorn, [2007] O.J. No. 3825 (S.C.J.) at para. 8; Nutech Brands Inc. v. Air Canada, [2008] O.J. No. 1065 (S.C.J.) at para. 9.

[38] The existence of settlement changes the nature of the preferable procedure analysis: Bona Foods Ltd. v. Ajinomoto U.S.A., Inc., 2004 CanLII 17525 (ON SC), [2004] O.J. No. 908 (S.C.J.) at paras. 16, 20 and 27; Cassano v. Toronto-Dominion Bank, [2005] O.J. No. 845 (S.C.J.) at para. 83 (aff’d [2006] O.J. No. 2930 (Div. Ct.) rev’d on other grounds (2007), 2007 ONCA 781, 87 O.R. (3d) 401 (C.A.)).

[39] The fact that certification has previously been denied does not preclude certification being granted in the context of a settlement. See: Gariepy v. Shell Oil Co., [2002] O.J. No. 4022 (S.C.J.); Fischer v. IG Investment Management Ltd., 2010 ONSC 5132.

[40] I am satisfied that in the context of the proposed settlement that all the criterion for certification have now been satisfied.

[41] I, therefore, conclude that this action should be certified for settlement purposes.

2. Settlement Approval

[42] To approve a settlement of a class proceeding, the court must find that in all the circumstances the settlement is fair, reasonable, and in the best interests of those affected by it: Dabbs v. Sun Life Assurance, Dabbs v. Sun Life Assurance Company of Canada (1998), 1998 CanLII 14855 (ON SC), 40 O.R. (3d) 429 (Gen. Div.), aff'd (1998), 1998 CanLII 7165 (ON CA), 41 O.R. (3d) 97 (C.A.), leave to appeal to S.C.C. refused Oct. 22, 1998, [1998] S.C.C.A. No. 372 at para. 9; Parsons v. Canadian Red Cross Society, [1999] O.J. No. 3572 (S.C.J.) at paras. 68-73; Class Proceedings Act, 1992, s. 29(2).

[43] In determining whether to approve a settlement, the court, without making findings of fact on the merits of the litigation, examines the fairness and reasonableness of the proposed settlement and whether it is in the best interests of the class as a whole having regard to the claims and defences in the litigation and any objections raised to the settlement: Baxter v. Canada (Attorney General) (2006), 2006 CanLII 41673 (ON SC), 83 O.R. (3d) 481 (S.C.J.) at para. 10.

[44] When considering the approval of negotiated settlements, the court may consider, among other things: (a) the likelihood of recovery or likelihood of success; (b) the amount and nature of discovery, evidence or investigation; (c) settlement terms and conditions; (d) recommendation and experience of counsel; (e) future expenses and likely duration of litigation and risk; (f) recommendation of neutral parties; (g) the number of objectors and nature of objections, if any; (h) the presence of good faith, arms-length bargaining and the absence of collusion; (i) the degree and nature of communications by counsel and the representative parties with class members during the litigation; and (j) information conveying to the court the dynamics of and the positions taken by the parties during the negotiation: Dabbs v. Sun Life Assurance Company supra at pp. 440-44; Parsons v. The Canadian Red Cross Society, supra at paras. 71-72; Frohlinger v. Nortel Networks Corp., 2007 CanLII 696 (ON SC), [2007] O.J. No. 148 (S.C.J.) at para. 8; Kelman v. Goodyear Tire and Rubber Co., 2005 CanLII 803 (ON SC), [2005] O.J. No. 175 (S.C.J.) at paras. 12-13; Vitapharm Canada Ltd. v. F. Hoffmann-La Roche Ltd. (2005), 2005 CanLII 8751 (ON SC), 74 O.R. (3d) 758 (S.C.J.) at para. 117; Sutherland v. Boots Pharmaceutical plc, [2002] O.J. No. 1361 (S.C.J.) at para. 10.

[45] I am satisfied having regard to the state of the action, the litigation risks, including the risk associated with the fact that certification for a contested class action and for leave has been refused, that the settlement is fair, reasonable and in the best interest of the Class Members affected by it.

[46] Indeed, having regard to the considerable litigation risks, the outcome is an excellent one for the Class.

[47] Accordingly, I approve the settlement, and I grant the attendant and incidental relief requested.

3. Fee Approval

[48] Turning to the matter of the approval of the counsel fee. The fairness and reasonableness of the fee awarded in respect of class proceedings is to be determined in light of the risk undertaken by the lawyer in conducting the litigation and the degree of success or result achieved: Serwaczek v. Medical Engineering Corp., [1996] O.J. No. 3038 (Gen. Div.); Parsons v. Canadian Red Cross Society (2000), 2000 CanLII 22386 (ON SC), 49 O.R. (3d) 281 (S.C.J.); Smith v. National Money Mart, 2010 ONSC 1334, [2010] O.J. No. 873 (S.C.J.) at paras. 19, 20.

[49] Where the fee arrangements are a part of the settlement, the court must decide whether the fee arrangements are fair and reasonable, and this means that counsel are entitled to a fair fee which may include a premium for the risk undertaken and the result achieved, but the fees must not bring about a settlement that is in the interests of the lawyers, but not in the best interests of the class members as a whole: Smith v. National Money Mart, supra, at para. 22.

[50] Fair and reasonable compensation must be sufficient to provide a real economic incentive to lawyers to take on a class proceeding and to do it well: Smith v. National Money Mart, supra, at para. 23.

[51] Factors relevant in assessing the reasonableness of the fees of class counsel include: (a) the factual and legal complexities of the matters dealt with; (b) the risk undertaken, including the risk that the matter might not be certified; (c) the degree of responsibility assumed by class counsel; (d) the monetary value of the matters in issue; (e) the importance of the matter to the class; (f) the degree of skill and competence demonstrated by class counsel; (g) the results achieved; (h) the ability of the class to pay; (i) the expectations of the class as to the amount of the fees; (j) the opportunity cost to class counsel in the expenditure of time in pursuit of the litigation and settlement: Smith v. National Money Mart, supra, at paras. 19-20.

[52] Having regard to the work performed, the risks undertaken, and the outcome, the fee request in the case at bar is fair and reasonable, and I approve the fee.

D. CONCLUSION

[53] For the above reasons, I grant the Plaintiffs’ motion.

Perell, J.

Released: June 18, 2015

CITATION: Bayens v. Kinross Gold Corporation, 2015 ONSC 3944

COURT FILE NO.: CV-12-44865100CP

DATE: 20150618

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

E. EDDY BAYENS, JOHN SINCLAIR, LUC FORTIN, PIERRE RACICOT and STANLEY SHORTT, in their capacity as TRUSTEES OF THE MUSICIANS’ PENSION FUND OF CANADA

Plaintiffs

‑ and ‑

KINROSS GOLD CORPORATION, TYE W. BURT, PAUL H. BARRY, GLEN J. MASTERMAN and KENNETH G. THOMAS

Defendants

REASONS FOR DECISION

Perell, J.

Released: June 18, 2015