On November 5, 1997, Deloitte & Touche Inc. (“Deloitte”) was appointed as Trustee in Bankruptcy (the “Trustee”) of Bre-X Minerals Ltd. (“Bre-X” or the “Company”) by the Alberta Court of Queen’s Bench. Bre-X had made an assignment in bankruptcy following the commencement of a series of multi-billion dollar shareholder lawsuits arising from the collapse of the Company’s share value. The collapse had been triggered by a series of announcements and statements in the press suggesting that the Company had seriously overstated the quantity of gold resources it claimed to have discovered in Indonesia and that the Company did not in fact hold the interests in the resource properties that it had previously claimed.
Following its appointment as Trustee, and in accordance with the directions of Bre-X’s Interim Inspectors and with the Court’s approval, the Trustee determined that it was in the stakeholder’s best interests to utilize the liquid assets available at the time of the bankruptcy to pursue potential avenues of recovery on behalf of the Estate. In accordance with this strategy, litigation was commenced in the Cayman Islands, Bahamas and Philippines and efforts were undertaken to recoup monies that had been deposited in a Channel Island Trust. The Trustee also assumed carriage of a Derivative Action commenced in the name of the Company in Ontario that sought to recover insider trading profits from several of Bre-X’s former executives. A similar action in Alberta was pursued against Bre-X’s sister company, Bresea Resources Inc.
From 1998 through to 2011, the Trustee pursued the various available avenues of recovery recouping the net amount of approximately $5 million from the Channel Island Trust and a further $2 million in the settlement of the action against Bresea. In accordance with the direction of the Estate’s Inspectors and with the approval of the Court, these monies were added to the cash on hand at the date of the bankruptcy and used to fund the Trustee’s ongoing recovery efforts.
By 2011 it had become evident to the Trustee that there was no realistic prospect of the Estate realizing any significant recovery through the litigation and that the costs of proceeding were prohibitive. Monies that had been frozen under the various Mareva Injunctions had been dissipated under the terms of those orders that permitted payment of the defendants’ living expenses and legal costs. One of the principal targets of the litigation, Bre-X’s geologist, John Felderhof, had been acquitted after a lengthy Ontario Securities Commission trial adding to concerns that proving his knowledge of the fraud was going to be extremely difficult. It became evident that the only responsible course was for the Trustee to make efforts to resolve the litigation. As a result, the following motions are scheduled:
The Ontario Superior Court directed that the Trustee send a Press Release to notify potential interested parties about the above motions and related dates. A copy of the Press Release is included separately on this website.
Update to July 17, 2013:
On March 14, 2013, the Ontario Superior Court granted the Trustee leave to discontinue the Ontario Derivative Action in accordance with the provisions of the OBCA.
On May 30, 2013, the Alberta Court of Queen’s Bench, which had initially authorized the Ontario Derivative Action, also granted leave to discontinue that action along with the Alberta Derivative Action and the foreign enforcement proceedings that had been brought in the Cayman Islands and the Bahamas.
The Ontario Class Action in Canada and the Texas Class Action in the United States are not part of the proceedings under the Bre-X Estate and are being handled by separate legal counsel. The Trustee is currently holding approximately Cdn$5.1 million in funds in trust for members of the plaintiff class in both class actions and the various Courts involved have approved a distribution of 67% of these funds to the Ontario class and 33% to the Texas class. These funds do not form part of the Bre-X Estate and the Trustee is simply acting as a “distribution agent” for the benefit of the plaintiffs in the class actions. No formal claims process has been run in Canada to date for the Ontario Class Action as the Trustee is awaiting further instructions from class counsel on this matter. A formal claims process has already been completed in the Texas Class Action.
If parties wish to contact counsel acting in the Ontario Class Action, contact details are as follows:
Sutts, Strosberg LLP
600 - 251 Goyeau Street Windsor, Ontario N9A 6V4 Tel: 519.258.9333
Fax: 519.258.9527 | 866 316.5311
If you have any questions or require further information, please contact Annick Paradis at Deloitte at 416-874-3887.
Order Discharging Trustee, granted January 25, 2017
Jan 27, 2017