GARY OAKES VICTORIA
In the first actual trial since
the enabling legislation was
passed, a B.C. Supreme Court
judge has ordered the forfeiture
of two homes worth nearly $1
million because they were used to
house marijuana grow operations.
The government’s application under the province’s Civil
Forfeiture Act involved three
houses in the same neighbourhood of Vancouver that were
rented by an agent to people
who were not known to owner
Sarban Singh Rai.
Justice Arne Silverman
noted that when the homes
were searched in May 2008,
police found a total of 2,254
marijuana plants which would
have had a potential street
value of between $282,000 and
“If ever there was wilful blindness
amounting to bad faith, this was it.
Rai’s evidence to be “less than
forthcoming” and said the
owner suspected what was
going on in the properties but
declined to confirm it “because
he wanted to be able to deny
“If ever there was wilful
blindness amounting to bad
faith, this was it.”
The judge concluded that
the $24,000 Rai received in
rent amounted to the proceeds
of crime while the three houses
themselves were the instru-
ments of unlawful activity.
Reasons: British Columbia (Director of Civil
Forfeiture) v. Rai,  B.C.J. No. 241.
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Re: Securities Class Actions
and Disclosure ‘Mistakes,’ The
Lawyers Weekly, Feb. 18
Kelley McKinnon acknowledges that the anticipated flood
of securities class actions has
not materialized, and that to
date, Canada has seen a mere
“trickle” of them. Yet she disregards the possibility that the
anticipated onslaught never
came because plaintiffs’ lawyers
have been selective in bringing
these cases. Indeed, for every of
the numerous securities class
actions that our firm has commenced, there are at least five
that we investigated at significant expense, but that we
elected not to pursue.
Rather than contemplate the
possibility that plaintiffs’ counsel
have been selective, Ms.
McKinnon strongly implies that
the norm thus far is the meritless
case that is filed purely on the
basis of a stock drop. That every
securities class action is preceded
by a stock drop should surprise no
one, and says nothing about the
quality of the actions brought.
Under Part XXIII.1 of the
Securities Act, there must be a corrective statement resulting in a stock
drop in order for a plaintiff to have
actionable losses arising from the
dissemination of materially misleading, positive information.
Moreover, to the extent that
any court has thus far commented upon the merits of a
Part XXIII.1 action, those comments have been favourable.
Namely, in Imax, two judges
have now rendered decisions
supporting the view that the
first action filed under Part
XXIII.1 has merit.
A closer look at the actions
brought under Part XXIII.1
amply demonstrates that what
precipitated those actions was far
more than a mere stock drop. In
Southwestern Resources and Bear
LETTER TO THE EDITOR
Lake Gold, for example, the
actions arose from acknowledgements by the issuer that one of its
senior officers had falsified drilling results. Other of the Part
XXIII.1 cases filed to date, including SunOpta and CV Technologies, arose from the issuer’s premature recognition of revenue or
other acknowledged violations of
GAAP. In several of the financial
restatement class actions filed
thus far, the issuer’s accounting
improprieties came to light not at
the issuer’s own initiative, but
because its board was forced to
act by a whistleblower. Other Part
XXIII.1 class actions have alleged
options backdating, or the concealment of operational failures
in the issuer’s flagship mines or
manufacturing facilities, or the
undisclosed participation of the
issuer’s principal operating subsidiary in an admitted conspiracy
to thwart competition.
Whereas Ms. McKinnon suggests that plaintiffs’ lawyers are
pouncing upon every missed projection that is followed by a stock
drop, in fact the vast majority of
the cases filed to date have little if
anything to do with forward-looking information, and with
good reason. Plaintiffs’ lawyers
recognize that a missed projection, standing alone, is not a
compelling basis upon which to
advance a claim.
Finally, Ms. McKinnon is
quite right to suggest that
motions for certification and
leave under Part XXIII.1 are
“very costly and time-consuming,” but those costs and delays
fall disproportionately upon the
party possessing fewer resources. Almost invariably, that
party is the plaintiff, and not the
issuer or its well-heeled executives and insurers.
A. Dimitri Lascaris
I’m delighted to have
prompted Mr. Lascaris to join
the much-needed debate about
securities class actions. They
arise in many different contexts
with different facts and clearly
my focus was on those actions
involving forward looking
information as well as the
impact of a low threshold for
such cases to proceed.
Since my article, we have now
received the decision in Imax
denying leave to appeal and so
there will be no appellate discussion of the threshold for
these cases for a while yet. The
speed with which many of these
proceedings are commenced,
the insufficiency of facts at early
stages, and the low threshold for
proceeding remain valid concerns for all parties and for
policy development in this area
in my view.
I also note the unfortunate
view that such cases are
defended by “well-heeled executives.” The executives and directors who appear to be named
routinely as defendants, regardless of their role, are usually
ordinary people who suffer anxiety from assertions they misled
investors and who do not necessarily have means to mount the
defences required in these
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