Justice Paul Perell of the Ontario Superior Court of Justice approved this shareholder class action settlement in the amount of $110 million. This is the largest settlement of secondary market-only claims in Canada since Part XXIII.1 of the Securities Act (Ontario) was introduced in 2006. In approving the settlement, the judge noted the novelty and complexity of this class action: “As a factual matter, the litigation was very complex. As a legal matter, the litigation was very complex, and its complexities were augmented by the circumstance that Part XXIII.1 of the Ontario Securities Act is uncharted deep sea legal waters.”
SNC-Lavalin Group Inc. (“SNC”), is a Montréal-based engineering, construction and infrastructure company with global operations. SNC is a reporting issuer within the meaning of Canadian securities legislation. Its shares trade on the Toronto Stock Exchange.
On February 28, 2012, SNC issued a press release announcing that its 2011 net income was expected to be approximately 18% (or approximately $80 million) below its previously announced 2011 outlook. This amount included “period expenses of approximately $35 million relating to certain payments made in the fourth quarter of 2011 that were documented to construction projects to which they did not relate.”
The company announced that its Board of Directors had initiated an independent investigation, led by its Audit Committee, into the $35 million in Q4/2011 payments, and had retained independent legal counsel for this purpose.
Following the press release, the price of SNC’s shares declined from $48.37 on February 27, 2012, to $38.43 on February 28, 2012 and $37.40 on February 29, 2012, causing a loss in its market capitalization of hundreds of millions of dollars.
On March 1, 2012, a proposed class action against SNC and several of its officers and directors for secondary market misrepresentation was commenced.
On March 26, 2012, SNC released its Management Discussion and Analysis for the financial year ended December 31, 2011, which disclosed the results of its independent investigation. These results indicated that $56 million (including the $35 million already disclosed) in irregular payments had been made.
In June 2012, it was disclosed that two former employees of SNC had been charged under the Corruption of Foreign Public Officials Act relating to SNC’s attempt to secure a contract for the construction of the Padma Bridge in Bangladesh.
On September 19, 2012, following lengthy negotiations among all parties, an order was issued pursuant to the Class Proceedings Act, 1992 (Ontario) certifying the class action and granting leave to proceed with causes of action under Part XXIII.1 of the Ontario Securities Act. Subsequently, the Québec Superior Court authorized and granted leave to proceed in the parallel Québec action. It was temporarily stayed pending the completion of discoveries in the Ontario action.
On November 26, 2012, it was disclosed that Swiss authorities were investigating possible illegal or improper payments by SNC in the approximate amount of $139 million. Subsequently, former executives of SNC were charged with criminal offences related to the contract awarded to SNC with respect to the construction and operation of the McGill University Health Centre in Montréal.
In January 2016, SNC and the external director Defendants delivered a motion record seeking summary judgment that sought the dismissal of the action. On June 30, 2016, the Plaintiffs brought a cross-motion for summary judgment on several of the certified common issues. The Court stayed the summary judgment motions and ordered that the action proceed to examinations for discovery and trial.
Between April and September of 2017, the parties conducted nearly 40 days of examinations for discovery in Toronto and Montréal. In April of 2018, the Plaintiffs delivered their trial record.
After two lengthy mediation sessions led by former Chief Justice of Ontario Warren Winkler in December 2016 and May 2018, a settlement was achieved. The settlement was approved in Ontario and Québec.
Counsel for the Plaintiffs were Michael Robb, Anthony O’Brien and Garett Hunter of Siskinds LLP, and Joel Rochon, Peter Jervis, Douglas Worndl, and Ronald Podolny of Rochon Genova LLP. Karim Diallo of Siskinds, Desmeules was counsel to the Plaintiff in the Québec action.
On the Defendants’ side, Linda Fuerst, François Fontaine, James Hodgson, Daniel Urquhart, Lynne O’Brien of Norton Rose Fulbright Canada LLP and Steve Tenai (now at Aird & Berlis LLP) acted for SNC-Lavalin.
Paul D. Guy and Scott McGrath of Thornton Grout Finnigan LLP represented Riadh Ben Aissa.