www.lexpert.ca/usguide-litigation/ | LEXPERT • December 2017 | 13
4.
Excalibur Special
Opportunities v. Schwartz
Levitsky Feldman LLP
It appears to be open season for global class actions in Canada
following the Ontario Court of Appeal's decision in Excalibur
Special Opportunities v. Schwartz Levitsky Feldman LLP, 2016
ONCA 916, which certified a global class action despite the fact
that most of the proposed class members had little or no connec-
tion to the province.
"e case is consistent with rulings from the British Colum-
bia Court of Appeal, particularly in mining cases," says
Margaret Waddell of Waddell Phillips Professional Corporation
in Toronto, who was co-counsel for Excalibur. "If the action has a
real and substantial connection to Ontario, our courts won't care
where the plaintiffs come from."
So much so that Canada appears to have one of the broadest —
if not the broadest — jurisprudential approaches to jurisdiction
in the world. But some lawyers argue that Canadian judgments
based on that approach may prove difficult to enforce.
"I agree completely with the dissent in Excalibur, which reasons
that our approach to jurisdiction doesn't take sufficient account
of principles of comity," says Katherine Kay, a litigation partner
in Stikeman Elliott LLP's office in Toronto. "What happens if
courts elsewhere will not recognize the real and substantial test
and fail to give our judgments preclusive effect? Will that gener-
ate more litigation abroad for global class members?"
Excalibur and 56 other investors made private-placement
purchases of shares of Southern China Livestock International
Inc. (SCLI), a Nevada company. Schwartz Levitsky Feldman
(SLF), an accounting firm with offices in Montréal and Toronto,
prepared an audit that was included in the private placement
memorandum. Subsequently, SCLI became insolvent. Excalibur
sued SLF, alleging negligence and negligent misrepresentation in
the preparation of the audit.
Excalibur sought certification in Ontario for a class of 57 inves-
tors, of whom only two lived in Ontario. Justice Paul Perell of
the Superior Court of Justice refused to certify. He reasoned
that class members would not have expected their rights to
be determined in Ontario when they were "non-residents of
Ontario making substantial investments in American dollars in
an American corporation in a transaction that was governed by
American corporate and securities law."
On appeal, a split divisional court agreed with Justice Perell.
But, in another split decision, the Ontario Court of Appeal
reversed the judgments below. As Justice Jean MacFarland,
who wrote the majority opinion, saw it, whether class members
could reasonably have expected Ontario's courts to decide their
claims was not determinative of whether there was the necessary
connection between the action and Ontario. Rather, because the
defendant resided, carried on business and prepared the audit in
Ontario, a real and substantial connection existed.
Moreover, the identity of 56 of the 57 class members had been
established and there was no serious question that Ontario courts
could provide the procedural fairness to which the non-resident
members of the class, like all litigants, were entitled. "I agree with
Excalibur that [precedent] does not stand for the proposition that
an Ontario court should approach the issue of taking jurisdic-
tion in a restrained manner," Justice MacFarland wrote. "To the
extent that the motion judge found that it did, he erred, as did
the divisional court majority in upholding that determination."
Justice Robert Blair, in dissent in the Court of Appeal,
agreed that Ontario had jurisdiction to certify a global class, but
concluded that it should not do so in this case. Echoing Justice
Perell, he noted that an Ontario court would have to decide the
claim in an "entirely foreign-related factual matrix." — J.M.
5.
R. v. Spears
Any US company that does business in Canada and employs
outside accountants would be well advised to have a close look
at R. v. Spears, 2016 NSPC 20. e little-followed case out of the
Provincial Court of Nova Scotia holds an important lesson, says
Al Meghji, a tax litigator at Osler, Hoskin & Harcourt LLP.
No business thinks about tangling with the taxman when it's
starting out. Meghji, who works out of both the firm's Toronto
and Calgary offices, says the decision makes it clear that, unless a
company sets up its relationships with outside professionals such
as accountants with an eye towards a possible dispute down the
road, "it may end up making it more difficult for your litigation
counsel in the event of a fight."
e fight in this case involves Spears Framing, which supplied
concrete formwork that was used in construction. Spears ran
afoul of the Canada Revenue Agency (CRA) — the equivalent of
the Internal Revenue Service — over an outstanding balance of
$210,000 in sales tax.
CRA assigned Alex Grover, a collections officer, to the case.
Grover dealt mainly with Glenda Power, a certified accountant
CROSS-BORDER SIGNIFICANCE
Margaret Waddell
Waddell Phillips
Professional Corporation
"[Excalibur] is consistent
with rulings from the
British Columbia Court
of Appeal, particularly
in mining cases. If the
action has a real and
substantial connection
to Ontario, our courts
won't care where the
plaintiffs come from."
