Court File and Parties
COURT FILE NO.: CV-14-502316-00CP DATE: 20220718
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
The Trustees of the Drywall Acoustic Lathing and Insulation Local 675 Pension Fund and Royce Lee Plaintiffs
– and –
Barrick Gold Corporation, Aaron W. Regent, Jamie C. Sokalsky, Ammar Al-Joundi and Peter Kniver Defendants
COUNSEL: Peter R. Jervis, Joel P. Rochon, Golnaz Nayerahmadi and Matthew W. Taylor, for the plaintiffs Kent P. Thomson, Steven G. Frankel and Kristine Spence, for the defendants
HEARD: June 27, 2022
PROCEEDING UNDER THE CLASS PROCEEDINGS ACT, 1992
J.T. Akbarali J.:
Overview
[1] On March 22, 2022, I released reasons in the plaintiffs’ motion for leave under Part XXIII.1 of the Securities Act, R.S.O. 1990, c. S.5 to commence an action against the defendant, Barrick Gold Corporation, and certain of its officers and directors, for alleged misrepresentations in its public disclosure documents and financial statements relating to a complex mining project in Chile and Argentina: DALI Local 675 Pension Fund (Trustees) v. Barrick Gold Corporation, 2022 ONSC 1767. These supplementary reasons are intended to be read with those reasons, which provide the reader with the full context to this motion.
[2] In my reasons, I denied leave to proceed with most misrepresentations alleged by the plaintiffs. However, at para. 185, I found that the plaintiffs had established a reasonable possibility that they will prove that Barrick made misrepresentations in its February and March 2012 disclosures by:
a. affirming, as a statement of current fact, that its forecasts were based on assumptions that it considered reasonable; and
b. disclosing an inaccurate capex budget and schedule by omitting to disclose that:
i. the estimates prepared by Barrick’s sub-contractors, and particularly Fluor-Techint, were unreliable, thus rendering Barrick’s capex budget unreliable and inaccurate; and
ii. Barrick’s internal estimates by January 2012 indicated that the capex budget was then estimated at $6.4 billion, and at $7.5 billion by Q1 2012.
[3] I did not find that Barrick’s internal estimates in hand in February and March 2012 were reliable or ought to have been disclosed as if they were reliable; rather, their undisclosed internal estimates were an indication that the disclosed capex budget and schedule were inaccurate.
[4] Following the February and March 2012 disclosures, Barrick made a further disclosure on May 2, 2012. The plaintiffs alleged the May 2012 disclosure was a further misrepresentation; I disagreed, and found that there was no reasonable possibility that the plaintiffs would succeed in proving that the statements made in May 2012 were untrue or misleading. Specifically, at para. 191, I held that “…the language that accompanied the forecasts [of the company’s capex budget and schedule for the Pascua-Lama project in May 2012] did exactly what the plaintiffs say the company should have done: warn the market that its capex budget and schedule were uncertain”.
[5] The plaintiffs did not plead that the May 2012 statements constituted corrective disclosure. In my reasons, I directed the parties to make further submissions on the question of the public correction of the alleged misrepresentations made in February and March 2012, in view of my conclusion that it was not reasonably possible that the plaintiffs could succeed in proving the May 2012 disclosure to be untrue or misleading. I wrote, at paras. 218-221:
Here is the problem in this case. I have found that the February and March 2012 misrepresentations were not repeated in May 2012, because Barrick clearly warned the market at that time that its capex budget and project schedule were undergoing a detailed review. That statement put the market on notice that the forecasts were not reliable.
However, the plaintiffs have not alleged that the May 2012 statement was corrective of anything. They allege that the May 2012 statement is a misrepresentation, an allegation I have found there is no realistic chance of proving.
But the impact of the May 2012 disclosure on the alleged February and March 2012 misrepresentations was not argued by anyone. At the very least, the question of the public correction has important ramifications for the class period if those misrepresentations are granted leave.
I thus require additional submissions from the parties on the issue. I direct the parties to schedule a case conference with me to determine the most efficient way to proceed to decide that issue.
[6] The parties have since delivered further written and oral argument on the issue. These reasons address the question of the public correction of the misrepresentations alleged to have been made in February and March 2012.
Public Correction
[7] In my reasons of March 22, 2022, I described the role of public correction on a leave motion at paras. 216-217 as follows:
In [Baldwin v. Imperials Metals Corporation, 2021 ONCA 838] the Court of Appeal did not find it necessary to determine whether public correction is an element of the statutory cause of action or simply a time-post to identify and delimit the members of the class. Rather, at para. 49, the court reiterated Hoy J.A.’s conclusion in its decision on the appeal in this case from Belobaba J.’s leave decision, at para. 41, that in any event, public correction is a necessary part of the statutory scheme. The Court of Appeal went on to say, at para. 50, that “misrepresentation does the heavy lifting in the statutory cause of action. It is the wrong at issue”.
In Imperial Metals, the Court of Appeal described the overarching question with respect to public correction for the purposes of the leave motion as “whether the alleged public correction was reasonably capable of being understood in the secondary market as correcting what was misleading in the impugned statement”: para. 47. There need only be some link or connection between the pleaded public correction and the misrepresentation: para. 54, 57.
[8] In the appeal of Belobaba J.’s decision on the first leave motion in this action, Drywall Acoustic Lathing and Insulation, Local 675 Pension Fund v. Barrick Gold Corporation, 2021 ONCA 104, [“Barrick OCA”] at para. 71, Hoy J.A. said this of public correction:
First, recall that, at the leave stage, a consideration of whether there has been a public correction of a misrepresentation follows a finding that there is a reasonable possibility that it will be found at trial that the defendant has released a document or made a public oral statement containing a misrepresentation (or, in rare cases, the making of an assumption that there was a misrepresentation). When that threshold has been cleared (or the misrepresentation assumed), the plaintiff’s claim is potentially meritorious. Where there is a reasonable possibility of a misrepresentation, the plaintiff’s claim can hardly be characterized as a strike suit. Furthermore, the clearing of the misrepresentation threshold, combined with the fact that the plaintiff brought an action, suggests that there was a public correction. The plaintiff must have learned of the misrepresentation somewhere.
[9] The plaintiffs argue that corrective disclosure may be partial, relying on cases including Green v. CIBC, 2012 ONSC 3637, DALI 675 v. SNC-Lavalin Group Inc., 2-012 ONSC 5288, and Vecchio Longo Consulting Services Inc. v. Aphria Inc., 2021 ONSC 5405. The defendants argue that the law in respect of partial public corrections is unsettled, noting that some authorities have accepted that misrepresentations can be partially corrected, while others have said the opposite. In my view, that is not an issue that ought to be decided on a leave motion, nor does it need to be decided on this motion.
[10] The real departure between the parties lies in their approach to the jurisdiction of leave motion judge in addressing the question of public correction. The plaintiffs argue that my task is only to determine if there is a reasonable possibility that the plaintiffs will succeed at trial in proving a misrepresentation. They argue that I need only ask myself if there is some credible evidence that demonstrates a reasonable possibility that the plaintiff will establish that the misrepresentation was publicly corrected, and that I ought not to consider any particular alleged public correction in so doing.
[11] The defendants argue that the necessary implication of my findings in my earlier reasons is that the only potential public correction of any misrepresentation in February or March 2012 was made on May 2, 2012. However, the plaintiffs have not pleaded the May 2, 2012 disclosure to be a public correction, and in written submissions on this issue, they continue to disavow the possibility that May 2, 2012 was a public correction. Thus, the defendants argue I ought to deny leave because the only possible public correction is not legally relevant.
[12] I note here that the question of public correction, especially when alleged to be made through partial corrections, may be relevant to the need for sub-classes on a certification motion. Normally a leave motion is heard at the same time as the certification motion. For reasons peculiar to this case, I deal only with the leave motion; the certification motion will come before Belobaba J. in the future. There is thus a fracture between considering public correction for the purposes of the leave motion, and its impact on any need for sub-classes in the certification motion. I thus approach the question of public correction in this case with an eye to judicial economy and access to justice. It is in no one’s interest to leave what ought to be determined on a leave motion to the certification judge; that will invite only duplication of efforts of the parties and the court.
[13] Having said that, I am cognizant of the jurisprudence discussing the approach to determining a public correction on its merits. In Drywall Acoustic Lathing and Insulation, Local 675 Pension Fund (Trustees of) v. SNC Lavalin Group Inc., 2016 ONSC 5784, quoted with approval in Barrick OCA, Perell J. held:
[T]he determination of whether a corrective disclosure is corrective depends not only on a semantic analysis of what the public correction means but also on an analysis of how the words would be understood in an efficient market and also a statistical analysis of the effect of those words on the market’s evaluation of the value of the securities that had been misrepresented to the marketplace. Put somewhat differently, a semantic analysis of whether a corrective disclosure was made is necessary, but it is not sufficient to determine the existence or non-existence of a corrective disclosure. What is required is an analysis of the literal meaning of the words, which is in any event not a purely mechanical exercise but one that involves evidence, opinion, and argument, and also an analysis of the perceived or effective meaning of the words in the secondary market, which once again is not a mechanical exercise, but rather one that involves evidence.
[14] On a leave motion, I am not equipped to undertake this analysis. Moreover, doing so would be inconsistent with the guidance of the Supreme Court of Canada in Theratechnologies Inc. v. 121851 Canada Inc., 2015 SCC 18, at para. 39, where the Court describes the leave threshold as requiring the claimant “to offer both a plausible analysis of the applicable legislative provisions, and some credible evidence in support of the claim”, and cautions that a leave motion should not be treated as a mini-trial.
[15] At the same time, in Theratechnologies, at para. 39, the Court described the legislative intent of the screening mechanism as follows: “to ensure that cases with little chance of success – and the time and expense they impose – are avoided”.
[16] In my view, the appropriate scope of my role on a leave motion when considering the question of public correction is to consider each alleged public correction to determine whether one, some, or all of them give rise to a reasonable possibility that the plaintiff will prove that the alleged public correction will be found to have some linkage or connection between the alleged misrepresentation and the alleged public correction (Baldwin, at paras. 54, 57), having regard to the context in which the alleged public corrections were made and how they would be understood in the secondary market (Barrick OCA, at para. 51).
[17] Considering each alleged public correction in this manner allows the court to adjudicate the leave motion in a manner that achieves the legislative intent of the screening mechanism. In other words, failing to consider the individual alleged corrections at all could lead to the possibility that, through the alleged public corrections (if unscrutinized), plaintiffs could unjustifiably expand the scope of discovery and the complexity of the proceeding, all of which is inconsistent with both the legislative goal of the screening mechanism. Such an expansion of the proceedings would also be inconsistent with at least two of the goals of the Class Proceedings Act, 1992: access to justice and judicial economy.
[18] Turning to the record before me, I note again that the plaintiffs continue to reject the notion that the May 2, 2012 disclosure was a public correction. I do not propose to dwell on the May 2, 2012 disclosure except to say that the defendants may choose to argue that the May 2, 2012 disclosure was a complete public correction, and as a result, deny liability. Whether they succeed will be a question for the trial judge.
[19] I next consider the alleged partial corrective disclosures on which the plaintiffs rely. I note that these statements are addressed in my original reasons. I do not repeat what I wrote in those reasons, but again encourage the reader to read these reasons together with my original reasons for a full understanding of the context. Here, I only briefly summarize the alleged partial corrective disclosures for ease of reference.
[20] The plaintiffs contend that the first partial corrective disclosure was on July 26, 2012. In this disclosure, Barrick revealed that its review of its capex budget and schedule were ongoing, and indicated that its preliminary results indicated that initial gold was expected in mid-2014, and its capex budget was expected to increase 50-60% from its earlier top-end estimate of $5 billion USD.
[21] I conclude that there is a reasonable possibility the plaintiffs will prove the July 2012 disclosure is a public correction. On the release of this disclosure, Barrick’s share price declined by $1.45. There is evidence that Barrick analysts and the market were shocked by the magnitude of the budget increase and the delay. One analyst report referred to the “Pascua-Lama capital blow-out”.
[22] The parties argue over whether the expert evidence filed by the plaintiff in support of its argument regarding public correction is admissible. I do not address that issue because in my view, it is not necessary to do so. Even ignoring the expert evidence led, there is enough in the record to establish that the July 2012 disclosure is, for purposes of the leave motion, a partial correction.
[23] Moreover, this conclusion about the July 2012 alleged public correction is consistent with Baldwin, at para. 57, where Strathy C.J.O. held:
Focusing on the market’s understanding of the alleged correction is also consistent with one of the core purposes of the statutory framework – to incentivize fair and accurate disclosure by public issuers. Permitting an issuer to escape liability by making vague or general disclosures (“something has happened and we are looking into it”) is inconsistent with that core purpose. It would undermine confidence in the securities market and deprive shareholders of compensation.
[24] The next alleged partial correction occurred on November 1, 2012, when Barrick released its Q3 2012 report. This report disclosed another increase in the capex budget from $7.5-8 billion USD to $8-8.5 billion USD and a delay to first production of gold to the second half of 2014. At this time, Barrick’s share price declined again by another $3.45. Again, analysts wrote negative reports about Barrick after this disclosure.
[25] At first blush, it appears that the November 2012 disclosure could meet the criteria to be a public correction. It discloses an updated budget and schedule, and thus has a link with the February and March 2012 alleged misrepresentations. There is some evidence in the record that it would be understood by the market to be linked to those earlier statements.
[26] However, in my earlier reasons I found that it was not reasonably possible that the plaintiffs could prove that, in July 2012, Barrick misrepresented that its then-disclosed budget and schedule were based on assumptions Barrick considered reasonable.
[27] In my view, this finding leads inescapably to the conclusion that Barrick had accurately corrected any pre-existing misrepresentation about the schedule and capex budget by July 2012. Subsequent increases were changes, not facts known but undisclosed earlier. Having accurately disclosed what it knew in July 2012, no subsequent statement can be a public correction of the February and March 2012 alleged misrepresentations. This extends to the alleged public correction on June 28, 2013 (which updated the schedule to first gold and the capex budget again).
[28] The same problem arises with respect to the alleged public corrections on April 10, 2013. The timing issue alone is sufficient to conclude that there is no reasonable possibility that the plaintiffs can prove that the April 10, 2013 disclosures corrected any misrepresentations made in February or March of 2012.
[29] However, having said that, I also note that the April 10, 2013 alleged public corrections relate to two press releases which announced the Chilean court’s decision to issue a preliminary injunction halting construction activities on the Chilean side of the Pascua-Lama project, and an announcement that Barrick would suspend construction work on the Chilean side of the project while working to address environmental and other regulatory requirements. These disclosures were made at the time the Chilean court issued the injunction. The plaintiffs argue that this was the first disclosure that indicated the entire project could be derailed.
[30] Neither of these press releases can be public corrections for reasons apart from their timing (well after the July 2012 disclosure). In my earlier reasons, at paras. 201-206, I found that it was inappropriate to grant leave to proceed with alleged omissions of material fact relating to environmental issues in the context of the alleged misrepresentations regarding the capex budget and schedule. The alleged environmental misrepresentations have been adjudicated in the earlier leave motion, and it has been finally determined that only a single environmental misrepresentation may proceed.
[31] In the circumstances of this case — at this stage, when the question of which alleged environmental misrepresentations will proceed has been decided — were I to accede to the notion that disclosures relating to environmental issues could be public corrections of the project’s schedule and capex budget, I would be opening up production and discoveries in a manner destined to make this litigation unwieldy and unduly costly, and therefore inconsistent with the goals of access to justice and judicial economy, and also the intent of the screening mechanism as described in Theratechnologies.
[32] Thus, in conclusion, I grant leave to proceed with the plaintiffs’ claim that Barrick made alleged misrepresentations in its February and March 2012 disclosures by:
a. affirming, as a statement of current fact, that its forecasts were based on assumptions that it considered reasonable; and
b. disclosing an inaccurate capex budget and schedule by omitting to disclose that:
i. the estimates prepared by Barrick’s sub-contractors, and particularly Fluor-Techint, were unreliable, thus rendering Barrick’s capex budget unreliable and inaccurate; and
ii. Barrick’s internal estimates by January 2012 indicated that the capex budget was then estimated at $6.4 billion, and at $7.5 billion by Q1 2012.
[33] The relevant possible public correction(s) of these alleged misrepresentations are Barrick’s disclosures on May 2, 2012, and July 26, 2012.
[34] Leave is also granted to proceed with these misrepresentations against the individual defendants, Aaron W. Regent and Jamie C. Sokalsky, who were both certifying officers of Barrick in February and March 2012, at the time the alleged misrepresentations were made.
Costs
[35] I encourage the parties to attempt to agree on costs, including costs of the original leave motion which I understand remain to be determined in this proceeding. If they are unable to agree on costs, they shall agree on a timetable for the exchange of written submissions and reasonable page limits, and provide me with their agreement for approval. They shall also advise me whether they believe oral argument will be required, or whether costs can be determined in writing.
J.T. Akbarali J.
Released: July 18, 2022
COURT FILE NO.: CV-14-502316-00CP DATE: 20220718
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
The Trustees of the Drywall Acoustic Lathing and Insulation Local 675 Pension Fund and Royce Lee Plaintiffs
– and –
Barrick Gold Corporation, Aaron W. Regent, Jamie C. Sokalsky, Ammar Al-Joundi and Peter Kniver Defendants
REASONS FOR JUDGMENT
Akbarali J.
Released: July 18, 2022.