Appellant Court confirms that Underwriters have a duty of care to investors

(January 6, 2020) Ontario’s Divisional Court (Backhouse, D.L. Corbett, and Myers JJ.) released an important decision concerning the role of class proceeding claims in providing access to justice for investors against investment banks.

Today’s decision reverses the motion court’s October 24, 2017 decision declining to certify a common law claim against underwriters Cormark Securities Inc. and Dundee Securities Ltd. The Court held that the motion judge fell into legal error on matters central to a proper application of section 5 of the Ontario Class Proceedings Act despite the constituent element of reliance and damages.

Although the Divisional Court’s reasons focus much on the fact that there was already a certified statutory claim against the corporate defendant, the Divisional Court affirmed that a common law claim requiring the investor to plead and prove reliance and damages can be certified “even standing alone.” Equally as important, the Divisional Court confirmed that it is Court’s view that Underwriters owe a duty of care, pursuant to common law and statutorily, to investors, e.g., “… there will be little financial incentive for underwriters to meet the standard of care required by the certificate mandated by the Securities Act. This claim is one involving an alleged misrepresentation in a statutorily-mandated investment document, behaviour that society has an interest in curbing.”

The Divisional Court’s decision will be important to several ongoing shareholder class action claims.

On January 10, 2020, the Underwriters advised the Plaintiff that they will seek leave to appeal to the Ontario Court of Appeal.

LBP Holdings Ltd. v. Hycroft Mining Corporation, Cormark Securities Inc., and Dundee Securities Ltd., 2020 ONSC 59.