In Samos Investments Inc. v. Pattison et al., 2001 B.C.S.C. 1790, Mr. Justice Robert Bauman of the British Columbia Supreme Court dismissed an application to certify as a class proceeding claims in breach of fiduciary duty, fraud, conspiracy, breach of the Securities Act and oppression or unfair prejudice against the directors, insiders and a lender of a widely held public company.
The plaintiff, a former shareholder of Westar Group Ltd., alleged that with the knowing assistance of CIBC, Jim Pattison, directors loyal to Pattison and various companies owned or controlled by Pattison conspired to: misappropriate Westar’s opportunity to renegotiate its debt; use Westar’s debt to increase their equity in Westar at less than fair market value; manipulate the trading price of Westar shares to acquire further equity; and induce the shareholders to approve a plan of arrangement taking Westar private and acquire a profit of approximately $500 million, thereby depriving all other shareholders of a fair realization on their investment.
The plaintiff applied to certify these allegations as a class proceeding on behalf of all former shareholders of Westar who held shares at any time during three broad periods of time; representing three distinct sets of impugned transactions. The plaintiff argued that the defendants’ liability for the overall conspiracy and each of the unlawful acts committed pursuant to the conspiracy were all common issues for the members of the proposed class. The plaintiff also argued that damages could be assessed as a common issue for the members of the proposed class using a constructive trust or other restitutionary remedy that would require the Pattison defendants to disgorge their alleged profits as aggregate damages to be divided amongst the shareholders according to how long they held their shares.
Mr. Justice Bauman found three independent grounds on which to deny certification: (1) “what superficially might appear as common issues are distinctly uncommon between members of the proposed class and [further, there exists a] real potential for conflicts between proposed class members”; (2) “a class proceeding… would not be the preferable procedure for the fair and efficient resolution of whatever common issues might be extracted from the mass of allegations levelled at [these] defendants”; and (3) “the plaintiff’s claim of an identifiable class of aggrieved parties with an interest in class proceeding lacks an air of reality.”
The plaintiff filed a notice of appeal on December 28, 2001 and filed its factum on February 21, 2002. The appeal is set for hearing for four days commencing November 25, 2002.
Darrell Roberts, Q.C., Wendy Baker and Maria Molloy of Miller Thomson LLP represented the plaintiff. Irwin Nathanson, Q.C., and Geoffrey Gomery of Nathanson, Schachter & Thompson in Vancouver represented Pattison and related corporate entities, and a former Westar director. Josiah Wood, Q.C., and Bruce Elwood of Blake, Cassels & Graydon LLP represented CIBC. William Everett, Q.C., and Anne Fitzpatrick of Lawson Lundell represented Westar. James Taylor, Q.C., and Christopher Russell of Taylor Jordan Chafetz in Vancouver represented a former Westar director. Andrew Borrell of Fasken Martineau DuMoulin LLP represented a numbered company jointly owned by CIBC and the Pattison interest.