Securities class action filings in Canada hit a record high in 2011, according to a new report from NERA Economic Consulting.
The report finds that there were 15 new class actions filed in 2011, topping the previous high of 12 filings in 2008. As a result, there are currently 45 active Canadian securities class actions, representing a total of approximately $24.5 billion in outstanding claims.
NERA says that the increase in filings is being driven by so-called ‘Bill 198′ cases, which involve claims concerning issuers’ continuous disclosure obligations. Nine of the 15 cases filed in 2011 were Bill 198 cases, compared to the seven filed in 2010. And, it says a total of 35 of these sorts of cases have been filed since the new provisions came into force in 2005. Of these, 24 remain unresolved, 10 have settled, and one has been dismissed.
Additionally, the report notes that three of the new filings in 2011 were made against Chinese companies whose shares trade on the TSX or TSX Venture Exchange, which it sees as a reflection of one of the major trends driving class action filings in the United States last year.
Of the six non-Bill 198 filings in 2011, one involved prospectus claims, one is related to a takeover bid, two involved allegations related to the management of investment funds, and two involve allegations of a Ponzi scheme.
By sector, five of the 15 cases filed in 2011 were brought against companies in the minerals sector, four were brought against companies operating in the finance sector, and two were brought against forestry companies.
And, Ontario continues to be the venue for the majority of Canadian shareholder class action filings. In 2011, 12 of the 15 new cases were filed in the province, it reports.
Two cases settled in 2011 for total payments by defendants of $58.6 million, most of that came in the case against Norbourg Asset management ($55 million).
“This upward trend seems likely to continue at least through 2012. Several factors may influence the number of filings and the size of settlements in the future, including future rulings in leave applications, certification motions, and any trial judgments, as well as the evolving landscape of US class actions involving foreign companies and investors following the US Supreme Court decision in Morrison,” added NERA vice president and report co-author, Brad Heys.
The report also notes that Canadian companies continue to face the risk of class action litigation in the U.S., with parallel actions in Canada. In 2011 five Canadian-based companies were named as defendants in six class action filings in the U.S., up from the three cases filed in each of 2009 and 2010, but down from the eight cases filed in 2008.