Court OKs Bre-X class action settlement

The lengthy battle by Bre-X investors to recover billions of dollars in Canada’s largest mining fraud appears to be over.

Under a settlement agreement approved Thursday by the Alberta Court of Queens Bench, all class-action suits against the principals in the case have been dismissed.

The Calgary court made the ruling at the request of bankruptcy trustees Deloitte and Touche, which said there was no realistic prospect of realizing any significant recovery through the litigation and that the costs of proceeding were prohibitive.

As a result, all parties agreed to a payment of $5.2 million to be divided among investors who apply for a settlement.

Bre-X became known as the largest mining fraud in Canadian history back in 1997 when its claim of a major gold discovery in Indonesia proved to be a fake.

Investors around the world lost an estimated $3 billion in the resulting collapse of the company’s share price.

Deloitte and Touche was appointed as trustee in bankruptcy of Bre-X Minerals Ltd. by the Alberta court in November 1997 after the company was hit with several multibillion-dollar shareholder lawsuits.

The trustee sought to recover insider trading profits from several of Bre-X’s former executives in Ontario and an action was pursued in Alberta against Bre-X’s sister company, Bresea Resources Inc.

Litigation was also pursued in the Cayman Islands, the Bahamas and Philippines and efforts were undertaken to recoup monies that had been deposited in a Channel Island Trust.

But in the end, the action from 1998 through to 2011 recovered only $5 million from the Channel Island Trust and a further $2 million in the settlement of the action against Bresea.

With court approval, the funds were added to the cash on hand and used to fund ongoing recovery efforts. However, Deloitte said that by 2011 it had become apparent no further recoveries were possible.

Part of the reason was that funds frozen under various injunctions had been spent under the terms of those orders that permitted payment of the defendants’ living expenses and legal costs, Deloitte said at the time.

As well, one of the principal targets of the litigation, Bre-X’s geologist, John Felderhof, was acquitted after a lengthy Ontario Securities Commission trial.