In Excalibur Special Opportunities LP v. Schwartz Levitsky Feldman LLP, the Ontario Court of Appeal reversed the motion judge's decision, which had dismissed the representative plaintiff's motion for certification of its action as a class proceeding. In so doing, the Court allowed a class action to proceed on behalf of a class composed overwhelmingly of non-resident foreign parties due to the fact that the defendant was located in Ontario, and its alleged negligent acts similarly occurred in the province.
The appellant, based in Toronto, was one of 57 investors that lost money in an investment in a US company (Southern China Livestock) which owned hog farming operations in China through various subsidiaries. The investments were effected through a private placement, and while the putative class was overwhelmingly resident in the United States, two investors were also located in Canada, with individual investors also from each of the UK, Cayman Islands, Samoa and Malaysia. After the collapse of Southern China Livestock, the investors sued the defendant accounting firm for alleged negligence with respect to the preparation of its "clean" audit report.
In allowing certification, the Court rejected the suggestion that the investors had only a "modest if not trivial" connection with Ontario. It was noted among other things that Ontario possessed jurisdiction simpliciter since the defendant was domiciled in Ontario, and the audit report was prepared in Toronto. In addition, the class was composed of a discrete body of investors rather than containing an unknown and indeterminate membership.
Moreover, the Court held that notwithstanding the significant losses being asserted by the individual investors, a class action was preferable to individual actions or joinder of claims. There were significant barriers to foreign investors bringing their own actions against the defendant, and a common issues trial on liability would afford an enforceable Ontario judgment.
It is worth noting that the decision was subject to a dissent of Blair J.A., wherein issue was taken with the conclusion that a real and substantial connection existed, and that a class action was the preferable procedure.
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