Canada: Ontario Court Upholds Amendment Of Imax Global Class To Exclude Members Participating In U.S. Settlement

On October 29, 2013, the Ontario Superior Court of Justice denied leave to appeal Justice van Rensburg's decision in Silver v. Imax, in which she had amended a previously certified global class to exclude those class members who were part of a settlement class in a parallel U.S. proceeding.


IMAX, a Canadian public company whose shares are dual-listed on the TSX and the NASDAQ, is a defendant in overlapping class proceedings in Ontario and the United States. The actions were commenced in both jurisdictions in 2006, and both involve similar allegations of misrepresentations and omissions in respect of the financial reporting and recognition of revenue for IMAX's theatre systems.

In December 2009, Justice van Rensburg certified a global class in the Ontario action that included all persons who acquired IMAX shares on the NASDAQ and the TSX and held such shares during the relevant class period. The U.S. class, on the other hand, included only those persons and entities that purchased or acquired IMAX shares on the NASDAQ. In 2012, the parties to the U.S. action reached a settlement for $12 million. This settlement was approved by a U.S. court on the condition that the global class definition in the Ontario action would be amended to exclude NASDAQ purchasers who did not opt out of the U.S. class action, and hence, chose to benefit from the U.S. settlement.

The defendants brought a motion in the Ontario action, seeking the amendment of the class definition contemplated by the U.S. settlement order. The amendment would reduce the class to approximately 15% of the global class originally certified. As discussed in an earlier post, Justice van Rensburg granted the defendants' motion on March 19, 2013.

Superior Court of Justice denies leave to appeal

As the amendment to the class definition was an interlocutory order, the plaintiffs had to seek leave to bring an appeal to the Divisional Court. The leave motion was heard by Justice Tzimas of the Ontario Superior Court of Justice, who denied leave.

After reviewing the test on the motion for leave to appeal from an interlocutory order, as well as the high degree of deference owed to a motions judge in a class proceeding, Justice Tzimas framed three key issues: was there (1) a conflicting decision by another judge or court in Ontario or elsewhere, (2) good reason to doubt the correctness of the decision, or (3) an error of law or palpable error of fact such that the motion judge's exercise of her broad discretion should be reviewed?

The first and third issues were disposed of quickly. There was no decision of another judge or court in conflict with Justice van Rensburg's order, which was specific to the unique circumstances of the Imax proceedings. As the motions judge case managing the Ontario class action for the past six years, Justice van Rensburg had demonstrated a thorough understanding of its facts and great consideration for ensuring a fair process, which entitled her decision to amend the global class to significant deference.

As to the second issue, Justice Tzimas rejected the grounds put forward by the plaintiffs for doubting the correctness of the decision to amend the global class. The amendment did not create an impermissible opt-in class, forcing NASDAQ purchasers to opt into the Ontario action by opting out of the U.S. class. Rather, the NASDAQ purchasers had an election between claiming immediate compensation in the U.S. action, or choosing to remain in the Ontario action and awaiting an uncertain outcome. The choice of jurisdictions was left not to the courts, but to the litigants. The amendment of the class would promote that "litigation autonomy", whereas a refusal to amend the class would effectively extinguish the U.S. settlement and deprive overlapping class members of the option to settle.

The motion to amend the class definition was also not barred by issue estoppel. Justice van Rensburg had anticipated that conflict of laws issues might arise as the litigation progressed, and had repeatedly cautioned from an early point that her certification order could be amended. The U.S. settlement was not yet underway or raised before the Ontario court at the certification motion, and would have been a relevant factor in the certification decision. Given that, issue estoppel would not prevent the amendment of the Ontario global class.

Justice Tzimas also confirmed that the motions judge did not have to "look behind" the U.S. settlement and evaluate it on its merits before determining that it should be enforced in Canada. Absent allegations of fraud or conduct contrary to public policy or natural justice, she would have had no legal basis to do so. The motions judge concluded that it was appropriate for her to recognise the decision of the U.S. court approving the U.S. settlement based on the principles set out by the Ontario Court of Appeal in Currie v. McDonald's Restaurants of Canada (2005), 74 O.R. (3d) 321.

The motions judge then sought to determine whether there was any other impediment to the amendment of the global class. In particular, she was prepared to accept that it might be preferable to refuse the amendment of the class and effectively defeat the U.S. settlement, if that settlement were improvident in comparison to the alternative of litigating the claims of the overlapping class members in Ontario. However, the Ontario legal regime was not demonstrably more advantageous to overlapping class members' claims and there was no evidence that the U.S. settlement was improvident. A refusal to amend the Ontario global class would deny the benefits of the U.S. settlement to the defendants and class members wishing to partake in it.

Justice Tzimas concluded that there was no palpable or overriding error of fact in this analysis that might warrant appellate review. In her view, the motions judge's conduct of the proceedings, including the amendment decision, reflected commendable efforts to give full meaning to due process, access to justice for the parties, respect for judicial comity, and common sense.


This decision provides some reassurance that defendants can settle a class action in one jurisdiction without settling a parallel proceeding in Canada or reaching a global settlement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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