The Supreme Court of British Columbia has published reasons explaining its certification of a class action suit against Boliden Ltd., parent company Trelleborg AG and Boliden’s lead underwriter, BMO Nesbitt Burns.

The plaintiffs in the class action claim damages for the breach of a statutory duty relating to a prospectus dated June 10, 1997 issued in connection with the initial public offering of Boliden. The defendants had agreed that the plaintiffs had met the minimum threshold requirements for certification, but it was up to the court to determine how the subclasses would be defined.

The plaintiff class is composed of all of those who acquired Boliden IPO shares. It says that some of the defendants realized or should have realized that one of Boliden’s mines should have been closed after heavy rains weakened its infrastructure, and that if that had happened a “proper accounting” would also have derailed the IPO.

But instead, the IPO went ahead. Then on April 25, 1998 Boliden’s tailings dam collapsed sending 7,000,000 cubic metres of toxic waste through a 15 metre breach in the reservoir wall and into the Spanish country side. As a result of the collapse of the dam, approximately 10,000 hectares of land were contaminated by toxic waste.

As a result of the disaster, Boliden has created a reserve of more than $50 million for remediation expenses beyond the amounts already paid by insurance carriers, and it says it may have to spend up to $250 million for remediation efforts. After the collapse was reported Boliden’s shares on the Toronto Stock Exchange went from an IPO price of $16 to $5.35.

The plaintiffs say the prospectus omitted many negative material facts that were known or should have been known to some or all of the defendants. Although the defendants agreed to a class action, they argue that that the applicable provincial statute is from the province of the place of residence of class members at the time of the purchase; that there is no statutory cause of action in New Brunswick; that the Quebec Securities Act contains no provision of “deemed reliance”; and that all claims under the Alberta Securities Act are barred by the limitation period. It sought to have these class members excluded.

The court agreed to a separate subclass for residents of Alberta, New Brunswick and Ontario. But it declined to create a class for Quebec residents. All other claimants will be covered in a catch-all non-resident class.

The court upheld the plaintiffs claim that the court should consider whether the suit covers only those who bought the initial IPO shares, because the IPO was completed through installment receipts. “I am satisfied that the plaintiff class has established a bona fide triable issue in this regard,” wrote the court.

“Accordingly, there will be a determination about whether such purchasers are to be included within a subclass because they purchased instalment receipts during the period of distribution even though they did not purchase them as a result of the distribution made pursuant to the IPO. However, those who purchased on the secondary market after the period of distribution ended will not be part of any subclass.”