Lexpert US Guides

www.lexpert.ca | LEXPERT • December 2014 | 31 INTERNATIONAL CLASS ACTIONS incremental in Canada. But it was only a matter of time before the Canadian jurisprudence would catch up with the American. Initially, the Canadian jurisdictional debate focused on whether a provincial court could certify a national class. It is now well ac- cepted that the Class Proceedings Acts in most Canadian juris- dictions permit certification of national classes. In Ontario, Mc- Cutcheon v. Cash Store Inc., 2006 CanLII 15754 (ON SC) was one of the first cases to seriously grapple with the issue of whether the court should take jurisdiction over class members resident in other provinces when all the material facts that gave rise to the non- resident class member's cause of action occurred outside Ontario and the class member's only connection to Ontario consisted of "a commonality of interest with the proposed representative plain- tiff and the resident class members over whose claims against the defendants this court has jurisdiction." In other words, should the court take jurisdiction over non-resident class members when their only connection to Ontario was that their claims raised the same common issues as Ontario residents? The answer in McCutcheon, and in most cases to follow was "Yes." In McCutcheon, Justice Cullity correctly identified that the fun- damental issue to be resolved was how the "real and substantial con- nection" test should be adapted to the unique circumstances of a class proceeding. He concluded that the analysis should center on whether the cause of action asserted on behalf of the non-resident class mem- bers has a sufficiently real and substantial connection to the forum to ground jurisdiction over their claims against the defendants. It is now accepted that when an international class is being proposed and opposed by the defense, the court will undertake the "real and substantial connection" analysis established by the Supreme Court of Canada in Club Resorts Ltd. v. Van Breda, [2012] 1 S.C.R. 572, to determine if it should take jurisdiction over the claims of the foreign class members. For some time, it appeared that Ontario courts were trending towards acceptance of international class actions. After McCutch- eon and up until early 2014, the Ontario courts often drew no fun- damental distinction between the claims of non-resident Canadian class members and the claims of international class members on cer- tification. So long as the claims asserted on behalf of the class raised common issues with a real and substantial connection to the forum, the courts seemed prepared, in large measure, to take jurisdiction and include the internationally domiciled claimants as part of the class. Whether the ultimate judgment would be enforced in the foreign jurisdictions was not the court's concern at certification. As Justice Sharpe (as he then was) said in Robertson v. Thomson, 43 O.R. (3d) 161 (SCJ), the possibility that some foreign class member might not opt out and then challenge the binding effect of the class-action judg- ment in her home jurisdiction is not sufficient grounds for declining jurisdiction over foreign class members. Based upon Robertson and McCutcheon, and the cases that fol- lowed, there was good reason to anticipate that Ontario courts would continue to assume jurisdiction over claims brought against foreign issuers (or other foreign defendants), even if the class action was brought solely for the benefit of foreign investors who purchased on a foreign exchange. So long as the plaintiff could meet the Van Breda real and substantial connection test, and identify a sufficient connection between the action and the jurisdiction, it seemed likely that Ontario's courts would welcome the foreign investors to pursue their claims here. A real and substantial connection could include any number of factors. For example, in Abdula v. Canadian Solar Inc., 2012 ONCA 211, the defendant did not list its securities on any Canadian exchange, but it did carry on business in Ontario. It was "PRACTICALLY speaking, Morrison meant that enterprising US class counsel would no longer be able to launch actions on their home turf if the target issuer was not carrying on business in the US or listed on an American exchange." found to be a "responsible issuer" under the Ontario Securities Act, and the court took jurisdiction over the proposed class proceeding. However, it remains to be seen whether at certification the court will agree to certify an international class. Based on more recent cases from the Court of Appeal for Ontario, certification may well be de- nied to the foreign class members. An earlier prominent case in which the Ontario court readily as- sumed jurisdiction over the claims of foreign investors was the origi- nal certification decision in Silver v. Imax Corporation, 2009 CanLII 72334 (ON SC). Imax traded on both the TSX and the NASDAQ, and the class was originally certified to include investors who bought on either exchange, despite the fact that a parallel class proceeding was being prosecuted in the US. At certification, it was unclear whether the claims of the foreign class members would be governed by Ontario's legislation or the laws of the United States. And in par- ticular, the issue of whether the Ontario Securities Act statutory cause of action applied to the foreign class members was not directly before the court. However, at around the same time that Morrison was released there were some early signs of judicial resistance to certification of claims asserted on behalf of foreign investors who purchased shares on a foreign exchange. For example in McKenna v. Gammon Gold Inc., 2010 ONSC 1591 (CanLII), Justice Strathy (as he then was) re- fused to include in the class those investors who purchased Gammon shares on a foreign stock exchange. He surmised that "The acquisi- tion of those securities in a jurisdiction outside Canada would not give rise to a reasonable expectation that the acquiror's rights would be determined by a court in Canada." He therefore excluded from the class all investors who purchased Gammon securities on a stock exchange outside of Canada, regardless of their place of residence. Important to the analysis, however, is the fact that the claim that was being asserted on behalf of the investors who purchased on a foreign exchange was for prospectus misrepresentations (and the content of the prospectus would have been subject to the rules and governance of the foreign exchange where the shares were issued, to the knowl- edge of the investors), and the common law misrepresentation claim was not certified at all. Since then, and particularly in 2014, judicial reticence seems to be developing towards taking jurisdiction over class members who are not domiciled within Canada. The pendulum is now swinging in the opposite direction away from the "wait and see" approach of Imax. As the cases mature, the Court of Appeal is circumscribing the instances in which it will take jurisdiction over, or certify an interna- tional class. The Court has relied heavily on the concept of interna- tional "comity" in declining jurisdiction or refusing certification of an international class. Comity is a "flexible concept" (Van Breda at paras. 74, 112), exer-

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