(April 26, 2021) We believe this certified shareholder class action is one of the longest running and complex (i.e., involving the bankruptcy court and multiple contested motions, including at the Court of Appeal) Primary Market (pursuant to a prospectus) shareholder class actions in Canada – visits to the bankruptcy court, adding investment banks, a half-dozen court decisions, visits to the Court of Appeal, 5 experts retained to support the investors’ claims.
The Ontario Superior Court – Divisional Court supported by the Court of Appeal – certified the claims for both retail and institutional investors (i.e., the lower court denied certification because the average class member lost more than $300,000, among various reasons that encouraged 250 separate lawsuits across Canada).
Indeed, the sound decision of Backhouse, D.L. Corbett, and Myers JJ., 2020 ONSC 59, affirmed that:
Even considering the amount of the average claim of $300,000 USD, the costs of litigation are enormous and represent a barrier. The certification judge found that expensive and repetitive evidence would be required at the individual issues trials. Many class members would likely be deterred from prosecuting on his or her own as too costly and too risky, given the high cost of litigation in this case and the spectre of costs being awarded against an individual plaintiff if the claim is unsuccessful against the underwriters.
Class proceedings have the potential to address the barriers to access to justice. The class members will not need to pay out-of-pocket for class counsel to litigate the common issues on their behalf.
The alternative of individual actions does not address the economic, social and psychological barriers discussed above. Access to justice concerns favour a class proceeding.
In this case, there is a statutory incentive for the investors to bring the s.130 claim. There already is a certified class proceeding against the Hycroft defendants for statutory misrepresentation on behalf of the same class that the plaintiff seeks to have certified against the underwriters. The underwriters also have a statutory responsibility to certify that disclosure in the prospectus was true to the best of their knowledge and they may also have done something wrong. Whether Hycroft violated its disclosure obligations must be proven for both claims. Damages may well overlap. It is not synergistic or conducive to judicial economy to require the class members to bring individual actions against the underwriters. It was an error in principle not to find that a class action is the preferable procedure.
The proposed Settlement Agreement will require Hycroft and its investment banks to convey USD $4.375 million, inclusive of costs, legal fees, and taxes, to investors. Investor Class Members will receive approximately 50% of the measured damages. The measure of damages was conducted by Dr. Craig McCann, Securities Litigation and Consulting Group (McLean, VA). The The Plan of Allocation contemplates that the Claim Form will be in electronic and hard copy format; and will be available at: https://canadianalliednevadasecuritiessettlement.com/
Lawyers Andrew Morganti, Albert Pelletier, Michael Spencer, and Paul Bates represented the investors.