Investment Banks’ Responsibilities: Court of Appeal for Ontario endorses claim

(June 17, 2020) Today the Court of Appeal for Ontario (MacPerson, Pardu and Huscroft JJ.) released an Endorsement affirming the Divisional Court’s decision, dated January 6, 2020, concerning the responsibilities of investment banks and certifying that offering memoranda and prospectuses contain accurate information, to the best of their knowledge.

Today’s decision affirms the reversal the motion court’s October 24, 2017 decision declining to certify a common law claim against the Underwriters.

The Divisional Court determined 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.

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.”

With respect to the class-wide issue, the Divisional Court concluded that issues of reliance, causation and damages could be managed/resolved through fairly straightforward mechanisms; as previously affirmed by the Court of Appeal for Ontario in Fantl v. Transamerica Life Canada, 2016 ONCA 633.

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

At the appellate level, the Investors were represented by Eli Karp, Hadi Davarinia, and co-counsel Paul Bates. At the motion court, the Investors were represented by Andrew Morganti.

LBP Holdings Ltd. v. Hycroft Mining Corporation, Cormark Securities Inc., and Dundee Securities Ltd., 2020 ONSC 59, Endorsed at M51241.