Markowich v. Lundin Mining Corporation

CITATION: Markowich v. Lundin Mining Corporation, 2022 ONSC 81

COURT FILE NO.: CV-17-00588044-00CP

DATE: 20220106

SUPERIOR COURT OF JUSTICE - ONTARIO

RE:

DOV MARKOWICH, Plaintiff

AND:

LUNDIN MINING CORPORATION, PAUL K. CONIBEAR, MARIE

INKSTER, PAUL MCRAE, LUKAS H. LUNDIN, and STEPHEN GATLEY,

Defendants

BEFORE:

Glustein J.

COUNSEL: Joseph Groia, Scott Robinson, Jay Strosberg, Bethanie Pascutto, and Steven

Chadwick, for the Plaintiff

Lara Jackson, John Picone, and Anna Tombs, for the Defendants

HEARD:

December 8 and 9, 2021

REASONS FOR DECISION

TABLE OF CONTENTS

NATURE OF THE MOTION AND OVERVIEW ........................................................................ 1

Background................................................................................................................................. 1

Nature of the claims and the motions ......................................................................................... 2

Overview of Markowich’s position ............................................................................................ 2

Overview of the defendants’ position......................................................................................... 3

Summary of conclusions on the leave motion for the Statutory Claim ...................................... 6

Summary of conclusions on the certification motion for the Common Law Claim................... 8

Summary of conclusions on the Apology Act ............................................................................ 8

FACTS............................................................................................................................................ 9

The parties................................................................................................................................... 9

The Candelaria mine................................................................................................................... 9

The inherent risks of pit wall instability and rock slides .......................................................... 10

Detection of Pit Wall Instability ............................................................................................... 10

The Rock Slide and its effects on mining at Candelaria........................................................... 11

The News Release..................................................................................................................... 13

Effect on share price after the News Release............................................................................ 15

The Conference Call ................................................................................................................. 15

Analysts reports and public news coverage.............................................................................. 17

Review of the expert mining evidence on the effect of the Pit Wall Instability and the Rock

Slide .......................................................................................................................................... 17

Review of the expert evidence on economic materiality of the Pit Wall Instability and Rock

Slide .......................................................................................................................................... 18

ANALYSIS................................................................................................................................... 21

The issues arising out of the leave motion................................................................................ 21

- Page 2 -

The test to grant leave to bring the Part XXIII.1 claim.............................................................22

Objection 1: The admissibility of Thomas’ evidence and the weight of such evidence ......24

(i)

The applicable law as to considerations of admissibility and weight of expert

evidence on a leave motion............................................................................ 24

(ii)

Application of the law to the present case ..................................................... 25

Objection 2: Does either the Pit Wall Instability or Rock Slide constitute a “change” to

Lundin’s business, operations, or capital? ......................................................26

(i)

The statutory framework................................................................................ 27

Principles from the applicable case law......................................................... 28

(ii)

(a) The distinction between material change and fact is deliberate and policy-

based….................................................................................................................. 28

(b) There is no bright-line test for a change – it is fact-specific................................. 29

(c) The definition of change requires establishing a different position, course, or

direction................................................................................................................. 30

(d) The definition of business, operations or capital................................................... 31

(e) Market impact is not determinative of change (or materiality)............................. 31

(f) General principles in determining whether a change has occurred....................... 32

(g) Cases which have considered whether a material change took place ................... 33

(iii)

Application to the present case ...................................................................... 34

Objection 3: The admissibility of Edwards’ evidence and the weight of such evidence ....37

(i)

The applicable law as to considerations of admissibility and weight of expert

evidence on a leave motion............................................................................ 38

(ii)

Application of the law to the defendants’ submissions.................................. 38

(a) Objections as to admissibility ............................................................................... 38

(b) Objections as to the weight of Edwards’ evidence ............................................... 38

Objection 4: Materiality of the Pit Wall Instability and Rock Slide.....................................39

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Conclusion on leave motion......................................................................................................40

Issues arising out of the certification motion............................................................................ 41

Objection 5: Deemed reliance is not available for the common law misrepresentation

claims in the present action.............................................................................42

(i)

The applicable law ......................................................................................... 42

Application of the law to the present case ..................................................... 46

(ii)

Objection 6: PCI 13 cannot be certified as a common issue since there is no basis in

fact to establish a punitive damages claim......................................................49

Objection 7: If leave is denied on the Statutory Claim, certification of the Common

Law Claim “must be denied under s. 5(1)(d)” ................................................50

Objection 8: In the alternative to Objection 7, since deemed reliance cannot be

certified as a common issue in the present action, certification of the

Common Law Claim cannot be granted since a class action would not be

the preferable procedure..................................................................................51

ORDER AND COSTS.................................................................................................................. 53

REASONS FOR DECISION

NATURE OF THE MOTION AND OVERVIEW

Background

[1]

The plaintiff, Dov Markowich (Markowich), and the proposed class acquired shares of

the defendant, Lundin Mining Corporation (Lundin) in the period between October 25, 2017 and

November 29, 2017 (the Class Period).

[2]

On or about October 25, 2017, Lundin detected pit wall instability, arising from an

unstable wedge, in a localized area of its open pit operations at its Candelaria copper mine

located in Chile (the Pit Wall Instability).

[3]

On or about October 31, 2017, the unstable wedge failed and an estimated 600,000 to

700,000 tonnes of waste material from “Phase 10” of the Candelaria mine moved down slope,

restricting access to Phase 9 (the Rock Slide).

[4]

On November 29, 2017, Lundin issued a news release entitled “Lundin Mining Provides

Operational Outlook & Update” (the News Release), consistent with its practice of releasing

operational updates in late November or early December each year. In the News Release, Lundin

(i) advised investors about the Pit Wall Instability which resulted in the Rock Slide, and (ii)

provided a detailed operational update which addressed all of its mining operations including (a)

revised expectations for production, cash costs and capital expenditures, and (b) a 10-year

forecast for the Candelaria mine.

[5]

On November 30, 2017, the price of Lundin’s shares on the Toronto Stock Exchange

(TSX) closed at $7.52, a decline of $1.44, or 16%, from the closing price of $8.96 on November

29, 2017. This one-day drop represented a loss of over $1 billion of market capitalization.

[6]

As required under National Instrument 43-101, Lundin delivered its “Technical Report

for the Candelaria Copper Mining Complex, Atacama Region, Region III, Chile” dated and

released on November 30, 2017 (the Technical Report), prepared by SRK Consulting (Canada)

Inc. (SRK). In that report, SRK reviewed the Pit Wall Instability and the Rock Slide, and

discussed planned resequencing for the mining operations.

[7]

On December 1, 2017, Lundin provided an operational update to investors by a

conference call (the Conference Call) during which the defendant Paul Conibear (Conibear), then

President and Chief Executive Officer of Lundin, and Philip Brumit (Brumit), then President and

Managing Director of the Candelaria mine, discussed the operational update set out in the News

Release, and answered questions from analysts. In that Conference Call, both Brumit and

Conibear discussed the Pit Wall Instability and the Rock Slide, as well as other information

disclosed in the News Release.

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Nature of the claims and the motions

[8] Markowich and the proposed class claim damages based on (i) the statutory cause of

action in Part XXIII.1 of the Securities Act, R.S.O. 1990, c. S.5 (Securities Act) (the Statutory

Claim) and (ii) common law negligent misrepresentation (the Common Law Claim).

[9]

The Statutory Claim is based on s. 75 of the Securities Act. Markowich submits that both

the Pit Wall Instability and Rock Slide were “material changes” to Lundin’s “business,

operations or capital” (as defined under s. 1(1) of the Securities Act) and, as such, Lundin failed

to (i) disclose them immediately by a news release on or about October 25 and 31, 2017

respectively, and (ii) file a material change report within 10 days.

[10] Under s. 138.8(1) of the Securities Act, Markowich requires leave from the court to assert

the Statutory Claim. Markowich seeks an order granting such leave. If leave is granted,

Markowich seeks an order certifying the Statutory Claim as a class action under s. 5 of the Class

Proceedings Act, 1992, S.O. 1992, c. 6 (CPA).

[11] The Common Law Claim is based on the same alleged failure to promptly disclose the Pit

Wall Instability and the Rock Slide, with the class asserting that (i) the defendants owed the class

a duty of care to make timely disclosure of both events; (ii) the defendants breached that duty by

not disclosing either event until the News Release; and (iii) the class relied on the alleged

omissions in making their investments during the Class Period.

[12] Markowich seeks an order certifying the Common Law Claim under s. 5 of the CPA,

regardless of whether leave is granted to assert the Statutory Claim.

Overview of Markowich’s position

[13] Markowich position on the Statutory Claim can be summarized as follows:

(i)

Leave under Part XXIII.1 should be granted since:

(a)

there is a reasonable possibility, based on credible evidence and a

plausible interpretation of the Securities Act, that Markowich can establish

at trial that under s. 75(1) of the Securities Act, Lundin was required to

immediately disclose the Pit Wall Instability and Rock Slide on or about

October 25 and 31, 2017 respectively,¹since those events were “changes”

to Lundin’s “business, operations or capital”; and

1

(and, under s. 75(2) of the Securities Act, file a material change report “as soon as practicable and in any event

within ten days of the date on which the change occurs”)

- Page 3 -

(b)

there is a reasonable possibility, based on credible evidence and a

plausible interpretation of the Securities Act, that Markowich can establish

at trial that under s. 75(1) of the Securities Act, the alleged changes were

“material” since they “would reasonably be expected to have a significant

effect on the market price or value” of Lundin’s shares; and

(ii)

If leave is granted to bring the Statutory Claim, then the Statutory Claim should

be certified as a class action under s. 5 of the CPA, since all requirements under s.

5 would be met.

[14] Markowich’s position on the Common Law Claim is that certification should be granted

because:

(i)

The Common Law Claim discloses a cause of action under s. 5(1)(a) of the CPA;

(ii)

There is some basis in fact to establish an identifiable class under s. 5(1)(b) of the

CPA;

(iii)

There is some basis in fact that the proposed common issues (PCIs)²for the

Common Law Claim can be determined without individual assessment and

significantly advance the claim and, as such, can be certified under s. 5(1)(c) of

the CPA;

(iv)

(v)

There is some basis in fact that a class action is the preferable procedure under s.

5(1)(d) of the CPA; and

There is some basis in fact that Markowich is a proper representative plaintiff

under s. 5(1)(e) of the CPA.

Overview of the defendants’ position

[15] The defendants oppose leave for the Statutory Claim, and on that basis, oppose

certification of that claim.³The defendants raise four objections.

²The PCIs are attached as Schedule A to these reasons.

3

While the heading of the defendants’ written submission is “If Leave is Granted, Certification should Still Be

Denied”, the defendants only submit that the Common Law Claim should not be certified if leave is granted on the

Statutory Claim. The defendants do not oppose certification of the Statutory Clam if leave is granted, and do not

oppose certification of PCIs 1-4 related to the Statutory Claim, if leave is granted.

It is settled law that “[t]here can be no doubt, however, that a class action is the preferable procedure for pursuing a

claim under Part XXIII.1 of the Securities Act. The statutory remedy is tailor-made for a class action”: Green v.

- Page 4 -

[16] The defendants submit that there is no reasonable possibility of success that Markowich

could establish at trial that either the Pit Wall Instability or the Rock Slide constituted a “change”

to Lundin’s “business, operations or capital”, as required under s. 1(1) of the Securities Act. For

this submission, the defendants assert that:

(i)

The report of Markowich’s expert on mining issues, Mr. David Thomas

(Thomas), is “inadmissible” or should be given “no weight”, “due to advocacy

and lack of expertise” or “due to flawed factual assumptions” (Objection 1); and

(ii)

Even if the court considers Thomas’ evidence, there is no reasonable possibility

of success that Markowich could establish at trial that either the Pit Wall

Instability or Rock Slide were “changes” to Lundin’s “business, operations, or

capital” (Objection 2).

[17] The defendants submit, in the alternative, that even if the Pit Wall Instability or the Rock

Slide constituted a “change” to Lundin’s “business, operations or capital” under s. 1(1), there is

no reasonable possibility of success that Markowich could establish at trial that such a change

was material. For this submission, the defendants assert that:

(i)

The report of Mr. Gregg Edwards (Edwards), Markowich’s expert on economic

materiality, is “inadmissible opinion on the ultimate issue” and if admitted, should

be given no weight due to “flawed methodologies” or “flawed factual

assumptions” (Objection 3); and

(ii)

Even if the court considers Edwards’ evidence, there is no reasonable possibility

of success that Markowich could establish at trial that either the detection of the

Pit Wall Instability or the Rock Slide was material (Objection 4).

[18] The defendants also do not challenge that PCIs 1-4 raise common issues for the Statutory

Claim (if leave is granted).⁴

Canadian Imperial Bank of Commerce, 2012 ONSC 3637, at paras. 595 and 611 (Green (SC)). As such, if leave is

granted, certification is suitable for the statutory claims and their attendant PCIs in this case.

4

These PCIs address (i) whether either the Pit Wall Instability (PCI 1) or the Rock Slide (PCI 2) was “a change in

the business, operations or capital of Lundin Mining that could reasonably be expected to have a significant effect

on the market price or value of Lundin Mining securities, and thus constitute a ‘Material Change’ within the

meaning of [the Securities Act]”; (ii) if either was a material change, “did the Defendants, or any one of them, fail to

make timely disclosure of the Pit Wall Change and/or the Rock Slide Change within the meaning of the [Securities

Act], if necessary the Equivalent Securities Acts, and any other applicable securities regulations” (PCI 3); and (iv) if

so, “did the failure to make timely disclosure of the Pit Wall Change and/or the Rock Slide Change constitute a

misrepresentation, if leave is granted, within the meaning of Part XXIII.1 of the [Securities Act] and, if necessary,

the Equivalent Securities Acts”? (PCI 4)

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[19] With respect to the Common Law Claim, the defendants do not challenge that (i) a cause

of action is disclosed (under s. 5(1)(a) of the CPA) and (ii) there is some basis in fact to meet the

requirements of (a) an identifiable class (under s. 5(1)(b) of the CPA) and (b) a suitable

representative plaintiff (under s. 5(1)(e) of the CPA).

[20] The defendants do not object to certification of PCIs 5-7, PCI 10, or PCI 12,⁵but only if

the court finds that the Common Law Claim can be certified under s. 5(1)(d) as the preferable

procedure (which the defendants oppose). There is no dispute that these PCIs raise common

issues which advance the claim.⁶

[21] The defendants take no position on whether PCI 14 should be certified.⁷

[22] The defendants’ objections to the Common Law Claim are based only on the

requirements under s. 5(1)(c) and (d) of the CPA.

[23] The defendants raise two objections to certification of the PCIs as common issues under

s. 5(1)(c) of the CPA.

[24] The defendants submit that PCIs 8, 9 and 11⁸cannot be certified because deemed reliance

is not available for the Common Law Claim (Objection 5).⁹

5

The defendants objected to PCI 12 in their factum but acknowledged at the hearing that this PCI, which seeks a

common determination of whether the defendants are “precluded from obtaining a reduction in damages” because of

issuing additional information in the News Release (described by Markowich as “Confounding Information”), is a

common issue affecting all class members and could be certified if the Statutory Claim was certified (if leave were

granted) or if the Common Law Claim was certified.

6

These PCIs address the following elements of the Common Law Claim: (i) whether the alleged failure to make

timely disclosure of the Pit Wall Instability or Rock Slide was “an omission that constitutes a misrepresentation at

common law” (PCI 5); (ii) whether “the Defendants, or any one of them, owe a duty of care to the Class Members”

(PCI 6); (iii) if so, “did the Defendants, or any of them, fail to meet the standard of conduct required in the

circumstances?” (PCI 7); (iv) whether Lundin is “vicariously liable or otherwise responsible for the acts and/or

omissions of the Individual Defendants and its other officers, directors, employees, agents and representatives” (PCI

10), and (v) whether the defendants are “precluded from obtaining a reduction in damages” because of issuing

additional information in the News Release (PCI 12).

7

PCI 14 asks “Should the Defendants, or any of them, pay the costs of administering and distributing any amount

awarded under sections 24 and 25 of the CPA? If so, who should pay it and in what amount?”. If certification is

ordered for either the Statutory Claim or the Common Law Claim (which I do not find for the reasons I discuss

below), I would certify this PCI as was done in Cassano v. The Toronto-Dominion Bank, 2007 ONCA 781, at para.

72 and in Charmley v. Deltera Construction Limited, 2010 ONSC 7153, at para. 34.

8

These PCIs address the deemed reliance theory. PCI 8 asks “Was the market for Lundin Mining securities

efficient?” PCI 9 asks whether “each Class Member’s reliance on the misrepresentation [can] be inferred from the

fact that each Class Member decided to and did acquire Lundin Mining securities in an efficient market?”. PCI 11

- Page 6 -

[25] The defendants also submit that PCI 13 should not be certified (Objection 6). PCI 13 asks

the court to determine whether “the Defendants, or any of them, [are] liable to pay punitive

damages to the Class Members”, and “[i]f so, who should pay it and in what amount?”. The

defendants submit that there is no basis in fact before the court to certify a punitive damages

claim.

[26] The defendants also object to certification of the Common Law Claim on the basis that a

class proceeding would not be the preferable procedure under s. 5(1)(d) of the CPA. The

defendants submit that:

(i)

If leave is denied on the Statutory Claim, certification of the Common Law Claim

“must be denied under s. 5(1)(d)” (Objection 7); and

(ii)

In any event, since deemed reliance cannot be certified as a common issue,

certification of the Common Law Claim cannot be granted since the action would

devolve into unmanageable individual actions in which each investor would be

required to establish reliance, causation, and damages (Objection 8).

[27] Finally, the defendants submit that the references to an alleged “apology” by Conibear

during the Conference Call must be struck from the pleadings, affidavit evidence, and a

newspaper article attached as an exhibit (which describes comments by Conibear as an apology)

(Objection 9). The defendants rely on (i) ss. 2(1) and 2(3) of the Apology Act, S.O. 2009, c. 3

(Apology Act), which provide that evidence of an apology is not admissible as evidence of fault

or liability and (ii) Rule 25.06(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which

requires pleading of material facts, but not evidence.

Summary of conclusions on the leave motion for the Statutory Claim

[28] For the reasons that follow, I dismiss the motion for leave to bring the Statutory Claim. I

agree with the defendants’ position on Objection 2 and find that there is no reasonable possibility

of success that Markowich could establish at trial that either the Pit Wall Instability or the Rock

Slide constituted a “change” to Lundin’s “business, operations or capital”, as required under s.

1(1) of the Securities Act.

asks whether damages under the Statutory Claim or the Common Law Claim “can be determined on an aggregate

basis pursuant to section 24 of the CPA [and] [i]f so, who should pay it and in what amount?”.

9

The defendants acknowledge that if leave is granted for the Statutory Claim then a claim for aggregate damages

under PCI 11 would be available for that claim since reliance is not required, but submit that it is not available for

the Common Law Claim.

- Page 7 -

[29] The uncontested evidence is that pit wall instability is a common issue in open pit

mining, which Lundin detected by “24/7” ground radar technology as part of its business

operations. There is no evidence that the Pit Wall Instability changed Lundin’s lines of business,

how it conducted its operations, or its capital structure.

[30] With respect to the Rock Slide, I find that there is no reasonable possibility that

Markowich could establish at trial that the event constituted a “change” to Lundin’s business,

operations, or capital.

[31] The evidence is that as a result of the Rock Slide, (i) approximately 20% of the copper

Lundin planned on mining in 2018 from “Phase 9” of the Candelaria mine would be deferred

until 2020 or 2021, and (ii) the deferred production constituted approximately 5% of Lundin’s

worldwide mining operations. Neither that evidence, nor Thomas’ evidence as to the potential

scope of a shutdown after the Rock Slide, could reasonably support a finding based on a

plausible interpretation of the Securities Act that the Rock Slide resulted in a change to Lundin’s

business, operations, or capital.

[32] I do not accept Objections 1 and 3. Based on the settled law and the facts of this case, I do

not find that the evidence of either Thomas or Edwards is inadmissible on the leave motion,

since this case does not raise the rare circumstance in which the court should make such an order.

Consequently, I consider Markowich’s expert evidence on (i) the effect of the Pit Wall Instability

and Rock Slide on Candelaria’s mining operations (from Thomas) and (ii) the economic

materiality of that information (from Edwards). However, that evidence does not establish a

“change” to Lundin’s business, capital or operations.

[33] Based on my review of Edwards’ expert evidence and that provided by the defendants’

expert on economic materiality, Mr. Bradley Heys (Heys), as well as other relevant evidence

including the comments of Conibear during the Conference Call and the reports of numerous

analysts, I find that there is a reasonable possibility that Markowich could establish that the Pit

Wall Instability and Rock Slide were “material” events, which would “reasonably be expected to

have a significant effect on the market price or value” of the Lundin shares. Consequently, I do

not accept Objection 4.

[34] For the above reasons, I deny leave to bring the Statutory Claim. However, if it were

found that there is a reasonable possibility that Markowich could establish that either the Pit

Wall Instability of Rock Slide were “changes” to Lundin’s “business, operations or capital”

(which I do not accept), then I would grant leave to Markowich to bring the Statutory Claim.¹⁰

10

As I note at footnote 3 above, had I granted leave to bring the Statutory Claim, I would have certified the

Statutory Claim under the Green (SC) analysis, as adopted in Musicians’ Pension Fund of Canada (Trustee of) v.

Kinross Gold Corp., 2014 ONCA 901, at para. 136.

- Page 8 -

Summary of conclusions on the certification motion for the Common Law Claim

[35] For the reasons that follow, I do not certify the Common Law Claim.

[36] I accept Objection 5 and find that the efficient market theory cannot be applied to deem

reliance in the present case, regardless of whether the misrepresentation is affirmative or by

omission.

[37] Markowich seeks to distinguish the cases relied upon by the defendants on the basis that

they arise from affirmative misrepresentations, which require determination of individual

reliance. However, the same individualized context to determine the reasons for investing applies

in the present case when the omission is alleged – each investor would need a trial to determine

whether the investor would have relied on the information if disclosed on October 25 and 31,

2017, just as an investor in an affirmative misrepresentation case is required to lead evidence as

to whether that investor relied on the misrepresentation. There is no distinction in principle

between the two scenarios.

[38] Consequently, I do not certify PCIs 8 and 9 related to the efficient market or deemed

reliance, nor PCI 11 seeking aggregate damages for the Common Law Claim.

[39] I also accept Objection 6. Even if the action could be certified for either the Statutory

Claim or the Common Law Claim, I would not certify PCI 13 as there is no basis in fact to

establish egregious or high-handed conduct by Lundin. Further, it is settled law that a claim for

punitive damages cannot stand on its own if there is no other cause of action certified.

[40] I do not agree with Objection 7 that if leave is denied on the Statutory Claim, then

certification of the Common Law Claim must automatically fail. That position was rejected in

Kinross, at paras. 96-99.

[41] However, I accept Objection 8 and find that, as the court held in Kinross, a class action is

not the preferable procedure in the present case since the common law misrepresentation claim

will require tens of thousands of idiosyncratic trials. The Securities Act misrepresentation

remedies, which do not require reliance, were established to provide a common cause of action

when it was not available under the common law. Given my finding that deemed reliance is not

available in the present case, I would follow the approach in Kinross that “generally, common

law negligent misrepresentation claims in securities cases are not suitable for certification”: at

para. 136.

Summary of conclusions on the Apology Act

[42] At the hearing, the parties reached an agreement to (i) redact all references to the

purported “apology” in the pleadings and affidavits, while maintaining the references to any

underlying recitation of the statements and (ii) maintain as exhibits any newspaper articles which

might use the word “apology” in unredacted form, as the articles cannot be used for the purposes

of establishing an apology. Consequently, I do not address Objection 9 in these reasons.

- Page 9 -

FACTS

The parties

[43] Lundin is incorporated pursuant to the laws of Canada. Its corporate head office is in

Toronto and it maintains offices around the world. It describes itself as a “diversified Canadian

base metals mining company with operations in Chile, the USA, Portugal, and Sweden, primarily

producing copper, nickel and zinc.”

[44] During the Class Period, the individual defendants were officers and/or directors of

Lundin.

[45] Markowich is a businessman residing in Toronto. Between November 15, 2017 and

November 27, 2017, he purchased 10,000 securities of Lundin at an average price of $9.156 per

security, for gross proceeds of $91,560 plus commissions. He did not sell any Lundin securities

during that period and continues to own them.

[46] The proposed class includes all persons, other than excluded persons,¹¹who acquired

Lundin’s securities during the Class Period (October 25 to November 29, 2017 inclusive) and

held some or all of those securities as of the close of trading on November 29, 2017.

The Candelaria mine

[47] The Candelaria mining complex is located in Chile’s Atacama Province and is composed

of an open pit mine and three underground mines which provide copper ore to an on-site

concentrator and a processing plant. Candelaria is owned jointly by Lundin (80%) and Sumitomo

Corporation (20%).

[48] At all material times, Candelaria’s mine plan contemplated that the open pit operation

would be mined in several phases over the anticipated remaining 19-year lifespan of the mine. In

2017, there were five remaining phases of the “life of mine” plan (LOM Plan), known as Phases

9 through 13. As of October 2017, Lundin was scheduled to mine Phase 9 and parts of Phase 10.

[49] Lundin removed 87 million tonnes of material in 2017 at the Candelaria open pit mine

(excluding the underground mines and Lundin’s mining operations in other countries), with daily

average production of 227,000 tonnes per day.

11

Excluded from the class are Lundin’s subsidiaries, affiliates, officers, directors, senior employees, legal

representatives, heirs, predecessors, successors and assigns, and any member of the individual defendants’ families

and any entity in which any of them has or had during the Class Period any legal or de facto controlling interest.

- Page 10 -

[50] As of October 2017, the three underground mines operated with collective overall mining

production of 13,750 tonnes per day.

[51] In 2016 and 2017, Candelaria made up between 55% and 60% of Lundin’s sales revenue.

The balance came from Lundin’s other mining operations: the Eagle mine (nickel), located in the

USA, the Neves-Corvo mine (copper), located in Portugal, and the Zinkgruvan mine (zinc),

located in Sweden.

The inherent risks of pit wall instability and rock slides

[52] Mining is an inherently risky and unpredictable industry. The rock masses that make up

underground and open-pit mines are composed of complicated material that varies in strength

and makeup over short distances. Unusual geological formations and rock slides are routine.

Given the constant presence of these challenges, the mining industry makes every attempt to

reduce risk from these hazards.

[53] One of the most common risks associated with open pit mines is slope instability.

[54] Lundin regularly warned investors of the risks of pit wall instability and rock slides. By

way of example:

(i)

In its 2016 annual information form published on March 24, 2017, Lundin

advised that its “business operations are subject to risks and hazards inherent in

the mining industry, including but not limited to […] the occurrence of rock wall

or ramp collapses”; and

(ii)

In a November 30, 2016 news release, Lundin advised that its statements about

future performance, including statements about copper production and capital and

operating costs, were forward looking information that were subject to “risks

inherent in mining including environmental hazards, industrial accidents, unusual

or unexpected geological formations, ground control problems …”.

[55] Similar warnings were included in Lundin’s news release dated October 25, 2017, its

third quarter management discussion and analysis dated October 25, 2017, and in the Technical

Report.

Detection of Pit Wall Instability

[56] Lundin continuously monitored slopes using advanced ground radar equipment. This

equipment alerts a mining operation of the increased risk of slope instability and possible slope

failure.

[57] In 2012, prior to Lundin acquiring its ownership interest in Candelaria, potential pit wall

instability was detected during the mining of Phase 8. This was believed to be associated with

the interaction of two intersecting geological structures, forming a wedge of waste material in the

open pit wall. In order to manage the unstable wedge, the affected area of the open pit wall was

- Page 11 -

redesigned while mining of Phase 8 continued. This revised mine plan included a “step-in” of the

open pit wall to mitigate the risk of further pit wall instability.

[58] Further mining revealed a third geological structure below the wedge, which had a flat-

lying geological fault that “daylighted” in the redesigned pit wall. Candelaria personnel were not

aware of the structure until it was exposed by mining, after which it could be mapped, and

potential ramifications could be assessed. The exposure of the third geological structure resulted

in further pit wall instability, which was detected on or about October 25, 2017 by real-time

slope monitoring radar equipment.

[59] The Pit Wall Instability was localized and resulted in the evacuation of Lundin personnel

from that area of the mine. However, neither party led evidence as to whether any of the

remaining area of the open pit mine, or the underground mine, was shut down as a result of the

detection of the Pit Wall Instability.

[60] Thomas, on behalf of Markowich, describes the suspension of operations as “major”

because he concludes that (i) there would have been a shutdown of at least the open pit mine and

(ii) best practices would have resulted in the closing of the underground mines as well. He opines

that a shutdown and evacuation would have been considered a “crisis” and would have engaged

Lundin’s crisis management procedures.

[61] Mr. Julian Watson (Watson), on behalf of the defendants, opines that there would be no

reason to shut down either the remaining open pit mine or the underground mines, as they were

either located far away from the localized area or could be protected through measures to ensure

the safety of Lundin personnel.

The Rock Slide and its effects on mining at Candelaria

[62] On October 31, 2017, the unstable wedge failed and an estimated 600,000 to 700,000

tonnes of waste material from Phase 10 moved down slope, restricting full access to Phase 9. The

Rock Slide was a localized slope failure and did not cause any fatalities, any injuries, or any

damage to equipment.

[63] Again, there is no evidence as to the effect of the Rock Slide on shutting down other

mining activities at the Candelaria mine.

[64] Thomas asserts that the Rock Slide “would have caused a major disruption of mine

operations and production because the mine would have effectively ceased to operate” but

acknowledges that there is no evidence to support such a hypothesis.

[65] Thomas further asserts that the “economic viability” of the Candelaria mine was at risk as

a result of the Rock Slide. However, he acknowledges on cross-examination that he conducted

no study of Candelaria’s economic viability nor provided an opinion on the issue.

- Page 12 -

[66] Watson asserts that the Rock Slide only resulted in a temporary suspension of mining

activities in a small area of the open pit, with all other mining procedures being unaffected and

continuing as usual. However, as with Thomas, there is no direct evidence to support Watson’s

opinion that since the Rock Slide was localized, the remainder of the mine would have operated

as usual.

[67] Lundin delivered the Technical Report on November 30, 2017. SRK set out the following

information about the Rock Slide:

(i)

“Following a localized failure in the east wall of the Phase 9 pit on October 31,

2017 modifications were made to the Phase 9 design”;

(ii)

“The LOM schedule was modified to reflect the changes in the design”;

(iii)

“The Mineral Reserves were not affected by the change in design as matter now

excluded from the original Phase 9 will be captured in Phase 10 in 2020 and

2021”; and

(iv)

“However, the forecast for 2018 now shows a reduction in contained copper of

approximately 20 percent over the previous production plan, as additional low

grade stockpile material will be processed in place of higher grade ore previously

scheduled from Phase 9”.

[68] Further, the uncontested evidence about the Rock Slide was that:

(i)

Lundin removed 87 million tonnes of material in 2017 at the Candelaria open pit

mine alone, with daily average production of 227,000 tonnes per day.

Consequently, the amount of material in the Rock Slide was 0.8% of 2017 annual

production (or the equivalent of approximately three days of mining);¹²and

(ii)

Revisions made to Candelaria’s 2018 production guidance resulted in a deferral of

approximately 19,000 tonnes of copper (of which Lundin’s 80% share is about

15,200 tonnes). Given that Lundin’s global production outlook for 2018 was

between 317,000 and 344,000 tonnes of base metals, the amount of deferred

copper production represented less than a 5% change.

12

Thomas disputes that it would have been practical or cost-effective to devote all of Candelaria’s resources to

removing the Rock Slide material in three days, but the reference is relied upon by the defendants as a scale-based

comparator, not as evidence that the Rock Slide material would have been removed in three days.

- Page 13 -

The News Release

[69] Lundin’s practice was to provide its investors with an operational update in late

November or early December of each year. Consistent with that practice, Lundin published the

News Release containing its “Operational Outlook & Update” on November 29, 2017.

[70] Lundin described the “key highlights” of the update (cited verbatim):

(i)

The Company will make significant investments in both the mine and mill at

Candelaria to increase the copper production profile over the life-of-mine. A

particular focus is on improvements in years 2021 and beyond. Forecasts for 2018

and 2019 have been lowered under the new re-phased open pit life-of-mine plan

and to address localized pit wall instability, reflecting the short-term impact on

production from a recent slide;

(ii)

Zinc production guidance has increased from 2019 incorporating the Zinc

Expansion Project (ZEP) at Neves-Corvo, though lowered for 2018. Total zinc

production is on-track to increase in 2020 by a forecast 60% over 2018 levels with

the ZEP to be contributing at full production rates;

(iii)

(iv)

Nickel production forecasts remain in line with previous guidance. Final approval

of permit amendments to develop and mine Eagle East were received November

20, 2017; and

Eagle and Zinkgruvan are to remain first-quartile producers, and Candelaria and

Neves-Corvo well positioned on global cash operating cost curves in 2018.

[71] The News Release set out disclosure of facts including the Pit Wall Instability and the

Rock Slide, information in respect of production guidance, cash costs and capital expenditures,

and a 10-year forecast for Candelaria.

[72] With respect to the Pit Wall Instability and Rock Slide, Lundin advised that:

(i)

“Forecasts for 2018 and 2019 have been lowered from the previous outlook under

the new re‐phased open pit life‐of‐mine plan and to address localized pit wall

instability, reflecting the short‐term impact on production from a recent slide”;

and

(ii)

“The latest open pit plan considers new phase designs, production sequences and

a change in pit ore excavation and truck loading methodology. It also addresses

recent instability in a localized area of the pit’s east wall and a slide which

occurred October 31, 2017. Both have impacted 2018 and 2019 production

forecasts. Production guidance for 2017 remains unchanged. Candelaria

attributable copper production guidance of 104,000 to 109,000 tonnes in 2018 is

less (20%) than the previous outlook for the year. As a result of the recent slide

- Page 14 -

and to take a more conservative approach in mining this area of the pit, the

near‐term plans have been altered to focus on waste push backs above the area

prior to mining where the slide occurred. In the meantime, low grade stockpile ore

will make up the difference in mill feed.”

[73] The production guidance indicated an improved copper production profile at Candelaria

over the life-of-mine and over the next 10 years. Production guidance for 2017, which was

increased in July 2017, remained the same.¹³Production guidance for 2018 was 20% less than

the previous outlook for the year.

[74] The cash cost guidance indicated an increase at Candeleria (copper), Neves-Corvo

(copper), and Zinkgruvan (zinc), and a decrease for Eagle (nickel). Following Lundin’s public

disclosure of this updated guidance, equity analysts increased their estimates of 2018 cash costs

for each of Candelaria, Neves-Corvo, and Zinkgruvan, and reduced their estimate of 2018 cash

costs for Eagle.

[75] The capital expenditures guidance indicated that Lundin planned to make significant

additional capital investments at Candelaria on equipment (US $220 million), mill improvements

(US $75 million), and infrastructure (US $47 million).

[76] Candeleria’s 10-year forecast reflected a revised mine plan, which included a

resequencing of Phases 9 and 10 of the open pit and a redesign of Phases 11, 12, and 13. The

resequencing had been planned before the Rock Slide.

[77] Lundin had previously advised its investors about the upcoming expansions to Candelaria

by way of its continuous disclosure, including in its (i) 2016 annual information form, (ii)

management discussion and analysis for the three and six months ended June 30, 2017 (dated

July 26, 2017), and (iii) management discussion and analysis for the three and nine months

ended September 30, 2017 (dated October 25, 2017).

[78] The resequencing required Lundin to transition out of Phase 9 earlier than under the

previous plan and accelerate the start of mining in Phase 10. Phase 9 involved mining under the

area originally planned to be mined in Phase 10 and, consequently, operating one phase above

another resulted in technical “line of fire issues”.

[79] Under the revised plan, waste-stripping in Phase 10 was to begin in 2018. As a result,

Lundin would mine more waste material in the short-term and have correspondingly lower

expectations for the volume of copper production, as reflected in Lundin’s 2018 and 2019 copper

production and cash cost guidance for Candelaria.

¹³This fact does not mean that production for 2017 was not impacted by the Pit Wall Instability or the Rock Slide as

there is no evidence as to whether production until the date of the events was ahead of scheduled production.

- Page 15 -

Effect on share price after the News Release

[80] On November 30, 2017, the price of Lundin’s securities on the TSX closed at $7.52, a

decline of $1.44, or 16% from the closing price of $8.96 on November 29, 2017. This one-day

drop represented a loss of over $1 billion of market capitalization.

The Conference Call

[81] On November 30, 2017, Lundin issued a news release, titled “Lundin Mining Operational

Outlook Conference Call”. The purpose of the call was to “discuss the details of its Operational

Outlook News Release disseminated on November 29, 2017”.

[82] Before the TSX opened, on December 1, 2017, Lundin held the Conference Call with

various stock analysts. During the call, Conibear stated:

(i)

“And now as we take a look at a summary of our 2018 production and cash cost

guidance, you will see, obviously, for those that know the company and know our

previous projections, that we are down on copper for next year, which is

obviously a concern to a lot of investors and one of the key elements as a result --

resulting in our significant stock decline yesterday”;

(ii)

“Candelaria has had a localized pit instability, which has been the primary reason

for the copper production profile for next year and 2019, and then it recovers up

significantly. That's also affected the C1 cost, which is now up to $1.70 for next

year”;

(iii)

“More specifically, at Candelaria, which, you see, is responsible for more than

50% of our revenue, 50% of our profits, if you take a look at the 5-year plan, 7-

year, 10-year and life-of-mine, we've made improvements on that year-upon-year,

and once again, what we're publishing now is we're taking a medium- and long-

term view of that very important asset, reinvesting in it to ensure that we have

outstanding cash flows, better than what were projected before on that”;

(iv)

(v)

“Now it's obvious in the release that we came out and the feedback that we got,

the #1 questions that are being raised and the concerns are around Candelaria and,

in particular, on the localized instability that we had. We had a slide at the end of

October”; and

“Okay. I would like to thank everybody for attending today's call. Obviously, our

stock price took a big hit yesterday, that's a black eye for us.”

[83] During the Conference Call, Brumit stated:

(i)

“When we look at where we're at, we also needed then to take into account the

slide that took place on October 31 of this year in Phase 9”;

- Page 16 -

(ii)

“So as a result, looking at the rephasing of the pit, I will draw your attention to the

slide on the right side. If you look at Phase 9 and Phase 10, you'll notice that the

south end of Phase 9 is basically mining underneath what is Phase 10. This is

what we call a line-of-fire issue”;

(iii)

“Next slide, please. I want to spend a few minutes and talk about the localized

failure there in Phase 9. This wedge basically started back in Phase 8, back in

2012. The phase was basically modified in 2012, step-in away from this wedge

failure. The wedge was formed by 2 structures that intersect, creating basically a

pie wedge of waste material. As we continued to mine down this area that was

naturally unstable, and we encountered an unseen or unmapped, relatively

flatlining structure that when we daylighted that, it released this past October”;

(iv)

“We actually had indications that this was going to happen about 5 days prior to

it. We used the latest technology to constantly scan our walls with radars 24/7, so

that we can actually see if there's any movement. On October 31, the slope

sloughed down, creating a tail of slope of about 600,000 to 700,000 tonnes of

waste material from Phase 10. Basically the impact of this was to delay ore that

was currently being mined out of Phase 9 until it can be mined when Phase 10

comes back through and mines out the failure area as well as this ore that's been

delayed. We expect that to happen between 2020 and 2021. The impacts in 2018

are, basically, twofold. About 55% of the impact in 2018 or about 19,000 tonnes

of copper was the result of the slide, which delayed that, like I said before, out to

2020, 2021. The other, of course, was the rephasing and the fact that we needed to

actually be mining more waste in 2018, thereby shipping lower grade material to

the mill”;

(v)

“Mark, next slide. This is the copper production profile over the life of the mine.

As you can see, 2018 and 2019 are less than what we projected in the gray line,

which is the 2016 plan. Each phase is represented here. So as you can see, our

Phase 9 represented by the blue will basically be mined out in 2019”; and

(vi)

“Yes. No, I've got it, Paul. No basically, when we look at that current conditions

that set up the slide, we look for those same type of structural conditions

throughout the pit. … So we're constantly reviewing and updating our procedures,

doing back analysis going forward, and of course, we monitor our pit slopes on a

24-hour, 7-day a week basis, with the latest technology -- GroundProbe

penetration radars, that type of stuff. So we actually saw this movement begin

about 5 days before it actually sloughed. So we've -- we were able to evacuate all

men and personnel from that area. And again, it's part about managing your slopes

and working through those.”

- Page 17 -

Analysts reports and public news coverage

[84] Markowich set out in detail the “immediate and extensive treatment by stock analysts and

media outlets” of the News Release and the Conference Call.

[85] The majority of analysts emphasized the negative 2018 and 2019 production revisions for

copper mining at Candelaria, while also commenting on the phase redesign and increased long-

term production. Some analysts stated that Lundin ought to have disclosed the Rock Slide earlier

than the News Release, and commented that Lundin’s credibility had been affected by the lack of

earlier disclosure.

Review of the expert mining evidence on the effect of the Pit Wall Instability and the Rock Slide

[86] Markowich relies on the evidence of Thomas, who was retained to provide his opinion as

a mining expert on the effect of the Pit Wall Instability and the Rock Slide. He has open pit

mining experience and is the Vice President and General Manager of a resource development

company that provides engineering support, pre-project planning and construction solutions for

open pit mining.

[87] Thomas was asked to provide an opinion relating to issues including (i) whether either

the Pit Wall Instability or Rock Slide should have been reported to management, (ii) steps

management ought to have taken and (iii) whether either event would “interfere with mine

production”, and if so “to what extent”.

[88] Thomas’ key conclusions are that:

(i)

“A major pit wall instability event occurred at the Candelaria Mine … causing an

immediate evacuation and shut down of mining operations” which resulted in “a

significant disruption to mine production and economic viability of Lundin

Mining’s operations at the Candelaria Mine”;

(ii)

(iii)

“Upon detecting the pit wall instability… it is reported that mine management

immediately shut down and evacuated the Candelaria Mine”, and “for safety and

operational reasons, it is reasonable to assume” that “the underground complex at

Candelaria Mine also shut down during this same time”;

“A major rock slide then occurred at the Candelaria Mine” which “posed a

significant disruption to mine production and economic viability of Lundin

Mining’s operations at the Candelaria Mine”;

(iv)

(v)

“The rock slide would have caused a major disruption of mine operations and

production because the mine would have effectively ceased to operate”; and

“[U]pper management at Lundin Mining knew or should have known these facts

immediately when they occurred”.

- Page 18 -

[89] The defendants rely on the evidence of Watson, who was retained to provide his opinion

as a mining expert on the effect of the Pit Wall Instability and the Rock Slide. He is a

geotechnical engineer with 21 years of operational and consulting mining rock mechanics

experience, with proficiency in mine design, decision-making, and senior corporate management.

[90] Watson was asked to respond to Thomas’ report. Watson’s key conclusions are that:

(i)

Thomas’ report fails to “address mine planning and scheduling activities required

to assess immediate to long-term effects on mine productivity and overall asset

value after the slope failure”;

(ii)

(iii)

“The 2017 event at Candelaria was one of many ordinary course large-scale mine

slope failures that have occurred since 2000 in modern open pit mines and was

very modest in scale by comparison”; and

“The slope failure was very localized and consequently resulted in a temporary

suspension of mining activities in a small area of the open pit. All other mining

and processing activities appear to have been unaffected and continued as usual”.

Review of the expert evidence on economic materiality of the Pit Wall Instability and Rock Slide

[91] The parties’ experts provide opposing views on the economic materiality of the Pit Wall

Instability and Rock Slide.

[92] Edwards was retained by Markowich to provide his opinion on (i) the efficiency of the

market for trading in Lundin, (ii) the economic materiality of the Pit Wall Instability and the

Rock Slide, (iii) a computation of per-share damages suffered by the class members, and (iv) a

methodology that can be used to estimate potential aggregate damages.

[93] Edwards has extensive experience in providing and supporting expert witness testimony

in business dispute matters, including securities class action litigation. He has an MBA in

Finance and is an Accredited Senior Appraiser in Business Valuation.

[94] The key conclusions in Edwards’ initial report are:

(i)

“During the Class Period, Lundin’s common stock traded in … an informationally

efficient market”;

(ii)

“[T]he pit wall instability and subsequent rockslide at Candelaria were

economically material to investors as evidenced by the highly statistically

significant decline in Lundin’s stock price on November 30, 2017”;

(iii)

Based on Edwards’ assumption that Lundin should have immediately known that

it would experience significant production delays and increased cash costs as a

result of the Pit Wall Instability and the Rock Slide, Edwards states that “it is

further my opinion that there is a high degree of economic correspondence

- Page 19 -

between the failure to disclose these events, and the information disclosed in the

[News Release] and [Conference Call]. As such, in my opinion, the disclosures of

the pit wall instability and subsequent rockslide at Candelaria would have been

economically material to investors had they been made earlier in the Class

Period”;

(iv)

“[T]he predominate cause of the statistically significant stock-price decline and

heavy trading volume on November 30, 2017, was the Company’s disclosure of

significantly reduced near-term copper production and higher C1 cash costs

which, according to the Company, were due primarily to the pit wall instability

and subsequent rockslide at Candelaria, as well as the numerous downgrades to

investment recommendations and/or price targets from research analysts due in

part to this same information”; and

(v)

“[L]osses to Class Members who purchased common shares of Lundin during the

Class Period can be calculated based on the formulas set out in Section 138.5(1)

of the [Securities Act]” and “potential aggregate damages under Section 138.5(1)

can be estimated using a mathematical model or algorithm called a trading

model”.

[95] The defendants rely on the evidence of Heys, who was retained to provide his opinion on

the economic materiality of the Pit Wall Instability and Rock Slide.

[96] Heys calculated the effect of a delay in production and sale of 15,200 tonnes of copper¹⁴

from 2018 until 2020 to 2021 to be $0.02 per share, based on a discounted cash flow analysis.

Heys concluded that $0.02 per share was not economically material.

[97] Heys further calculated per-share effects of the other information contained in the News

Release, including (i) revised production/cash costs for Candelaria in 2018 to 2020 ($0.51 per

share), (ii) increase in capital expenditures at Candelaria in 2018 ($0.57 per share), (iii) revised

production/cash costs at remaining mines from 2018 until 2020 ($0.47 per share), and (iv)

increase in capital expenditures at other mines in 2018 ($0.13 per share), with a total effect of

$1.68 per share, more than the $1.44 per share stock price decline of Lundin on November 30,

2017.

[98] Finally, with respect to Edwards’ proposed methodology to calculate aggregate damages,

Heys comments that Edwards “does not address” the following issues affecting his ability to use

a “multi-trader model”: (i) “it is typically not possible to test” assumptions used in trading

models “with any actual empirical data and which could potentially have a material effect on the

¹⁴As set out at para. 68(ii) above, Lundin owned 80% of the Candelaria mine, its share of the 19,000 total tonnes of

deferred production was 15,200 tonnes.

- Page 20 -

resulting damages estimate”, and (ii) trading models are “generally proprietary, making it

difficult or impossible to determine if they have been properly and consistently applied or to test

the sensitivity of the resulting estimates to changes in parameter assumptions”.

[99] In his reply report, Edwards challenges the methodology used by Heys, both to assess the

per share effect of the Pit Wall Instability and Rock Slide and to calculate alleged other effects

on share price from information disclosed in the News Release.

[100] In particular, Edwards’ opinion is that:

(i)

Heys errs by “ignoring the financial benefits expected to be received based on the

increased capital expenditures associated with the [LOM] Plan”. By way of

example, while Heys calculated the per share value of decreased short-term

production and increased capital expenditures at Candelaria at $1.08 per share

($0.51 plus $0.57 per share, as set out at para. 97 above ), he “misleadingly

ignores the significant expected increase in future production and decrease in

future production costs that Lundin management and other market participants

expected over the life of the mine as a direct result of the same capital

expenditures”, which “translated to over $2 billion of incremental revenue and

$800 million of incremental cash flow”, and which “translates to a benefit of

approximately $1.61 per share” between 2018 to 2027 and $2.22 per share over

the life of the mine (2018-2035), which exceeds the purported per share cost from

increased capital expenditures;

(ii)

“The long-term financial benefits associated with the capital expenditures

contemplated under the [LOM] Plan were also widely reported on by research

analysts following the November News Release” and were “discussed extensively

during the December 1 call”;

(iii)

(iv)

Heys’ analysis based on expected cash flows for these other factors fails to take

into account the expected reduction in income taxes which would result ($0.26

per share); and

Heys’ analysis of the $0.02 per share decrease based on expected cash flows fails

to take into account (a) direct costs of the Rock Slide through incremental costs of

modifications to the [LOM] Plan, (b) the financial implications of the evacuation

of personnel and suspension of operations at Candelaria following the detection of

the pit wall instability, as well as continued production interruption while Lundin

assessed the extent of the failure, (c) additional incremental costs such as geo-

technical drilling to identify other potential failure areas within the mine, and (d)

indirect costs of the Rock Slide which result when investors are asked to bear the

additional risk associated with increased variability in future earnings, given the

perceived riskiness of Lundin’s future earnings when the Pit Wall Instability and

Rock Slide were disclosed.

- Page 21 -

[101] Further, Edwards notes that Heys’ analysis is contrary to statements made by Conibear

during the Conference Call that one of the “key elements … resulting in our significant price

decline” was that Lundin was “down on copper for next year”, which he described as the

“number one” concern following the News Release, and was relied upon by numerous analysts

as a reason to reduce target share prices of Lundin.

[102] Edwards defends his initial opinion that the share decline was predominately due to

disclosure of the Pit Wall Instability and Rock Slide. Edwards refers to statements by Conibear

that the Pit Wall Instability was “the primary reason for the copper production profile for next

year and 2019”, and notes that Brumit’s statement “identified the rockslide as being responsible

for 55% of the reduction in copper production guidance for Candelaria in 2018”.

[103] Further, since Lundin management made clear in the News Release that the LOM Plan

would provide an overall “value-enhancing” effect, Edwards states that it is reasonable to

conclude that the disclosure of the Pit Wall Instability and Rock Slide were predominately the

cause of the decline in Lundin’s share value. Edwards concludes that this view was shared

contemporaneously by analysts, some of whom stated that the information should have been

disclosed earlier.

[104] With respect to Heys’ criticisms of Edwards’ approach to a trading model methodology

to determine aggregate damages, Edwards cites Heys’ own article in which he states that trading

models are “commonly used” in U.S. shareholder class actions.

[105] Edwards asserts that based on Heys’ “written work”, Heys “agrees that i) trading models

are reasonable and appropriate tools for estimating aggregate damages in the absence of trading

records; ii) the proprietary nature of some trading models do not affect their suitability for

determining aggregate damages; and iii) there are a wide range of tools available to financial

economists for dealing with any case-specific issues that may arise when attempting to estimate

aggregate damages using trading models”.

ANALYSIS

[106] I first review the issues arising out of the leave motion, and then consider the certification

issues.

The issues arising out of the leave motion

[107] I first consider the applicable test to grant leave to assert the statutory cause of action

under Part XXIII.1 of the Securities Act.

[108] I then consider the objections raised by the defendants on the leave motion. In particular,

I review the objections as to:

(i)

the admissibility or weight to be attached to the Thomas expert evidence on

mining operations (Objection 1),

- Page 22 -

(ii)

whether, on the evidence before the court (including the expert evidence), the

leave test has been met to establish a “change” to Lundin’s “business, operations

or capital” under s. 1(1) of the Securities Act (Objection 2),

(iii)

(iv)

the admissibility or weight to be attached to the Edwards expert evidence on

economic materiality (Objection 3), and

whether, on the evidence before the court (including the expert evidence), the

leave test has been met to establish that the Pit Wall Instability or Rock Slide is

“material” under s. 1(1) of the Securities Act, i.e., whether it “would reasonably

be expected to have a significant effect on the market price or value of” Lundin’s

shares (Objection 4).¹⁵

The test to grant leave to bring the Part XXIII.1 claim

[109] Leave shall be granted under s. 138.8(1) of the Securities Act if the court is satisfied that

(i) the action is brought in good faith; and (ii) there is a reasonable possibility that the action will

be resolved in the plaintiff’s favour at trial.

[110] The defendants do not challenge Markowich’s good faith. Consequently, the only issue

for leave in the present case is whether Markowich has a reasonable possibility of success at

trial.

[111] The court reviewed the applicable law for the “reasonable possibility” test in Dyck v.

Tahoe Resources Inc., 2021 ONSC 5712, at paras. 91-95:

Under settled law in Theratechnologies Inc. v. 121851 Canada Inc., 2015 SCC

18, [2015] 2 S.C.R. 106, the court is required to engage in a “robust screening

mechanism” to ensure that “cases without merit are prevented from proceeding”.

The threshold is “more than a ‘speed bump’”: at para. 38.

However, the screening mechanism is not intended to become a “mini-trial”. The

plaintiff must only establish a “reasonable or realistic chance that the action will

succeed”: Theratechnologies, at para. 38. Consequently, the requirement for a

reasonable possibility of success is satisfied if the plaintiff can establish “both a

plausible analysis of the applicable legislative provisions, and some credible

evidence in support of the claim”. In Theratechnologies, the Court held, at para.

39:

15

I address Objections 3 and 4 on the assumption that the leave test has been met to establish that the Pit Wall

Instability or Rock Slide is a “change” to Lundin’s “business, operations or capital” under s. 1(1) of the Securities

Act (which I do not accept).

- Page 23 -

A case with a reasonable possibility of success requires the

claimant to offer both a plausible analysis of the applicable

legislative provisions, and some credible evidence in support of the

claim. This approach, in my view, best realizes the legislative

intent of the screening mechanism: to ensure that cases with little

chance of success - and the time and expense they impose - are

avoided. I agree with the Court of Appeal, however, that the

authorization stage under s. 225.4 should not be treated as a mini-

trial. A full analysis of the evidence is unnecessary. If the goal of

the screening mechanism is to prevent costly strike suits and

litigation with little chance of success, it follows that the

evidentiary requirements should not be so onerous as to essentially

replicate the demands of a trial. To impose such a requirement

would undermine the objective of the screening mechanism, which

is to protect reporting issuers from unsubstantiated strike suits and

costly unmeritorious litigation. What is required is sufficient

evidence to persuade the court that there is a reasonable possibility

that the action will be resolved in the claimant's favour. [Italics in

original.]

Consequently, in assessing the evidentiary record, the court should not engage in

a finely calibrated weighing process, and it should keep in mind the relatively low

threshold and limits of the record: Kauf v. Colt Resources, Inc., 2019 ONSC 2179,

145 O.R. (3d) 100, at para. 69.

The leave motion is also not the forum in which to resolve conflicts in the expert

evidence, unless it can be established that there is no reasonable possibility that an

expert’s opinion would be accepted by a trial judge: Green v. Canadian Imperial

Bank of Commerce, 2012 ONSC 3637, at para. 315; Swisscanto Fondsleitung AG

v. Blackberry Ltd., 2015 ONSC 6434, at para. 48.

Morgan J. summarized the applicable test in the recent decision of Gowanlock v.

Auxly Cannabis Group Inc., 2021 ONSC 4205 by stating that the leave test is

“very much stacked in the moving party’s favour”. Even if the motion judge

believes that the defendant has a strong chance of success at trial, the court can

conclude that the plaintiff has a reasonable possibility of success at trial if the

plaintiff meets such lower threshold: Drywall Acoustic Lathing and Insulation

Local 675 Pension Fund (Trustees) v. Barrick Gold, 2019 ONSC 4160, 148 O.R.

(3d) 755, at paras. 32-35, rev’d on other grounds 2021 ONCA 104.

[112] Further, as discussed in Dyck, at para. 218, the court on a leave motion must consider

what evidence is not before the court. In Rahimi v. SouthGobi Resources Ltd., 2017 ONCA 719,

137 O.R. (3d) 241, leave to appeal refused, [2017] S.C.C.A. No. 443, the court held, at para. 48:

- Page 24 -

[T]he motion judge’s duty to scrutinize the entire record is not restricted to a

review of the evidence filed on the motion. The motion judge is also obligated to

consider what evidence is not before her. She must be cognizant of the fact that, at

the leave stage, full production has not been made and the defendant may have

relevant documentation that has not been produced or relevant evidence that has

not been tendered. Consideration of these evidential limitations of the leave stage

is important because they can work to the prejudice of plaintiffs who have

potentially meritorious claims. [Emphasis in original text.]

[113] The court further held in Rahimi that where “contentious issues of credibility that impact

on the decision whether to grant leave” arise, “the motion judge must ask herself whether they

can be resolved on the existing record”: at para. 49. The court also concluded that the motion

judge “must vigilantly implement the screening mechanism of the leave requirement under s.

138.8 while at the same ensuring that the secondary market remedy is not rendered illusory

through the elimination of potentially meritorious claims”: at para. 45.

[114] I now consider the particular objections raised by the defendants.

Objection 1: The admissibility of Thomas’ evidence and the weight of such evidence

[115] The defendants submit that Thomas’ evidence on mining operations at the Candelaria

mine should not be admitted due to “advocacy and lack of expertise”, or given little weight due

to “flawed factual assumptions”. I do not agree.

[116] I first review the applicable law as to the court’s analysis of expert evidence on a leave

motion under s. 138.8(1). I then apply that test to the submissions raised by the defendants about

the Thomas evidence.

(i)

The applicable law as to considerations of admissibility and weight of expert

evidence on a leave motion

[117] In Dyck, the court reviewed the law on admissibility of expert evidence in the context of a

leave motion, at paras. 278-81:

The court in White Burgess adopted a two-stage test for determining the

admissibility of expert evidence: at paras. 23-24. The first stage involves a

threshold requirement where the expert must be properly qualified by being

willing and able to fulfil the duty to the court to provide evidence that is unbiased:

at paras. 26, 32.

The court in White Burgess stated that as a “matter of fact and degree” an expert is

“clearly unwilling and/or unable to carry out the primary duty to the court” if the

expert, “in his or her proposed evidence or otherwise, assumes the role of an

advocate for a party”: at paras. 49-50. If this is proven, then “the evidence, or

- Page 25 -

those parts of it that are tainted by a lack of independence or impartiality, should

be excluded”: at para. 48.

Exclusion of an expert’s evidence at this stage is “quite rare” and would occur

“only in very clear cases”: at para. 49. There is a high bar for exclusion.

The second “gatekeeper” stage permits the court to balance the benefits of

admitting evidence against its potential risks, considering such factors as bias: at

para. 54.

[118] In Dyck, the court relied on the following principles with respect to the treatment of

expert evidence on a Part XXIII.1 leave motion:

(i)

“The leave motion is also not the forum in which to resolve conflicts in the expert

evidence, unless it can be established that there is no reasonable possibility that an

expert’s opinion would be accepted by a trial judge”: at para. 94;

(ii)

“For the purposes of the leave application, it is not appropriate to determine which

expert’s evidence will be accepted at trial. As long as Dyck can establish that

there is a reasonable possibility of success at trial based on credible evidence from

Dr. Escobar and a plausible interpretation of the Securities Act, the issue as to the

specific level of risk posed by the CALAS amparo petition is not to be resolved

on this leave motion”: at para. 253;

(iii)

(iv)

“It is not the role of the court on a leave motion under s. 138.8(1) to determine

which expert evidence will be accepted at trial. I review the expert evidence

above in some detail only to conclude that Dyck has led credible evidence to

establish a reasonable possibility, based on a plausible interpretation of the

legislation, that Dr. Hartzmark’s evidence on materiality would be accepted at

trial”: at para. 275; and

“[T]he conflicting expert evidence sends a strong signal that there is a reasonable

possibility that Dyck can establish the economic materiality of the Omissions”: at

para. 263.

[119] I now apply the above principles to the issues of (i) “advocacy”, (ii) “lack of expertise”,

and (iii) “factually flawed assumptions” submitted by the defendants.

(ii) Application of the law to the present case

[120] For the reasons that follow, I do not find that Thomas’ expert evidence is inadmissible on

this motion due to advocacy or lack of expertise, nor do I make a finding that his evidence is of

little or no weight due to alleged factually flawed assumptions.

[121] The defendants submit that Thomas’ report is inadmissible because (i) Thomas “does not

have the education, expertise, or experience to be qualified to opine on any matters related to an

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open-pit copper mine”, (ii) he is not a “professional engineer”, and (iii) he purposefully misled

the court on his credentials. I do not agree.

[122] First, Thomas does have the necessary experience. His open pit experience mining gold,

silver, lead, zinc, and coal properly qualifies him to opine on mining issues. Further, he has

direct experience with various pit wall instabilities.

[123] Second, Thomas was not retained to provide evidence as a professional engineer, but

instead to provide his opinion as a mining expert. He did not claim to be a professional engineer,

and he immediately corrected any confusion from a CV reference to an undergraduate degree in

civil engineering by stating that he had a BA or a BSRA in construction management with a

minor in civil engineering. In any event, it is Thomas’ mining experience which is relevant.

[124] Third, the defendants submit that Thomas assumed an advocacy role by acknowledging

in his cross-examination that a mine manager or Lundin management would need some time to

assess and respond to the Pit Wall Instability, when Thomas stated in his report that “the

technical, operational and economic impacts to the long term viability of the Candelaria Mine”

would have been “immediately recognized” by the mine manager upon detection of the Pit Wall

Instability.

[125] Even if there is any inconsistency in these statements (someone can still immediately

recognize a threat to long-term viability but still need time to conduct a proper assessment), any

alleged acknowledgement or clarification by Thomas in his evidence would not be sufficient for

the “rare” circumstance of finding expert evidence to be inadmissible under the White Burgess

test.

[126] Fourth, the defendants submit that Thomas relies on the “flawed factual assumption” that

“following the pit wall instability and rock slide, Candelaria ceased to operate”. However, as I

discuss above, neither Thomas nor Watson have direct evidence as to whether (and to what

extent) the Candelaria mine shut down after the Pit Wall Instability or Rock Slide. Both experts

base their conclusions as to what likely took place on (i) public documents, (ii) their experience,

and (iii) what they consider to be industry practice.

[127] For the above reasons, I find that Thomas’ evidence is admissible and I do not give it

little or no weight as submitted by the defendants. Consequently, I reject this objection.

Objection 2: Does either the Pit Wall Instability or Rock Slide constitute a “change” to

Lundin’s business, operations, or capital?

[128] I first consider the applicable statutory framework. I then review the principles from the

applicable case law governing the determination of whether a “change” has occurred. Finally, I

apply the statutory definitions and case law to the facts before the court.

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(i)

The statutory framework

[129] Lundin is a “reporting issuer” as defined under s. 1(1) of the Securities Act, and as such

has the statutory obligation to make “timely disclosure” of “material changes” under ss. 75(1)

and 138.1.

[130] Lundin is also a “responsible issuer” under s. 138.1 of the Securities Act (as a “reporting

issuer”). Consequently, the individual defendants, by virtue of their positions, are statutorily

liable for a failure to make timely disclosure under s. 138.3(4) of the Securities Act.

[131] Under s. 1(1) of the Securities Act, a “material change” in relation to an issuer other than

an investment fund is defined as:

(i)

a change in the business, operations or capital of the issuer that would reasonably

be expected to have a significant effect on the market price or value of any of the

securities of the issuer, or

(ii)

a decision to implement a change referred to in subclause (i) made by the board of

directors or other persons acting in a similar capacity or by senior management of

the issuer who believe that confirmation of the decision by the board of directors

or such other persons acting in a similar capacity is probable.

[132] Under s. 75(1) of the Securities Act:

Subject to subsection (3),¹⁶where a material change occurs in the affairs of a

reporting issuer, it shall forthwith issue and file a news release authorized by a

senior officer disclosing the nature and substance of the change.

[133] Under s. 75(2) of the Securities Act:

Subject to subsection (3), the reporting issuer shall file a report of such material

change in accordance with the regulations as soon as practicable and in any event

within ten days of the date on which the change occurs.

[134] Consequently, under the Securities Act a material “change” to an issuer’s “business,

operations or capital” must be reported immediately by a news release and followed as soon as

practicable by a material change report. In contrast, a material “fact” must be disclosed to

investors in the course of an issuer’s periodic disclosure, when the issuer collects and discloses

matters that affect the issuer’s business, operations and capital, but do not constitute a “change”.

16

Section 75(3) of the Securities Act does not apply in the present case as there are no confidentiality concerns

raised by the Pit Wall Instability or the Rock Slide.

- Page 28 -

[135] Section 1(1) is clear that there are two components to a material change. First, there must

be a change to the issuer’s business, capital or operations. Second, the change must be material,

i.e. a fact that “would reasonably be expected to have a significant effect on the market price or

value of any of the securities of the issuer” (see also Cornish v. Ontario (Securities Commission),

2013 ONSC 1310 (Div. Ct.), at para. 46).

[136] There is no statutory definition of “change” under the Securities Act. The only assistance

provided under the Securities Act is that the “change” must be to the “business, operations or

capital” of the issuer.

[137] There is no statutory definition of either “business”, “operations”, or “capital” under the

Securities Act.

(ii) Principles from the applicable case law

[138] I set out the applicable principles from the case law below.

(a)

The distinction between material change and fact is deliberate and policy-

based

[139] The courts must not conflate the concepts of material change and material fact. The

distinction is deliberate and policy-based.

[140] In Kerr v. Danier Leather Inc., 2007 SCC 44, [2007] 2 S.C.R. 331, Binnie J. discussed

the difference between material change and material fact, at para. 38:

The distinction between "material change" and "material fact" is deliberate and

policy-based, as explained by a former chairman of the O.S.C.:

The term "material fact" is necessary when an issuer is publishing

a disclosure document, such as a prospectus or a take-over bid

circular, where all material information concerning the issuer at a

point in time is published in one document which is convenient to

the investor. The term "material change" is limited to a change in

the business, operations or capital of the issuer.

[141] Similarly, Strathy J. (as he then was) held in Green (SC), at para. 28:

The requirement to make timely disclosure of a material change is not an

obligation to provide a running commentary on the company’s progress during the

quarter or to comment on internal or external events that may impact its

performance.

[142] In his recent decision in Peters v. SNC-Lavalin Group Inc., 2021 ONSC 5021, Perell J.

summarized the distinction, at paras. 150-51:

- Page 29 -

The definition of material fact is broader than that of material change because it

encompasses any fact that reasonably would be expected to have a significant

effect on the market price or value of the securities of an issuer and thus

encompasses more than facts that affect the business, operations, or capital (assets

or ownership) of the issuer or facts that would be expected to have such an effect.

The distinction between material change and material fact was a deliberate and

policy-based legislative decision to relieve reporting issuers of the obligation to

continually interpret external political, economic, and social developments as they

affect the affairs of the issuer, unless the external¹⁷change will result in a change

in the business, operations or capital of the issuer, in which case, timely disclosure

of the change must be made. [Footnotes omitted.]

[143] Consequently, if a development is material and causes a change in the business,

operations or capital, it must be disclosed immediately. If the development is material and affects

a company’s business, operations or capital without resulting in a change, it is a material fact to

be disclosed in the ordinary course of periodic disclosure.

(b)

There is no bright-line test for a change – it is fact-specific

[144] In Peters, at para. 153, Perell J. adopted the following passage from the decision of the

Ontario Securities Commission (OSC) in AiT Advanced Information Technologies Corporation,

2008 ONSEC 3, 40 B.L.R. (4th) 242, at para. 215:

We agree that there is no "bright-line test". Instead, the assessment of whether a

material change has taken place will depend on the circumstances and series of

events that took place. This is because the determination of a material change is a

question of mixed fact and law (Re YBM Magnex et al., supra at para. 94). This

determination requires ascertaining whether the existing facts fulfill the legal test.

Each case will be unique, and the specific facts and circumstances will vary case

by case. Since the fact scenarios will differ in all cases, it is impossible to

articulate a bright-line test that will apply in all circumstances.

[145] As Perell J. noted in Peters, at para. 186:

17

I note that Perell J. refers to “external” change while Strathy J. in the above passage from Green (SC) refers to

“internal or external events that may impact performance”. I do not take Perell J. to be limiting a material change

obligation to the disclosure only of events outside of a company’s control (if that meaning were to apply to

“external”), as a company’s “internal” decision to cease or change its business would, under the Green (SC) test,

also be subject to the obligation to disclose a material change. Such an interpretation is consistent with a broad and

purposive interpretation of s. 75 to protect the interests of investors.

- Page 30 -

[D]eterminations of materiality, and determinations of what counts for a material

fact or for a material change are intensely fact-specific and depend on the

circumstances of the particular case. There is no bright-line test for change.

(See also Cornish, at para. 53)

[146] Consequently, the courts must consider the evidence in every case to determine if there

has been a change. By way of example, a regulatory prohibition resulting in the inability to sell

one product line may not be a material change to the business or operations of a global

household and consumer products company that sells thousands of products, but could be a

material change to a small company that sells only that product.

(c)

The definition of change requires establishing a different position, course,

or direction

[147] As Perell J. noted in Peters, “[t]he Ontario Securities Act does not define what counts for

a ‘change’”: at para. 153.

[148] The defendants rely on case law in which the courts held that a material change only

arises upon “important and substantial ‘changes’ in key aspects of the business, operations or

capital of the issuer”: Green (SC), at para. 28, or a “significant disruption or interference in the

ongoing operation of the business itself”: Mask v. Silvercorp Metals Inc., 2015 ONSC 5348, at

paras. 57-58, aff’d 2016 ONCA 641.

[149] Markowich submits that the above comments were either obiter and/or “impose too high

and too rigid, while at the same time too abstract, of a standard for ‘change’ generally, let alone

for consideration on the lower credible evidence/plausible analysis test”.

[150] Applying the grammatical definition of change, a change will occur in the context of s.

1(1) and the disclosure obligations under s. 75(1) upon “a different position, course, or

direction”.¹⁸Such an approach maintains the distinction between a material change and material

fact, without requiring “a running commentary on the company’s progress during the quarter or

to comment on internal or external events that may impact performance”: Green (SC), at para.

28.

[151] Consequently, regardless of the adjective used to describe the nature of the “change”, the

requirement for a “change” remains under s. 1(1). Whether or not the change is considered to be

“substantial” or “important”, the key conclusion from both Green (SC) and Mask is that a change

occurs when the event results in a different position, course, or direction to a company’s

¹⁸Merriam-Webster Dictionary, sub verbo “change”, <www.merriam-webster.com/dictionary/change>.

- Page 31 -

business, operations, or capital. Otherwise, the distinction between material change and material

fact would be lost.

[152] For the same reasons, if there are events which affect the company, but do not amount to

a change in business, operations or capital, those events cannot be a material change requiring

immediate disclosure.

(d)

The definition of business, operations or capital

[153] The “business” of an issuer has been broadly described by the OSC as the lines or

activities in which the issuer engages to generate revenues: Coventree Inc., 2011 ONSEC 25, at

para. 76, aff’d 2013 ONSC 1310 (Div. Ct.); Rex Diamond Mining Corporation et al., 2008

ONSEC 18, at paras. 10-11, 222 (Rex Diamond (OSC)), aff’d 2010 ONSC 3926 (Div. Ct.).

[154] Put differently, the term “business” is used to describe what the company does.

[155] The “operations” of an issuer were reviewed by the OSC in Rex Diamond as “where” the

company conducted business. The OSC referred to the company’s mining “operations” located

in various countries: at paras. 8 and 11.

[156] Put differently, the term “operations” is used to refer to the activities conducted by the

company to engage in its lines of “business”. If a company changes its position, course or

direction as to how or where it conducts business, it may be considered a change to “operations”.

[157] “Capital” is also undefined. Markowich relies on Pezim v. British Columbia

(Superintendent of Brokers), [1994] 2 S.C.R. 557, in which the applicable statute defined a

material change as including a change to “business, operations, assets or ownership of the

issuer”. Markowich submits that “capital” should be defined to include both assets and

ownership. However, the court in Pezim was not considering the definition of “capital”, but was

instead interpreting a different statute which did not include the term “capital”.

[158] Further, such a broad interpretation of “capital” is inconsistent with the ordinary meaning

of the “capital” of a corporation, which refers to its share structure and rights of shareholders.

[159] Consequently, I would not accept Markowich’s submissions that increased costs could be

part of the definition of “capital”. However, the distinction is of little import as a change to costs

that results in a change of business or operations would still be considered a “change” under s.

1(1).

(e)

Market impact is not determinative of change (or materiality)

[160] In Peters, at para. 190, Perell J. noted that the Supreme Court in Theratechnologies held

that there was no material change even though the defendant’s share price decreased by 58

percent after disclosure of the impugned information. Perell J. held, at paras. 195 and 197:

- Page 32 -

A third and for present purposes very important lesson from Theratechnologies

inc. is that it is a mistake to reason backwards, as Mr. Peters and his expert

witness Dr. McCann appear to do in the immediate case, from a precipitous

decline in the market value of the issuer's shares to the conclusion that there has

been a material change in the issuer's business operations or capital of SNC. In

Theratechnologies inc. v. 121851 Canada inc. there was a 58 percent whack to the

share price, but there was no evidence of a material change to the business,

operations, or capital of Thera.

…

Cornish and Theratechnologies inc. demonstrate that while market impact is

relevant to the question of materiality and share value is relevant to the question

of whether there has been a change, value volatility is not determinate as to

whether a change has occurred. A single factor such as share price movement will

not conclusively determine whether a material change has occurred. [Emphasis in

original text.]

(f)

General principles in determining whether a change has occurred

[161] The court in Cornish set out some general principles which I adopt. In particular:

(i)

“[A] supercritical interpretation of the meaning of material change does not

support the goal of promoting disclosure or protecting the investing public”: at

para. 48;

(ii)

(iii)

(iv)

(v)

“[A] technical interpretation of the language of the [Securities Act] should not be

relied upon to justify non-disclosure of material changes”: at para. 48;

“[I]f the decision is borderline, then the information should be considered material

and disclosed”: at para. 48;

“No single factor will be determinative of whether a material change occurred”: at

para. 51;

Management’s subjectively optimistic hopes or attempts to mitigate the issue do

not alleviate the requirement for immediate disclosure of an otherwise

objectively-determined material change: at para. 55;

(vi)

It is important “to recognize the dangers of hindsight in coming to this conclusion

and to be careful not to look at the situation based on what subsequently

happened”: at para. 49; and

(vii) If a “business managed to continue its operations in a lesser form, despite these

changes” it “does not detract from” the reality that a “material change” still

occurred: at para. 116.

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[162] Further, the “business judgment rule” and related issuer-focused principles are irrelevant

to whether a “material change” has occurred: Kerr, at paras. 54-55, 58.

(g)

Cases which have considered whether a material change took place

[163] At the hearing, counsel relied on numerous cases in which the courts or securities

commissions found that a material change had taken place or had not taken place. Applying the

above principles assists in finding a common thread between these cases.

[164] The court in Kerr found that a decline due to unseasonably warm weather did not

constitute a material change, at paras. 47-48:

It almost goes without saying that poor intra-quarterly results may reflect a

material change in business operations. A company that has, for example,

restructured its operations may experience poor intra-quarterly results because of

this restructuring, but it is the restructuring and not the results themselves that

would amount to a material change and thus trigger the disclosure obligation.

Additionally, poor intra-quarterly results may motivate a company to implement a

change in its business, operations or capital in an effort to improve performance.

Again, though, the disclosure obligation would be triggered by the change in the

business, operations or capital, and not by the results themselves.

In the present case, there is no evidence that Danier made a change in its business,

operations or capital during the period of distribution. It is not disputed that the

revenue shortfall as of May 16 was caused by the unusually hot weather, a factor

external to the issuer. Consequently, Danier experienced no material change that

required disclosure and did not breach s. 57(1). [Emphasis in original text.]

[165] In Rex Diamond, the OSC held that a material change took place no later than when a

final notice was provided to a mining company indicating that its leases for diamond mines in

Sierra Leone were going to be cancelled if it failed to comply with certain terms within 90 days.

The OSC, as affirmed by the Divisional Court, also concluded it was “likely that there was a

material change” when the issuer received two previous warning letters. The OSC found that

these prior warning letters warned the issuer that “there was a very possible risk that the Leases

would be cancelled by the Government of Sierra Leone”: Rex Diamond (OSC), at paras. 211 and

285.

[166] However, regardless of which letter constituted a change in the company’s business,

operations, or capital, all of the letters made clear that “the Minerals Advisory Board

recommended to the Minister of Mineral Resources that Rex's leases be cancelled because Rex

did not comply with the conditions set out in the Leases”: Rex Diamond (OSC), at para. 8.

Consequently, such a result would be a change to the company’s business (what it did) and its

operations (where and how it operated the business).

- Page 34 -

[167] Similarly, in Cornish the company (Coventree) could no longer issue asset-backed

commercial paper, which was its primary source of revenue and a crucial aspect of its business.

Coventree’s securitization activities comprised 90% of its total revenue and, accordingly, when it

became unable to carry on this aspect of its business, the court held that a material change had

occurred: at para. 109. The loss of the ability to carry on 90% of a company’s business would

constitute a change to its business or operations.

[168] In Mask, the court held that a downward trend in the performance of a business, without

more, did not amount to a material change because there was no suggestion that the defendant

company was no longer able to carry on its principal business: at para. 58.

[169] The above decisions are all consistent with the approach that if there are events which

affect a company’s business, operations or capital but do not constitute a change, those events are

not material changes requiring immediate disclosure. A “change” is required in position, course

or direction — otherwise the “running commentary” concerns raised by Strathy J. in Green (SC)

would be imposed for every fact “that would reasonably be expected to have a significant effect

on the market price or value of the securities” of a responsible issuer.

[170] I now apply the principles from the above case law to the facts of the present case.

(iii) Application to the present case

[171] On the present motion, Markowich must satisfy the court that he has a reasonable

possibility of success at trial to establish that a “change” occurred to Lundin’s business,

operations, or capital as a result of the Pit Wall Instability and the Rock Slide, based on credible

evidence and a plausible interpretation of the Securities Act.

[172] For the reasons that follow, I find that Markowich has not met his burden on the evidence

before the court.

[173] There is no evidence of any change to Lundin’s business, operations, or capital arising

from the events. The only effect was that 15,200 tonnes of copper mining was deferred until

2020 or 2021, with some increased costs and decreased revenues arising from milling lower

quality copper. The deferred copper represented less than 5% of Lundin’s annual production,

which was already scheduled to be reduced (by a lower amount) due to previously planned

resequencing.

[174] There was no evidence that either the Pit Wall Instability or the Rock Slide raised any

threat to Lundin’s economic viability, as acknowledged by Thomas on cross-examination. At all

times, Lundin was able to continue its business, operations and capital as a worldwide mining

corporation.

[175] At the hearing, the expert evidence between Thomas and Watson differed on what each

thought would have been the immediate consequences of the Pit Wall Instability or the Rock

Slide. Thomas assumed that at a minimum, the open pit mining was suspended. He also

- Page 35 -

concluded that best practices would have been to shut down the entire mine, including all of the

open pit operations and the underground mine operations.

[176] Watson did not believe that such a shutdown took place, nor that it would have been

required. Watson opined that mining operations could have continued both in the underground

mine and in the open pit mine, with proper protective measures put into place.

[177] Markowich asks the court to draw an adverse inference from (i) the uncertainty as to the

scope of any shutdown after the Pit Wall Instability or Rock Slide, and (ii) the lack of evidence

from Lundin as to (a) how the events were managed, or (b) whether the events were considered a

crisis. Markowich relies on Rahimi, and on the decision in Dyck, in which the courts considered

the evidence which was not in the record in assessing whether the plaintiff had a reasonable

possibility of success at trial.

[178] However, unlike in Rahimi, the alleged “missing” information in the present case would

not support the plaintiff’s success at trial. Even if there was a shutdown or if the events were

considered a crisis, there remains no evidence that any such shutdown or crisis resulted in, or

threatened to result in, a change to Lundin’s business, operations or capital.

[179] The evidence is that the Pit Wall Instability and the Rock Slide were inherent risks in

open pit mining operation, and that Lundin managed those risks with advanced ground radar

technology and operated its business under those risks. When such a risk occurred, it may have

been a material fact which would reasonably be expected to have a significant effect on Lundin’s

shares,¹⁹but there is no evidence to support that either of the events was a material change to

Lundin’s business, operations, or capital. It did not constitute a different position, course, or

direction.

[180] Similarly, the present case is unlike Dyck, in which there was evidence before the court

that the defendant company knew of the presence of Xinka people (as set out by an admission in

February 2018). The defendant in Dyck chose to file no evidence to explain how that state of

knowledge was any different in May 2017 when the impugned news release was issued: at paras.

214-21. In Dyck, the missing evidence was relevant to the plaintiff’s success at trial.

[181] Consequently, Thomas’ evidence does not assist the court in finding that there was a

change to Lundin’s operations, even if his factual assumptions as to a shutdown are established

at trial.

19

(and was disclosed on November 29, 2017 in the “Operational Outlook & Update” contained in the News

Release)

- Page 36 -

[182] It is not the shutdown which causes a change in Lundin’s business, operations, or capital.

It is only if the shutdown arises from a change of business, operations or capital that the

obligation to disclose a material change is triggered.

[183] Similarly, the court in Kerr held that it was not the change in the sales forecast which

constituted a change in operations or business, but instead the reason for the change in forecast

which had to be considered. On that basis, the unseasonably warm weather was not a change to

the business, unlike a situation in which restructuring caused the change in the forecast: at paras.

47-48.

[184] The present case can be contrasted with Rex Diamond, in which the corporation risked

being unable to conduct its business of mining diamonds, and Cornish, in which Coventree was

unable to conduct 90% of its busines in asset-backed commercial paper.

[185] Further, the court cannot “reason backwards” from a share price decline to find that there

was a change in business. Changes to an LOM Plan to address resequencing are part of the

ordinary business and operation of a copper mining company. Such resequencing was already

planned before the Pit Wall Instability and the Rock Slide. Some additional resequencing which

is done to address the ordinary occurrence of pit wall instability and a rock slide does not

transform resequencing into a material change.

[186] I agree with Markowich that the routine disclosure of the generic risk of pit wall

instability or rock slides in annual information forms or other corporate disclosure does not

inoculate Lundin from disclosure of a particular rock slide or pit wall instability if those events

constitute a material change or a material fact when they occur. However, as I discuss above, in

the present case there is no evidence that the Pit Wall Instability or Rock Slide caused a change

to Lundin’s business, operations, or capital.

[187] Unlike Rex Diamond or Cornish, there is no evidence that either the Pit Wall Instability

or the Rock Slide had any effect on Lundin’s “line of business”. Lundin continued to engage in

copper mining by making some additional changes to its resequencing plan. Lundin did not lose

the ability to conduct its business.

[188] Further, there is no evidence that such a change to Lundin’s lines of business was, or

could have been, contemplated at the time of either the Pit Wall Instability or the Rock Slide,

contrary to the unsupported “economic viability” concerns raised by Thomas.

[189] The evidence before the court is that Lundin engaged in the same operations at the

Candelaria mine after the events, but on the basis of some additional modifications to the

resequencing plan, the purpose of which was to address the best sequencing method in light of

all relevant factors at that time. The evidence is that resequencing is a usual component of

Lundin’s operations, and there is no evidence that the Pit Wall Instability or Rock Slide ever

raised any concerns that Lundin could not carry out its operations at the Candelaria mine.

- Page 37 -

[190] There is no evidence of any change to Lundin’s capital as a result of the Pit Wall

Instability or Rock Slide, nor any evidence that such ought to have been identified upon the

occurrence of the events. While Markowich submits that increased costs associated with mining

the Rock Slide are a “capital” expenditure, as I discuss above, it cannot be the case that every

event that occurs which requires additional expenditures constitutes a material change to capital

and requires a running commentary to investors.

[191] Consequently, I do not accept Markowich’s submissions that the defendants ask the court

in the present case to conduct a mini-trial, engage in a “battle of the experts”, or take a “hyper

technical” approach during the leave process. In the present case, there is no evidentiary basis for

a finding of change to Lundin’s business, operations or capital, and as such, the low threshold of

“reasonable possibility” is not met. There was no different position, course, or direction taken as

a result of the Pit Wall Instability or the Rock Slide.

[192] For the above reasons, I find that it is not reasonably possible that Markowich could

establish at trial, based on any credible evidence and a plausible interpretation of the Securities

Act, that either the Pit Wall Instability or the Rock Slide resulted in a material change which

required immediate disclosure and delivery of a material change report.

[193] On this basis I accept Objection 2 and dismiss the leave motion.

[194] I have concluded in my analysis above that Markowich has not established a reasonable

possibility of success that either the Pit Wall Instability or Rock Slide constituted a “change” to

Lundin’s business, operations or capital. Consequently, the materiality of either event is

irrelevant to the dismissal of the leave motion.

[195] However, if it were found that Markowich has established a reasonable possibility of

success that either the Pit Wall Instability or Rock Slide constituted a “change” to Lundin’s

business, operations or capital, I address the issue of materiality on the evidence led before the

court.

Objection 3: The admissibility of Edwards’ evidence and the weight of such evidence

[196] The defendants submit that Edwards’ evidence on economic materiality is (i)

“inadmissible opinion on the ultimate issue” or (ii) in the alternative, should be given “no

weight” due to “flawed methodologies” or “flawed factual assumptions”. I do not agree.

[197] I first review the applicable law as to the court’s analysis of expert evidence on a leave

motion under s. 138.8(1). I then apply that test to the admissibility and weight submissions raised

by the defendants about Edwards’ evidence.

- Page 38 -

(i)

The applicable law as to considerations of admissibility and weight of expert

evidence on a leave motion

[198] I rely on the law I review with respect to Objection 1, as set out at paras. 117-18 above,

which sets out the general principles on the approach to be taken by the court with respect to

expert evidence on a leave motion.

[199] Further, the ultimate issue before the court is whether there is a material change. An

expert cannot opine on whether a news release/material change report should have been issued

per ss. 75(1)-(2) upon the advent of a “material change”, as “[t]his is precisely the issue to be

decided at trial, if leave is granted”: Bradley v. Eastern Platinum Ltd., 2014 ONSC 4284, at

paras. 12, 22-24.

(ii)

Application of the law to the defendants’ submissions

(a)

Objections as to admissibility

[200] Both Edwards and Heys provided an opinion as to whether the Pit Wall Instability and

Rock Slide could reasonably be expected to have an effect on the value of Lundin’s shares, i.e.,

“materiality”. The scope of Edwards’ initial report was summarized in its first paragraph, in

which he stated that he was asked to provide his opinion on the “economic materiality of the

misrepresentations and omissions alleged in the Claim”. Both experts sought to assist the court in

understanding whether the Pit Wall Instability and Rock Slide could have been economically

material events, i.e., events that had the market impact required under the Securities Act.

[201] The defendants cross-examined Edwards on the scope of the questions put to him in his

instruction letter from Markowich’s counsel, which did ask Edwards to opine on whether the Pit

Wall Instability or Rock Slide constituted “a change in the business, operations or capital of

Lundin Mining that could reasonably be expected to have a significant effect on the market price

or value of Lundin Mining securities”. However, it is clear from his reports that Edwards (like

Heys) did not address whether the events constituted a “change” and instead restricted his

opinion to the issue of economic materiality, a subject matter on which Edwards’ qualifications

were not challenged.

[202] Materiality is ultimately an issue for the court to decide. However, both the Edwards and

Heys opinions can be of assistance to the court. Edwards was not qualified to opine on “change”

and did not do so. Equally, he was not qualified to opine on the conjunctive legal concept of

“material change”, nor the concordant legal obligation of “timely disclosure”, and did not do so.

[203] Consequently, I dismiss the objections as to the admissibility of the Edwards reports.

(b)

Objections as to the weight of Edwards’ evidence

[204] As I set out below in my analysis of the materiality of the Pit Wall Instability and the

Rock Slide (Objection 4), I find that Markowich has established a reasonable possibility of

- Page 39 -

success at trial, based on the evidence before the court and the expert evidence of Edwards, that

the Pit Wall Instability or Rock Slide were economically material events which would

reasonably be expected to have a significant effect on the value of Lundin’s shares.

[205] Consequently, I do not review each criticism of Edwards’ methodologies as raised by the

defendants. Those issues could be addressed at trial, as there is competing evidence on

materiality and it is not the role of the court on a leave motion to determine which expert

evidence will be accepted at trial. As I discuss below, Edwards’ evidence is credible, even if not

ultimately accepted by a trial court.

[206] Given my analysis of the expert evidence on economic materiality below, I reject the

defendants’ position that the Edwards’ report should be given little or no weight on the leave

motion.

[207] For the above reasons, I dismiss Objection 3.

Objection 4: Materiality of the Pit Wall Instability and Rock Slide

[208] A “material” fact or change is one “that would reasonably be expected to have a

significant effect on the market price or value of the securities”: Securities Act, s. 1(1).

[209] It is settled law that "the applicable standard is defined in strictly economic terms"

because "the market impact definition is the one that the statute embraces": Miller v. FSD

Pharma, Inc., 2020 ONSC 4054, at paras. 63-64; Kerr v. Danier Leather Inc. (2005), 77 O.R.

(3d) 321 (C.A.), at para. 53, aff'd 2007 SCC 44, [2007] 3 S.C.R. 331, at para. 18; Cornish, at

paras. 65-66, 72.

[210] In the present case, the issue before the court is whether there is a reasonable possibility,

based on credible evidence and a plausible interpretation of the Securities Act, that Markowich

could establish that the Pit Wall Instability or Rock Slide was material. For the reasons that

follow, I agree that this threshold has been met.

[211] It is not the role of the court on a leave motion to determine whether a plaintiff will

succeed on establishing materiality at trial. The only issue is whether it is reasonably possible for

the plaintiff to establish materiality at trial.

[212] In the present case, there is a credible “battle of the experts” on the issue of economic

materiality. As I set out in more detail at paras. 91-105 above, while Heys asserts that the loss is

limited to $0.02 per share, Edwards raises issues related to the alleged failure of Heys to take

into account:

(i)

the overall positive effect of changes to the LOM Plan,

income tax considerations associated with the alleged deferral of production,

increased costs of production, and

(ii)

(iii)

- Page 40 -

(iv)

the effect on share price of reduced corporate credibility.

[213] In essence, Edwards’ position is that based on the other information in the News Release

an investor could conclude that the LOM Plan would provide an overall “value-enhancing”

effect. Consequently, Edwards’ position is that given the “good news” from the LOM Plan, it is

reasonable to conclude that the “predominate” cause of the market share decline was because of

the Pit Wall Instability and Rock Slide disclosed in the News Release. Such a position is not

unreasonable, even if ultimately not accepted at trial.

[214] Further, given the numerous analysts who raised concerns about the effect of the Pit Wall

Instability and Rock Slide after the News Release, it may be less likely that a court would accept

Heys’ evidence that the Pit Wall Instability and Rock Slide only accounted for $0.02 (or

approximately 1.4%) of the $1.44 decline in share price value on November 30, 2017.

[215] Statements made by Conibear and Brumit during the Conference Call establish that the

Pit Wall Instability and Rock Slide were the “number one” concern of investors, supporting a

conclusion that the events could reasonably be expected to have a significant effect on the

market price or value of the securities. Conibear stated that one of the “key elements … resulting

in our significant price decline” was that Lundin was “down on copper for next year”, which he

described as the “number one” concern following the News Release.

[216] Similarly, Conibear stated during the Conference Call that the Pit Wall Instability was

“the primary reason for the copper production profile for next year and 2019”. Brumit identified

the rockslide as being responsible for 55% of the reduction in copper production guidance for

Candelaria in 2018.

[217] Given all of the above evidence, I find that if Markowich can establish a reasonable

possibility of success that the Pit Wall Instability and Rock Slide were “changes” to Lundin’s

business, operations or capital (which I do not accept), then Markowich would meet the test to

establish a reasonable possibility of success that the events were material to investors, based on

credible expert and other evidence, and a plausible interpretation of the Securities Act.

Conclusion on leave motion

[218] For the above reasons, I accept Objection 2 and find that Markowich has not established a

reasonable possibility of success that the Pit Wall Instability and Rock Slide were “changes” to

Lundin’s business, operations or capital.

[219] I dismiss Objections 1, 3, and 4, and find that Markowich established a reasonable

possibility of success that the events were material to investors, based on credible expert and

other evidence, and a plausible interpretation of the Securities Act.

- Page 41 -

Issues arising out of the certification motion

[220] With respect to the Statutory Claim, the defendants do not submit that certification is not

available if leave is granted under s. 138.8(1) of the Securities Act. Further, the defendants do not

oppose certification of PCIs 1-4 as common issues if leave is granted under s. 138.8(1). The

defendants’ position is consistent with settled law in Green (SC) that “[t]here can be no doubt,

however, that a class action is the preferable procedure for pursuing a claim under Part XXIII.1

of the Securities Act. The statutory remedy is tailor-made for a class action”: at para. 611.

[221] Consequently, if leave is granted, certification is suitable for the Statutory Claim and their

attendant PCIs in this case.

[222] Conversely, Markowich does not assert that the Statutory Claim should be certified if

leave is not granted under s. 138.8(1).

[223] With respect to the Common Law Claim, the defendants do not challenge that a cause of

action is disclosed (under s. 5(1)(a) of the CPA). The defendants also agree there is some basis in

fact to meet the requirements of (i) an identifiable class (under s. 5(1)(b) of the CPA) and (ii) a

suitable representative plaintiff (under s. 5(1)(e) of the CPA).

[224] The defendants do not dispute that PCIs 5, 6, and 7 are appropriate for certification for

the Common Law Claim, if leave is granted for the Statutory Claim.²⁰

[225] Consequently, the defendants’ objections to certification are limited to the Common Law

Claim.²¹The defendants raise four objections to the certification motion, which are:

(i)

Objection 5: PCIs 8, 9 and 11 cannot be certified as common issues for the

Common Law Claim since deemed reliance is not available for the common law

misrepresentation claims in the present action;

(ii)

Objection 6: PCI 13 cannot be certified as a common issue since there is no

basis in fact to establish a punitive damages claim;

(iii)

Objection 7: If leave is denied on the Statutory Claim, certification of the

Common Law Claim “must be denied under s. 5(1)(d)”; and

²⁰Such an approach is consistent with the settled law as discussed in Green v. CIBC, 2014 ONCA 90, at paras. 103-

05 (Green (CA)). Similarly, the court in Peters held that if it had granted leave for the statutory claim, the court

would have certified the statutory claim in its entirety and certified the first three elements of the negligent

misrepresentation claim (similar to PCIs 5-7 in the present case) as common issues: at para. 231.

²¹(subject to the defendants’ overriding objection to certification of the Statutory Claim based on the alleged failure

of Markowich to satisfy the leave requirement)

- Page 42 -

(iv)

Objection 8: In the alternative to Objection 7, since deemed reliance cannot be

certified as a common issue in the present action, certification of the Common

Law Claim should not be granted since the action would not be the preferable

procedure.²²

[226] For the reasons I discuss below, I accept Objections 5, 6, and 8, but I reject Objection 7.

[227] I now review each of the objections.

Objection 5: Deemed reliance is not available for the common law misrepresentation claims in

the present action

[228] Markowich asks the court to determine, as a common issue, whether (i) “the market for

Lundin Mining securities [is] efficient” (PCI 8), and (ii) if so, “can each Class Member’s reliance

on the misrepresentation be inferred from the fact that each Class Member decided to and did

acquire Lundin Mining securities in an efficient market?” (PCI 9). The aggregate damages PCI

11, with respect to the Common Law Claim, is also based on deemed reliance.

[229] Markowich submits that the present case is “sui generis” since it is based on an omission

as opposed to an affirmative misrepresentation, and, as such, the efficient market theory can be

applied so that PCIs 8, 9 and 11²³can be certified for the Common Law Claim. I do not agree.

[230] I first consider the applicable law and then apply the law to the facts of the present case.

(i)

The applicable law

[231] It is settled law that reliance issues in a common law securities misrepresentation claim

cannot be certified on the basis of deemed reliance arising from a “fraud on the market” or

“efficient market” theory.

[232] Reliance is an essential element of a common law misrepresentation claim. The court

held in Queen v. Cognos Inc., [1993] 1 S.C.R. 87, at p. 110:

The required elements for a successful Hedley Byrne claim have been stated in

many authorities, sometimes in varying forms. The decisions of this Court cited

above suggest five general requirements: (1) there must be a duty of care based on

22

As I discuss at para. 42 above, I do not address Objection 9 with respect to the scope of the Apology Act as the

parties reached an agreement on this issue which is consistent with the Act.

23

The defendants’ objection to the aggregate damages claim raised by PCI 11 is based on the alleged inability to

establish deemed reliance and, as such, relates only to the Common Law Claim. The defendants do not challenge

certification of an aggregate damages claim based on the Statutory Claim, if leave is granted under s. 138.8(1).

- Page 43 -

a "special relationship" between the representor and the representee; (2) the

representation in question must be untrue, inaccurate, or misleading; (3) the

representor must have acted negligently in making said misrepresentation; (4) the

representee must have relied, in a reasonable manner, on said negligent

misrepresentation; and (5) the reliance must have been detrimental to the

representee in the sense that damages resulted.

[233] In Green (SC), Strathy J. held that the purpose of the statutory remedy for secondary

market misrepresentation was to provide a remedy which, unlike a common law securities

misrepresentation claim, was not reliance-based. He held, at paras. 595 and 600:

[T]he statutory remedy for a secondary market misrepresentation under s. 138.3 of

the Securities Act was enacted, in part, due to the difficulty in proving reliance-

based common law claims and the rejection in Ontario of the "fraud on the

market" theory. The statutory provisions contain checks, such as the leave

procedure, to ensure that the remedy is not abused and balances, such as the

liability cap, to protect the corporation and its continuing shareholders from

crippling exposures.

…

The decision of the Supreme Court of Canada in Sharbern Holdings Inc. v.

Vancouver Airport Centre Ltd., [2011] 2 S.C.R. 175, above, has re-affirmed the

need to establish reliance in a common law misrepresentation claim. This is not an

issue that is capable of resolution on a common basis. In my view, there is no

authority to support the proposition that "fraud on the market" or the "efficient

market" theory can supplant the need to prove individual reliance.

[234] The Court of Appeal approved the above analysis: Green (CA), at paras. 101-03:

In Green v. CIBC, Strathy J. concluded that the issues of individual reliance were

not suitable for certification on any basis. Nor could the issues of individual

reliance be supplanted by an inference of group reliance in the secondary market

context. He supported that conclusion by observing that there was no authority for

the use of the "fraud on the market" theory to supplant the inquiry into individual

reliance in the secondary market context.

Finally, Strathy J. also based his decision on the fact that the introduction of the

statutory remedy for secondary market misrepresentation under s. 138.3 of the

Securities Act "was enacted, in part, due to the difficulty in proving reliance-based

common law claims and the rejection in Ontario of the 'fraud on the market'

theory" (para. 595). The remedy includes provisions that prevent abuse and

protect continuing shareholders from damaging exposure to such claims. He

observed that to allow common law claims where the corporate and shareholder

- Page 44 -

protections are not available would render the new remedy and the protective

leave process redundant.

I see no error in the motion judge's analysis and no basis to interfere with his

conclusion that the reliance issues should not be certified.

[235] In Kinross, the motion judge denied leave to assert a statutory claim and denied

certification of common law negligent misrepresentation claims. The Court of Appeal upheld the

decision and concluded, at para. 117, that “[r]eliance is a claimant-specific issue, requiring

individualized evaluation and fact-finding”. The Court of Appeal further stated that reliance

could only be determined on an individual basis, at para. 128:

First, proof of reliance, causation and damages poses particular difficulties in this

case. To establish these elements of the common law tort, individualized inquiries

and fact-finding will be both necessary and unavoidable. For example, to establish

reliance on Kinross' alleged misrepresentations regarding the goodwill associated

with the Tasiast mine and consequential damages, numerous investor-specific

questions arise. These include: 1) what representations were communicated or

made known to each investor, and when; 2) what was the comparative experience

level and degree of investment sophistication of each investor at the relevant

times; 3) what investment recommendations were made to each investor; 4) what

connection, if any, exists between Kinross' alleged misrepresentations and each

investor's acquisition of Kinross shares; 5) how many Kinross shares were held,

and when, by each investor; and 6) what was the date of acquisition, the

acquisition price and the sale price for each investor's shares?

[236] In Coffin v. Atlantic Power Corp., 2015 ONSC 3686, 127 O.R. (3d) 199, the court took

the same approach. Belobaba J. reviewed the relevant case law and held, at paras. 135-39:

Class counsel have tried to side-step the 'proof of individual reliance' problem

(and in doing so, the manageability problem) by building on the accepted

proposition that individual reliance can be "inferred" from the surrounding facts or

circumstances. Thus, in securities class actions, class counsel have presented

expert evidence that the securities in question were trading in an "efficient

market" and then used this evidence to certify a common issue that asked whether

individual reliance could be inferred from these (efficient market) circumstances.

In the past, some class action judges, myself included, accepted this approach and

certified the question about the efficient market and inferred reliance as a common

issue. Class counsel were thus able to avoid both the s. 5(1)(c) pitfall (individual

assessments) and the s. 5(1)(d) pitfall (manageability).

However, as I was soon to discover, this approach (inferring reliance via evidence

of an efficient market) is not available in Ontario. Justice Strathy explained why

in Green v. CIBC:

- Page 45 -

[T]he statutory remedy for a secondary market misrepresentation

under s. 138.3 of the Securities Act was enacted, in part, due to the

difficulty in proving reliance-based common law claims and the

rejection in Ontario of the "fraud on the market" theory. The

statutory provisions contain checks, such as the leave procedure, to

ensure that the remedy is not abused and balances, such as the

liability cap, to protect the corporation and its continuing

shareholders from crippling exposures ... In my view, there is no

authority to support the proposition that "fraud on the market" or

the "efficient market" theory can supplant the need to prove

individual reliance.

The Court of Appeal agreed. To allow common law claims where the corporate

and shareholder protections set out in the [Securities Act] leave provision are not

available "would render the [statutory] remedy and the protective leave provision

redundant."

A few months later in Kinross, the Court of Appeal revisited the leave provision

and reaffirmed that "reliance is a claimant-specific issue requiring individualized

evaluation and fact-finding." The Court of Appeal also noted that "the statutory

action under s. 138.3 ... was enacted in part due to the difficulty in proving

reliance-based common law claims" and, quoting Justice Strathy, agreed that it

was "tailor-made for a class action." In short, the Court of Appeal has closed the

door (in my view correctly) to any further use of the American-based efficient

market/fraud on the market theory to establish inferred reliance in a common law

negligent misrepresentation claim.

Thus, the plaintiffs' attempt herein -- presenting expert evidence that the ATP

shares were trading in an efficient market during the proposed Class Period and

asking that an "inferred reliance" common issue be certified -- must be rejected.

If, having lost the leave motion, the plaintiffs intend to proceed with the negligent

misrepresentation claim they may do so, but they will be required to prove

individual reliance. [Footnotes omitted.]

[237] In Peters, Perell J. reviewed the relevant case law and summarized the principles at paras.

232 and 234-36:

From a class action perspective, the problematic constituent element of the

misrepresentation torts is the reliance element. Reliance is an essential component

of a common law cause of action for negligent misrepresentation, and to establish

a cause of action in negligent misrepresentation, a plaintiff must prove both that

he or she relied, in a reasonable manner, on the misrepresentation and that his or

her reliance was detrimental in the sense that damage resulted.77 Reliance

constitutes the causal link between the misrepresentation and the loss suffered by

the plaintiff.

- Page 46 -

…

As demonstrated by Mr. Peters himself, reliance is an idiosyncratic not a class-

wide phenomenon. Reliance is a question of fact as to the plaintiff's state of mind,

and the plaintiff advancing a negligent misrepresentation claim must prove that

the misrepresentation was at least one factor that induced him or her to act to his

or her detriment.

While it is possible that all or some members of a group might commonly

experience the human psychological experience of reliance, more typically their

respective experiences would be idiosyncratic. Some purchasers of stocks and

bonds undertake rigorous due diligence before making an investment decision.

Some purchasers of stocks and bonds rely on investment advisers to undertake

rigorous due diligence before making an investment decision. Some purchasers of

stocks and bonds undertake no due diligence and make purely emotional or

hopping on the bandwagon or hopping off the bandwagon decisions. Some

purchasers of stocks and bonds purchase stocks and bonds capriciously without

studying or informing themselves about material facts and material changes.

In the context of securities misrepresentation class actions, the Canadian

jurisprudence has rejected the American fraud on the market theory that would

displace the reliance requirement in securities misrepresentation claims. Thus, in

the context of securities misrepresentation class actions, the reliance element is

typically an individual issue, and this means the Class Members' common law

misrepresentations claims will not be capable of resolution at the common issues

trial. [Footnotes omitted.]

(ii) Application of the law to the present case

[238] Markowich submits that the above cases can be distinguished because they are “material

fact” cases in which the plaintiff relied on affirmative misrepresentations.²⁴However, I do not

agree that such a distinction modifies the principles set out in the above cases.

[239] The need to establish individual reliance is no different for an omission. Applying the

“investor-specific questions” set out in Kinross, each investor would need to lead evidence on

the following questions:

24

In Peters, the court applied the above principles to a material change case based on an omission. Markowich

submits that the case is wrongly decided on this issue and advises the court that the decision is under appeal.

- Page 47 -

(i)

if the alleged omissions relating to the Pit Wall Instability and the Rock Slide had

been disclosed in a news release and a material change report as submitted by

Markowich, would the investor have become aware of the representation;

(ii)

what was the comparative experience level and degree of investment

sophistication of each investor at the relevant times;

(iii) what investment recommendations were made to each investor;

(iv)

what connection, if any, exists between the alleged omission and each investor's

acquisition of the shares;

(v)

how many Lundin shares were held, and when, by each investor; and

(vi)

what was the date of acquisition, the acquisition price and the sale price for each

investor's shares.

[240] In the present case, each investor would have to lead evidence as to whether they would

have seen the representation if made, as many investors would not even follow a press release or

material change report. Under a common law misrepresentation by omission claim, it cannot be

“deemed” or “inferred” that each investor would have been aware of the impugned omission if it

had been disclosed, in the same way that reliance on an affirmative misrepresentation cannot be

“deemed” under the “efficient market” theory.

[241] Further, even if an investor could establish that they would have become aware of the

omitted information if disclosed, each investor would still have to lead evidence as to whether, if

they had known about the Pit Wall Instability or Rock Slide, it would have affected the price

they paid for the securities.

[242] Further, Markowich seeks to distinguish the above cases on the basis that they arise in the

context of “material fact” cases rather than “material change” cases. However, I find no basis for

such a factual distinction altering the settled law.

[243] Regardless of whether the misrepresentation is based on the failure to disclose a material

fact, or a failure to make timely disclosure of a material change, there remains a

misrepresentation by omission which requires proof of reliance under the Cognos factors.

Reliance on a misrepresentation by omission does not become discarded as a requirement only

because the claim is based on a material change instead of a material fact.

[244] Consequently, reliance remains an individual issue under the Kinross and Green analysis

regardless of whether the claim arises from non-disclosure of a material fact or a material

change.

[245] Markowich relies on his evidence that when he purchased his Lundin shares, (i) he

believed that the price reflected all information in Lundin’s own possession that could have a

significant effect on the market price or value of its securities and (ii) he relied on that belief

- Page 48 -

when he purchased his shares. He also testified that had he known that Lundin had such

information in its possession but had omitted it from the market at the time he purchased, he

would not have purchased his shares in the manner he did.

[246] However, Markowich’s evidence reflects the idiosyncratic nature of reliance as set out in

the case law. A purchaser who acquired shares based on an affirmative representation, which was

alleged to be untrue, could also lead evidence that the purchaser believed that (i) the price

reflected the market’s knowledge of that representation and (ii) the investor would not have

purchased the shares if the investor had known that the representation was not true. However, it

is that same evidence which settled law has found to be idiosyncratic and requires individual

evidence from each investor.

[247] In the same way, Markowich’s idiosyncratic evidence that he would not have purchased

his shares in the manner he did, if he had known about the Pit Wall Instability and Rock Slide,

would also have to be determined on an individual basis for each investor.

[248] Markowich also relies on the principle that deemed reliance may be appropriate in some

common law securities misrepresentation cases. By way of example, he relies on the comments

of the Court of Appeal in Green (CA), at para. 100:

Dealing first with whether the issue of reliance should be certified, in other cases

of negligent misrepresentation, such as Strathy J.'s recent decision in Cannon v.

Funds for Canada Foundation, 2012 ONSC 3009, 218 A.C.W.S. (3d) 264, the

facts allowed the court to certify certain common issues, including inferred

reliance. In that case, investors had invested in a tax shelter which was promoted,

in part, based on an opinion letter and a comfort letter from a defendant lawyer.

Strathy J. was prepared to certify common issues relating to reliance on the basis

that there were only two documents investors looked at, and the entire tax shelter

was premised on those documents being true. In those circumstances, inferred

group reliance could be certified as a common issue.

[249] In Cannon, the court certified a common issue on inferred reliance since there was a basis

in fact for a trial court to find that the only reason for an investor to acquire the security was to

obtain the charitable tax deduction, based on only two documents provided to investors, a

distinction relied upon in Green (CA), at para. 100.

[250] Markowich contends that deemed reliance can similarly be found here, because the

alleged omissions affected each investor equally, and investors “would not have invested in the

manner they did during that relevant time period” if they had been aware of the omissions.

However, no such inference can be made in the present case.

[251] As in Green, Kinross, Mask, and Peters, there is no basis to deem reliance by an investor

on the alleged omissions. There is no basis to find that any particular investor would have even

been aware of the Pit Wall Instability or Rock Slide if the representation had been made, or that

it would have affected the decision to purchase. For the reasons I discuss above, the “investor-

- Page 49 -

specific questions” raised by the court in Kinross apply to the present case and as such, there is

no basis to apply the efficient market theory to deem reliance on the alleged omission.

[252] For the above reasons, I accept Objection 5, and I would not certify PCIs 8, 9, and 11 as

common issues.

Objection 6: PCI 13 cannot be certified as a common issue since there is no basis in fact to

establish a punitive damages claim

[253] Markowich submits that:

The November News Release, which contained the Confounding Information, is

itself sufficient basis in fact for the certification of [PCI 13]. Viewed in light of

the plaintiff’s pleadings noted above, whether the defendants issued the

Confounding Information in the manner alleged, and if by doing so, their conduct

to the class warrants punitive damages, are merits questions for trial, not for

certification.

[254] It is settled law that punitive damages can be certified as a common issue, since it is an

issue which does not require individual trials and will advance the litigation.

[255] However, the plaintiff must still establish some basis in fact for such a submission, even

though the court on a certification motion does not consider the merits of a claim.

[256] In the present case, the only evidence relied upon by Markowich to assert a punitive

damages claim is that in the News Release, Lundin disclosed additional information about its

operations, relating to its revised operational plans (which included revisions to the LOM Plan

due to the Pit Wall Instability and the Rock Slide).

[257] The only evidence before the court is that the News Release (i) was a scheduled aspect of

Lundin’s periodic disclosure, and (ii) disclosed information relevant to its business and

operations, i.e., matters relevant to its shareholders. There is no basis in fact to support

Markowich’s claim that such an approach was taken for the purpose of “confounding” the

information available to investors, as an intentional, high-handed tactic to avoid the

consequences of allegedly failing to make timely disclosure of the Pit Wall Instability and Rock

Slide. While the “some basis in fact” threshold is low, it is not meaningless. Mere speculation

will not meet the test.

[258] Further, the punitive damages claim could not be certified as a common issue if no other

claims remained: Batten v. Boehringer Ingelheim (Canada) Ltd., 2017 ONSC 53, at para. 206,

affirmed 2017 ONSC 6098, at para. 27 (Div. Ct.), leave to appeal refused, 2018 CarswellOnt

8466 (C.A.); Kaplan v. Casino Rama, 2019 ONSC 2025, 145 O.R. (3d) 736, at para. 83; and

G.C. v. Jugenburg, 2021 ONSC 3119, 155 O.R. (3d) 634, at para. 178. Given my conclusion that

neither the Statutory Claim nor the Common Law Claim can be certified, a stand-alone punitive

damages claim could not be certified.

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[259] Consequently, I accept Objection 6. While I dismiss certification of the Common Law

Claim in any event due to a failure to satisfy the preferable procedure requirement under s.

5(1)(d) of the CPA (as set out in my analysis of Objection 8 below), I would not certify PCI 13

even if the Common Law Claim could be certified, based on the above reasons.

Objection 7: If leave is denied on the Statutory Claim, certification of the Common Law Claim

“must be denied under s. 5(1)(d)”

[260] I address this objection briefly, as I find that certification of the Common Law Claim

depends on the facts of this case and not on a general principle which would preclude

certification of any common law misrepresentation claim if leave on the statutory securities

misrepresentation claim is denied.

[261] In Kinross, the Court of Appeal rejected the submission that it was axiomatic that a

common law misrepresentation claim cannot be certified if leave is denied to the statutory

misrepresentation claim. The Court of Appeal reversed the decision of the motion judge who had

held that “it would and should naturally follow that if leave is denied that there would be no basis

in fact for the certification claim”: at para. 95. The Court of Appeal held, at paras. 96-99:

Thus, on the motion judge's approach, when statutory and common law

misrepresentation claims are combined, the "evidentiary footprint" for the two

types of claims "will essentially be the same", except for the issue of reliance. On

this basis, the motion judge concluded that if leave to proceed with the statutory

claims is denied, the refusal of certification for the common law claims is

effectively axiomatic.

In my opinion, this approach to certification of the common law claims reflects an

error in principle. It does not automatically follow from the denial of leave for the

statutory claims that there will be no basis in fact for all of the class definition,

common issues and preferable procedure certification criteria.

The focus on a certification motion is on the form of the action and whether the

asserted claims are suitable to proceed as a class proceeding. All that is required to

succeed on a certification motion is that the plaintiff show some basis in fact for

each of the CPA certification requirements, other than the requirement under s.

5(1)(a) that the pleadings disclose a cause of action.

The fact that the court, on a leave motion, has determined that the statutory claims

have no reasonable possibility of success and that the evidence supporting the

statutory and common law actions would essentially be the same does not mean

that there is not some basis in fact: 1) that "there is an identifiable class of two or

more persons that would be represented by the representative plaintiff or

defendant" (the class definition criterion at s. 5.1(b)); or 2) that the "claims or

defences of the class members raise common issues" (the common issues criterion

at s. 5.1(c)). The court's determination of the merits of the statutory claims has no

- Page 51 -

place in the analysis of these certification criteria. However, as I discuss later in

these reasons, in cases like this one, the denial of leave for the statutory claims is a

relevant factor in the preferability analysis. [Citations omitted.]

[262] I adopt the above reasons and, as such, dismiss this objection. Statutory and common law

claims are not identical. Different tests are required for each claim. The threshold for leave

requires the plaintiff to establish a reasonable possibility of success. A certification motion does

not address the merits of the claim since the plaintiff must only establish that (i) the pleadings

disclose a cause of action under s. 5(1)(a) of the CPA and (ii) there is some basis in fact to satisfy

the requirements of ss. 5(1)(b)-(e) of the CPA.

[263] Further, securities and common law misrepresentation claims may not share the same

legal basis, even if the factual bases are the same or similar. In the present case, a trial court on

the Statutory Claim would have to find that the Pit Wall Instability and Rock Slide were

“changes” to Lundin’s “business, operations or capital” in order for the claim to succeed. A

common law misrepresentation claim, on the other hand, does not require such a determination.

A court must only find that there was a misrepresentation by omission made in circumstances

when it was reasonable for the plaintiff to rely on it, and that such reliance caused damage to the

plaintiff.

[264] Consequently, I dismiss Objection 7 on an “axiomatic” basis.

[265] However, the seminal issue is whether, based on the facts of the present case and similar

cases which have considered the issue, it is appropriate to certify the Common Law Claim as a

stand-alone claim (without certification of any reliance issues) on the basis of the preferable

procedure requirement, given the nature of the common law misrepresentations at issue in the

present case. I now address that issue, raised as Objection 8 by the defendants.

Objection 8: In the alternative to Objection 7, since deemed reliance cannot be certified as a

common issue in the present action, certification of the Common Law Claim

cannot be granted since a class action would not be the preferable procedure

[266] The issue before the court is whether there is some basis in fact that the Common Law

Claim can satisfy the preferable procedure requirement. For the reasons that follow, I find that

Markowich has failed to satisfy this criterion under s. 5(1)(d) of the CPA.

[267] In the cases discussed above which rejected deemed reliance based on the efficient

market theory, the courts have held that the preferable procedure requirement cannot be met if

the need for individual inquiries for every shareholder renders the proceeding inappropriate for a

class action.

[268] In Kinross, one of the factors relied upon by the court to deny certification was the lack of

a preferable procedure due to the idiosyncratic nature of reliance. After setting out the

idiosyncratic issues which would need to be resolved for each investor (see para. 235 of these

reasons above), the court held, at paras. 129 and 136:

- Page 52 -

Resolution of these questions does not lend itself to a class action. Rather, the

need for a host of individual inquiries regarding reliance, causation and damages

renders the common law claims unsuitable for certification. See for example,

Green (S.C.J.), at paras. 599-601. At a minimum, the need for numerous

individual inquiries undercuts the goal of judicial economy and could overwhelm

the resolution of the common issues, producing an inefficient and unmanageable

class proceeding.

…

I therefore do not read the decisions of this court in Green and Bre-X as retreating

from the proposition that, generally, common law negligent misrepresentation

claims in securities cases are not suitable for certification. As Strathy J. (as he

then was), indicated in Green, (S.C.J.), at para. 610, a class proceeding is not the

preferable procedure for resolving such reliance-based claims, which give rise "to

individual issues of causation and reliance that would be unmanageable". In

contrast, of course, there is no need to prove reliance in statutory

misrepresentation claims under the Securities Act. For this and other reasons, the

statutory action under s. 138.3, which was enacted in part due to the difficulty in

proving reliance-based common law claims, is "tailor-made for a class action":

Green (S.C.J.) at paras. 595 and 611.

[269] In Green (SC), Strathy J. took the same approach, at paras. 609-10:

Section 5(1)(d) of the C.P.A. requires that a class proceeding be the preferable

procedure for the resolution of the common issues. It necessitates an analysis of

whether a class proceeding is a manageable way of resolving the claims of the

class members and whether it is preferable to other means. It must be approached

by considering the goals of class proceedings, namely access to justice, judicial

economy and behaviour modification.

I have stated that I am not prepared to certify common issues relating to the

common law misrepresentation claim, which would require proof of reliance. For

the same reason, a class proceeding would not be the preferable procedure for

resolving a reliance-based claim, as it would give rise to individual issues of

causation and reliance that would be unmanageable.

[270] The same concerns arise in the present case. Counsel advised the court that there are “tens

of thousands” of class members. Under the settled case law, each of them would be required to

establish reliance on the representations. Causation and damages would necessarily follow as

individual issues. The proceeding would be “unmanageable” and “the need for numerous

individual inquiries undercuts the goal of judicial economy and could overwhelm the resolution

of the common issues, producing an inefficient and unmanageable class proceeding”.

[271] I also adopt the following passage from Kinross, at para. 139:

- Page 53 -

I recognize that there may well be economic barriers to the pursuit of the common

law claims on an individual basis. I also acknowledge that the option of individual

actions to pursue securities misrepresentation claims is unappealing, costly and

cumbersome. But that is precisely the access to justice impediment sought to be

remedied by s. 138.3 of the Securities Act.

[272] Consequently, I rely on Kinross and Green and find that class proceeding would not be

the preferable procedure for the resolution of the common issues in the Common Law Claim.

[273] At the hearing, the defendants also relied on case law in which the failure to establish a

statutory cause of action could be considered by the court as an additional factor upon which to

find that a class action is not the preferable procedure: Kinross, at paras. 132 and 138.

[274] In the present case, I do not rely on this submission of the defendants. As set out above, I

deny leave to bring the Statutory Claim on the basis that there is no reasonable possibility that a

court could find that either the Pit Wall Instability or Rock Slide could constitute a “change”

under s. 75(1). However, this issue of mixed fact and law would not arise on the common law

misrepresentation claim, which would only consider if there was an omission to state a material

fact in a timely manner.

[275] Consequently, I rely on the idiosyncratic nature of reliance, causation, and damages, as

discussed in Kinross and Green, as the basis to conclude that a class action would not be the

preferable procedure to address any common issues in the Common Law Claim.

[276] Markowich again attempts to distinguish Kinross and Green on the basis that they are

material fact cases based on affirmative misrepresentations, unlike the present case which arises

from the alleged failure to make timely disclosure of a material change. I rely on my reasons at

paras. 239-51 above to find that the same unmanageability arises in the context of an omission

claim which requires idiosyncratic evidence on reliance, causation and damages for tens of

thousands of class members. I do not agree with Markowich that the present case is sui generis

and can be certified despite the settled law.

[277] For the above reasons, I accept Objection 8 and find that Markowich has not satisfied the

requirement of s. 5(1)(d) of the CPA with respect to the Common Law Claim.

ORDER AND COSTS

[278] For the above reasons:

(i)

I dismiss the motion for leave to bring the Statutory Claim;

(ii)

I dismiss the certification motion with respect to both the Statutory Claim (on the

basis that I do not grant leave) and the Common Law Claim (on the basis that

Markowich has not satisfied the preferable procedure requirement under s. 5(1)(d)

of the CPA); and

- Page 54 -

(iii)

In any event, I do not certify PCIs 8, 9, 11, and 13.

[279] If the parties are unable to agree on costs, the defendants shall deliver a costs submission

of no more than six pages (not including the costs outline) by January 24, 2022. Markowich shall

deliver responding costs submissions of no more than six pages (not including the costs outline)

by February 7, 2022. The defendants may deliver a reply costs submission of no more than three

pages by February 14, 2022.

GLUSTEIN J.

Date: 20220106

SCHEDULE A

LIST OF PROPOSED COMMON ISSUES

1.

2.

Was the detection of movement in a previously developed wedge of waste material in the

Candelaria Mine resulting in the immediate suspension of business and/or operations at,

and evacuation of personnel from, the affected area on 25 October 2017 (“Pit Wall

Change”), a change in the business, operations or capital of Lundin Mining that could

reasonably be expected to have a significant effect on the market price or value of Lundin

Mining securities, and thus constitute a “Material Change” within the meaning of the

OSA?

Did the 31 October 2017 slide of between 600,000 and 700,000 tonnes of waste material

onto the pit floor of the Candelaria Mine (“Rock Slide Change”) constitute a change in

the business, operations or capital of Lundin Mining that could reasonably be expected to

have a significant effect on the market price or value of Lundin Mining securities, and

thus constitute a “Material Change” within the meaning of the OSA?

3.

4.

5.

If the answer to (1) and/or (2) is “yes”, did the Defendants, or any one of them, fail to

make timely disclosure of the Pit Wall Change and/or the Rock Slide Change within the

meaning of the OSA, if necessary the Equivalent Securities Acts, and any other applicable

securities regulations?

If the answer to (3) is “yes”, did the failure to make timely disclosure of the Pit Wall

Change and/or the Rock Slide Change constitute a misrepresentation, if leave is granted,

within the meaning of Part XXIII.1 of the OSA and, if necessary, the Equivalent

Securities Acts?

If the answer to (3) is “yes”, was the failure to make timely disclosure of the Pit Wall

Change and/or the Rock Slide Change an omission that constitutes a misrepresentation at

common law?

6.

7.

Did the Defendants, or any one of them, owe a duty of care to the Class Members?

If the answer to (6) is “yes”, did the Defendants, or any of them, fail to meet the standard

of conduct required in the circumstances?

8.

9.

Was the market for Lundin Mining securities efficient?

If the answer to (5) and (8) is “yes”, can each Class Member’s reliance on the

misrepresentation be inferred from the fact that each Class Member decided to and did

acquire Lundin Mining securities in an efficient market?

- Page 2 -

10.

11.

Is Lundin Mining vicariously liable or otherwise responsible for the acts and/or omissions

of the Individual Defendants and its other officers, directors, employees, agents and

representatives?

Can the amount of damages for negligent misrepresentation and/or the statutory claim

pursuant to Part XXIII.1 of the OSA, and if necessary, the Equivalent Securities Acts, be

determined on an aggregate basis pursuant to section 24 of the CPA? If so, who should

pay it and in what amount?

12.

Did Lundin Mining issue the Confounding Information in the November News Release,

and if so, are the Defendants, or any of them, precluded from obtaining a reduction in

damages attributable to the Confounding Information?

13.

14.

Are the Defendants, or any of them, liable to pay punitive damages to the Class

Members? If so, who should pay it and in what amount?

Should the Defendants, or any of them, pay the costs of administering and distributing

any amount awarded under sections 24 and 25 of the CPA? If so, who should pay it and

in what amount?

CITATION: Markowich v. Lundin Mining Corporation, 2022 ONSC 81

COURT FILE NO.: CV-17-588044-00CP

DATE: 20220106

ONTARIO

SUPERIOR COURT OF JUSTICE

DOV MARKOWICH

Plaintiff

AND:

LUNDIN MINING CORPORATION, PAUL K.

CONIBEAR, MARIE INKSTER, PAUL MCRAE,

LUKAS H. LUNDIN and STEPHEN GATLEY

Defendants

REASONS FOR DECISION

Glustein J.

Released: January 06, 2022