BRE-X MINERALS LTD., IN BANKRUPTCY
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:
- On March 14, 2013 the Trustee will seek leave from the Ontario Superior Court to discontinue its Ontario lawsuit against the Estate of David Walsh and John Felderhof; and
- On May 30, 2013 the Trustee will seek leave from the Alberta Court of Queens Bench to discontinue its lawsuits against the Estate of David Walsh, John Felderhof and Ingrid Felderhof brought in Alberta, Cayman Islands and the Bahamas.
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.
If you have any questions or require further information, please contact Annick Paradis at Deloitte at 416-874-3887.