Investors suing Sino-Forest Corp. have lost a bid to speed up parts of their potential $9.18-billion class-action claim against three of the scandal-plagued company’s former executives and its big-name underwriters and auditors.
Lawyers acting for burned investors were in court last week, asking an Ontario Superior Court judge to partly lift the stay, or litigation freeze, imposed on the troubled company. The stay order came with Sino-Forest’s move to seek protection from its creditors this year as it faced fraud allegations and investigations by the Ontario Securities Commission and the RCMP.
In a decision released on Tuesday, Mr. Justice Geoffrey Morawetz of the Ontario Superior Court extended the stay order until at least Dec. 10, saying that doing so would do no harm to the plaintiffs in the securities class action against the company.
Lawyer Dimitri Lascaris of Siskinds LLP, acting for the plaintiffs, had urged the court to lift the stay to allow the potential class-action claims to proceed against only three former company executives and the company’s auditors and its underwriters.
None of the allegations have been proven in court. The defendants have denied the allegations.
Lawyers for three former Sino-Forest executives, the auditors, Ernst & Young LLP and BDO Ltd., and the company’s long list of major underwriters, opposed the plaintiffs’ move.
They argued it was unfair to proceed against only their clients. They also said the class-action proceedings should be delayed until the Ontario Court of Appeal rules on their challenge of the terms of Sino-Forest’s proposed restructuring deal. That deal, on which the company’s debt holders are to vote this month, would see them take over its remaining assets.
Mr. Lascaris pointed out Tuesday in an e-mail that Judge Morawetz’s decision also says the claims of investors who lost billions in Sino-Forest’s collapse will eventually have to be heard. “Although we would have preferred that Justice Morawetz lift the stay, His Honour has stated clearly that the class actions will have to proceed. So sooner or later, the defendants will have to answer for their conduct.”