The plaintiff brought a proposed class action in which he asserted a statutory
claim for secondary market misrepresentation under Part XXIII.1 of the Securities
Act against the defendant as a “responsible issuer” and a common law negligent
misrepresentation claim. The defendant’s head office was in London, England, and
its securities were not traded on any Canadian stock exchange. The plaintiff
bought his shares on the Hong Kong Stock Exchange using a Hong Kong bank
account which he accessed through his home computer in Ontario. The motion
judge dismissed the Securities Act claim and stayed the common law claim, holding
that Ontario did not have jurisdiction simpliciter and that, even if it did, Ontario
was not the appropriate forum. He awarded $1,000,455.22 in costs. The plaintiff
Held, the jurisdiction appeal should be dismissed; the costs appeal should be
allowed in part.
Section 138.1 of the Securities Act defines a responsible issuer to mean (a) a reporting issuer or (b) any other issuer with a real and substantial connection to Ontario,
any securities of which are publicly traded. It was common ground that the
defendant was not a reporting issuer. The legislature intended the common law
test for “real and substantial connection” to apply in the context of s. 138.1. A non-reporting issuer does not have a real and substantial connection to Ontario merely
because it knows or ought to know that its investor information is being made available to Canadian investors. To hold otherwise would make Ontario the default jurisdiction for issuers around the world whose securities were purchased by residents
of Ontario. The legislature did not intend to create universal jurisdiction.
The plaintiff did not meet the common law test for establishing that the defendant had a real and substantial connection to Ontario. The motion judge did not err
in finding that the defendant did not carry on business in Ontario. The defendant
could not be said to be carrying on business in Ontario simply because the plaintiff
could access its disclosure information using his home computer in Ontario. The
motion judge did not err in finding that, while the defendant had a presumptive
real and substantial connection to Ontario by virtue of possibly committing a misrepresentation-based tort in Ontario, that presumptive connecting factor was
rebutted because downloading materials from an issuer is an extremely weak connection and does not point to any real relationship between the subject matter of
the litigation and Ontario.
The motion judge accurately applied the forum non conveniens doctrine. Comity
continues to be a key consideration in the forum non conveniens analysis. The
more appropriate forum for secondary market claims will generally be the forum
where the securities transaction took place. The defendant could not reasonably
have expected that it would be subject to the regulation of the law of Ontario. The
motion judge was right to conclude that Ontario was forum non conveniens.
This was not an appropriate case for no award of costs. It was not public interest
litigation and did not raise a novel point of law.
There was no basis to interfere with the motion judge’s finding that the expert
evidence produced by the defendant was necessary for the motion. However, it was
not clear whether the motion judge considered the reasonableness of the expert
fees charged in terms of hours spent and hourly rates imposed. A class action
defendant does not have carte blanche to unreasonably spend money on experts.
The obligation of reasonableness in the expenditure of funds on experts is an
aspect of ensuring access to justice, one of the principle purposes of class actions.
The costs award should be reduced to $800,000.