After years of waiting and several near misses, the Ontario Superior Court of Justice has finally decided the merits of a class action under the secondary market liability provisions of Part XXIII.1 of the Ontario Securities Act. Justice Belobaba’s decision in Wong v. Pretium Resources, 2021 ONSC 54 (CanLII), https://canlii.ca/t/jcxkw dismissed the plaintiff’s claims, finding that there had been no misrepresentation, and in any event, the defendants were entitled to a reasonable investigation defence.
As the first of its kind, Wong provides valuable insight into the relationship between leave to proceed, certification, and judgment on the merits. The decision also provides clarity on the structure of the defences to statutory liability. The take-away is that clearing the hurdle of leave to proceed does not count for much in the final arithmetic.
The facts
Wong concerned an allegation that a gold mining company, Pretium Resources Inc. (“Pretium”), and its then-CEO failed to disclose an adverse opinion about its mineral resource estimate. The adverse opinion was tendered by Strathcona Mineral Services Ltd. (“Strathcona”). Pretium had engaged Strathcona for the limited purpose of overseeing a bulk sample program. It had not engaged Strathcona to assess the resource estimate, which had been prepared by Snowden Mining Industry Consultants Pty Ltd. (“Snowden”) in November 2012.
Pretium did not believe Strathcona was qualified to estimate the mineral content of the unique deposit at issue. Accordingly, Snowden remained engaged throughout the bulk sample program to update its resource estimate at the conclusion of same. When Strathcona raised concerns about the mineral resource estimate, Pretium consulted with Snowden. Snowden advised Pretium that the existing resource estimate remained valid. Pretium’s own technical team likewise concluded that Strathcona was wrong. Pretium communicated these views to Strathcona, which was unmoved. Frustrated that Pretium would not disavow Snowden’s resource estimate, Strathcona resigned.
Pretium publicly disclosed Strathcona’s resignation, and shortly thereafter, it disclosed Strathcona’s concerns about the resource estimate. The plaintiff alleged that these disclosures caused the price of Pretium’s securities to fall, and that both disclosures constituted corrective disclosure of a material misrepresentation: namely, the omission of Strathcona’s concerns about the resource estimate. The plaintiff advanced claims for both common law misrepresentation and statutory misrepresentation under Part XXIII.1 of the Securities Act.
Days after Strathcona resigned, however, Pretium began to receive mill results from the bulk sample, which proved that Snowden was right and Strathcona was wrong. With the benefit of fulsome analysis, the results of the bulk sample materially confirmed Snowden’s earlier resource estimate. Ultimately, Pretium built the mine and brought it into commercial production. In time, the price of Pretium’s securities rose to new highs.
The question in Wong was whether investors could recover any damages that they actually suffered, or were statutorily deemed to have suffered, on account of the temporary decline in the price of Pretium’s securities following the impugned disclosures.
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