Canada: Global Warming: Court Of Appeal Shows Openness To Global Classes

Class Action Case Update: The Ontario Court of Appeal's recent decision in Excalibur Special Opportunities LP v Schwartz Levitsky Feldman, 2016 ONCA 916 addresses when to assume jurisdiction in a global class action.

When 98 percent of the proposed class members are all non-residents of Ontario, the company in which they invested is based in the United States, and the transactions were governed by American law–does it make sense to certify a global class in Ontario? The majority in the Court of Appeal's decision in Excalibur Special Opportunities LP v Schwartz Levitsky Feldman, 2016 ONCA 916 (Excalibur) says "yes", given that the claim here was against an Ontario defendant in relation to work it performed in Ontario.

Factual Background

In 2010, the plaintiff and 56 other accredited investors decided to invest in Southern China Livestock (Southern China), an American company that owned and operated hog farms in China. In making that decision, the proposed class member investors allegedly relied on an audit report prepared by the defendant, an Ontario-based accounting firm, which stated that Southern China's financial statements fairly represented its financial position. A year later, it was revealed that Southern China had little control over its revenue and expenses and subsequently became worthless. The proposed representative plaintiff (an investor in Ontario) sought to certify a global class action against the defendant for negligence and negligent misrepresentation.

The Motion Judge Denied Certification

Justice Perell of the Ontario Superior Court of Justice dismissed the plaintiff's class certification motion. In addition to preferable procedure issues, Justice Perell found that the class definition criterion under s. 5(1)(b) of the Class Proceedings Act was not met because the proposed claim lacked a real and substantial connection to Ontario. Given that 98 percent of the proposed class members were non-resident of Ontario, Southern China was based in the United States, and the transactions were governed by American law, Justice Perell found the connection to Ontario to be "modest" or "trivial".

Excalibur appealed to the Divisional Court, where the majority deferred to and affirmed Justice Perell's decision. In dissent, however, Justice Sachs was of the view that Justice Perell erred in failing to find a real and substantial connection between Ontario and the proposed action.

Appeal to the Court of Appeal

The issue before the Court of Appeal was whether the Divisional Court erred in deferring to Justice Perell's decision to deny certification. The majority of the Court of Appeal, largely agreeing with Justice Sachs' dissent at the Divisional Court, found that Justice Perell erred in failing to assume jurisdiction of the global class by:

  1. mischaracterizing the claim in a way that prevented him from finding a real and substantial connection to Ontario (using the test found in Club Resorts Ltd v Van Breda, 2012 SCC 17), by improperly focusing on the private placement transaction in the U.S. Instead, Justice Perell should have focused on the fact that Excalibur's claim was against a firm of accountants that resided in Ontario and actively conducted business in Ontario in relation to an audit that the firm performed in Ontario. Conceived of in this way, Justice Perell could not have concluded that Ontario's connection to the claim was either "modest" or "trivial";
  2. focusing on whether it would reasonable for the global class members to expect that their rights would be determined by a foreign court; and
  3. exercising "restraint" in his approach to the issue of taking jurisdiction over foreign parties. For example, in this case, considerations of order and fairness were not seriously challenged. Restraint was therefore not necessary given that the identity of all class members but one was known and could be notified directly about the claim and their opt-out options. This was not a situation where there were unknown and indeterminate class members.

Justice Blair's Dissent

Justice Blair, dissenting, disagreed with what he referred to as the majority's misplaced emphasis on the expression "real and substantial connection" in the Van Breda sense. In Justice Blair's view, the motion judge properly recognized that the court had jurisdiction simpliciter over the proposed class action, and therefore that there was a real and substantial connection in the Van Breda sense. However, Justice Perell was not using the term in the Van Breda sense. Instead, he was trying to determine whether there was a sufficient connection between Ontario and the subject matter of the dispute such that the Ontario court should assume jurisdiction over a global class, not whether it could assume jurisdiction.

Justice Blair argued that the idea that a court should exercise restraint in assuming jurisdiction over a case with a foreign element is deeply-rooted in the Ontario judicial approach to that issue. In that context, Justice Perell appropriately exercised restraint in considering whether the non-resident class members would reasonably expect that their rights would be determined in and by a foreign court. As a result, Justice Perell's decision to not assume jurisdiction over a global class and therefore deny certification was entitled to deference.


In the end, the Ontario Court of Appeal decided to certify the global class action in Excalibur, overturning Justice Perell's decision. This decision indicates that an Ontario-based defendant, which does work that is relied upon by others in foreign jurisdictions, may be sued in Ontario in a global class action. But the contrasting views at all levels of the Ontario judiciary reveals the ongoing uncertainty about the degree of "restraint" that a court should exercise in determining whether to assume jurisdiction over foreign parties and certify a global class. 

Whether the defendant seeks leave to appeal this decision or not is yet to be determined. The Supreme Court of Canada recently denied leave to appeal from the Court of Appeal's decision in Kaynes v BP, Plc, 2014 ONCA 580–a securities case in which certification of a global class was denied largely on the basis that principles of international comity justified adhering to the U.S. standard of tying jurisdiction to the place where the securities were traded. Given the apparent jurisdictional restraint exercised in the Kaynes decisions, if leave to appeal is granted in Excalibur, it will be interesting to see how the issue of assuming jurisdiction over a global class holds up to further judicial scrutiny.

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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