Feeling “secure” in foreign jurisdictions: Ontario’s top court tells security purchasers to pursue their claims where they bought their security

 

Introduction

The Ontario Court Appeal’s decision in Kaynes v BP, PLC[1] raises interesting questions about an Ontario court’s jurisdiction over securities class actions. In this case, the Court of Appeal considered its jurisdiction over claims with respect to foreign issuers who do not trade on local exchanges.

 

The Facts & Issues

In this proposed class action, the respondent plaintiff alleged secondary market misrepresentation pursuant to the Securities Act[2] against the appellant, BP PLC.

The proposed class included Canadian residents who, between May, 2007 and May, 2010 purchased BP securities over the Toronto Stock Exchange and foreign exchanges, including the New York Stock Exchange and the London Stock Exchange.  The plaintiff alleged that BP misrepresented its safety programs operations, and the accident, which would have impacted BP’s share price, both before and after the April, 2010 Deep Water Horizon oil spill in the Gulf of Mexico. Parallel class proceedings, alleging the same misrepresentations, were brought in the United States District Court in Texas.

The issue raised on appeal was whether Ontario had or should assert jurisdiction over the claims.

BP conceded that Ontario had jurisdiction to consider the claims of those class members who purchased BP shares on the TSX. However, BP argued that the class members who purchased BP shares on foreign exchanges had no real and substantial connection to Ontario. BP argued, in the alternative, that if the court found it had jurisdiction simpliciter Ontario should decline jurisdiction based on the forum non conveniens doctrine.

 

The Court’s Decision

The Court of Appeal unanimously held that while Ontario courts could assume jurisdiction over the class members who purchased securities in foreign exchanges, it should not do so on the basis of forum non conveniens. Accordingly, the court decided to stay the action of the purchasers of securities in foreign exchanges.

 

The Jurisdiction Issue

The Court of Appeal held that the proposed class action satisfied the jurisdiction test set out by the Supreme Court of Canada in Club Resorts Ltd. v Van Breda.[3]  BP’s tort was “committed in Ontario”, one of four connecting factors required to establish jurisdiction under Van Breda.  The court reasoned that, by releasing disclosure documents outside Ontario that BP knew it was legally required to provide to Ontario shareholders, BP  “committed an act with sufficient connection to Ontario to qualify as the commission of a tort in Ontario.”[4]

 

The Forum Issue

While the Court of Appeal held that Ontario courts had jurisdiction over the dispute, the court used its discretion to decline exercising that jurisdiction under the forum non conveniens doctrine as articulated in Van Breda.

Where the moving party can establish that a more convenient or appropriate forum exists to adjudicate the dispute, forum non conveniens recognizes the court’s “residual power to decline to exercise its jurisdiction.”[5] In this case, the court declined to exercise jurisdiction because of the international comity principle, which requires “an attitude of respect for the courts and legal systems of other countries”.

 

In holding that Ontario was not the most convenient forum for the adjudication of this dispute, the Court of Appeal considered a number of factors, including:

 

  • Parallel proceedings, based on the same allegations, had been commenced in the United States for all BP shareholders, including the plaintiff;
  • Those purchasing securities in foreign exchanges should look to the forum courts for relief, particularly, where the securities laws in other countries, namely the United States and the United Kingdom, “assert jurisdiction on the basis of the exchange where the securities are traded”;[6]
  • The number of BP securities purchased on the TSX was negligible compared to securities purchased on the NYSE or the LSE; and
  • The proposed class action should be considered in the much broader international context having due regard to the securities law regimes of Ontario, the United States, and the United Kingdom. While the minimal standard of jurisdiction simpliciter was made out, this was a case where the court “should go beyond the strict application of that minimal standard.”[7]

Conclusion

Subject to further appeal, the decision in Kaynes curtails the likelihood of Ontario courts assuming jurisdiction over securities class actions where shares are purchased in foreign exchanges.  The message to security purchasers is to look to the forum where they acquired the securities before considering commencing class proceedings in Ontario.

[1] 2014 ONCA 580 [Kaynes].

[2] RSO 1990, c 55.

[3] 2012 SCC 17

[4] Kaynes, supra note 1 at para. 28.

[5] Van Breda, at para. 104

[6] Kaynes, supra note 1 at para. 47.

[7] Ibid at para. 46.