Kaynes v. BP, PLC
[Indexed as: Kaynes v. BP plc]
Ontario Reports
Court of Appeal for Ontario,
Sharpe, Simmons and Benotto JJ.A.
August 14, 2014
122 O.R. (3d) 162 | 2014 ONCA 580
Case Summary
Conflict of laws — Forum conveniens — Defendant a U.K. company which did not own any real or personal property in Canada or carry on business in Canada — Ontario-resident plaintiff purchasing shares in defendant on New York Stock Exchange — Plaintiff bringing proposed class action for secondary market misrepresentation under Securities Act — Ontario court not forum conveniens — Parallel proceeding based on same alleged misrepresentations currently underway in U.S. — Principle of comity strongly favouring declining jurisdiction — Litigation in more than one jurisdiction inevitable in light of prevailing U.S. and U.K. rules pertaining to jurisdiction over claims for secondary market misrepresentation — Securities Act, R.S.O. 1990, c. S.5.
The defendant, BP, a U.K. corporation, did not own any real or personal property in Canada or carry on business in Canada. It ceased to be a reporting issuer in Ontario in 2009 on condition that it undertake to continue to send relevant investor documents to its shareholders in Canada. The plaintiff, a resident of Ontario, purchased shares of the defendant on the New York Stock Exchange. He brought a proposed class action against the defendant in Ontario for secondary market misrepresentation under the Securities Act. The proposed class consisted of all residents of Canada who acquired BP equity securities between May 9, 2007 and May 28, 2010, and who held some or all of those securities through the end of the proposed class period. That proposed class excluded those who purchased shares on the NYSE and did not opt out of a parallel proceeding currently underway in the United States based on the same alleged misrepresentations. On a motion by the defendant, the motion judge found that the Ontario court had jurisdiction simpliciter and was forum conveniens. The defendant appealed.
Held, the appeal should be allowed.
The motion judge did not err in finding that the Ontario court had jurisdiction simpliciter. A presumptive connecting factor existed as the alleged statutory tort was committed in Ontario. While the defendant did not release the documents that contained the alleged misrepresentations in Ontario, it knew by virtue of the undertaking it had given that the documents would find their way to its Ontario shareholders.
The motion judge erred in refusing to decline jurisdiction on the basis of forum non conveniens. She failed to take into account the principle of comity in assessing the effect of exercising Ontario jurisdiction over claims arising from foreign traded securities. There is a well-established regime governing class actions for secondary market misrepresentation in the U.S., and there was a pending class action in the U.S. based on very similar allegations, covering substantially the same period, and embracing the claims of all BP shareholders, including the plaintiff, who purchased their shares on a U.S. exchange. Under the Securities and Exchange Act of 1934, 15 U.S.C. 78A, the U.S. district courts have exclusive jurisdiction over violations of that statute, including claims for secondary market misrepresentation. The U.K. also asserts jurisdiction on the [page163] basis of the exchange where the securities are traded. Asserting Ontario jurisdiction over the plaintiff's claim would be inconsistent with the approach taken under both U.S. and U.K. law with respect to jurisdiction over claims for secondary market misrepresentation. Moreover, the number of BP shareholders who acquired their shares on a Canadian exchange was dwarfed by those who used a foreign exchange. Permitting the plaintiff to use the defendant's negligible relative trading on the TSX (all of which ended two years prior to the end of the proposed class action) as a toehold for bringing foreign exchange purchasers under the jurisdiction of an Ontario court would be opportunistic. As for avoiding a multiplicity of proceedings, given the prevailing U.S. and U.K. rules pertaining to jurisdiction over claims for secondary market misrepresentation, litigation in more than one jurisdiction was inevitable. The defendant had demonstrated that there was another forum that was clearly more appropriate for the adjudication of the plaintiff's claim and the claims of foreign exchange purchasers.
Club Resorts Ltd. v. Van Breda, [2012] 1 S.C.R. 572, [2012] S.C.J. No. 17, 2012 SCC 17, 291 O.A.C. 201, 2012EXP52, J.E. 2012-788, EYB 2012-205198, 429 N.R. 217, 343 D.L.R. (4th) 577, 91 C.C.L.T. (3d) 1, 10 R.F.L. (7th) 1, 17 C.P.C. (7th) 223, 212 A.C.W.S. (3d) 712; Moran v. Pyle National (Canada) Ltd., 1973 CanLII 192 (SCC), [1975] 1 S.C.R. 393, [1973] S.C.J. No. 149, 43 D.L.R. (3d) 239, 1 N.R. 122, [1974] 2 W.W.R. 586, apld
Abdula v. Canadian Solar Inc. (2012), 110 O.R. (3d) 256, [2012] O.J. No. 1381, 2012 ONCA 211, 289 O.A.C. 226, 98 B.L.R. (4th) 199, 348 D.L.R. (4th) 597, 214 A.C.W.S. (3d) 1006; Central Sun Mining Inc. v. Vector Engineering Inc. (2013), 117 O.R. (3d) 313, [2013] O.J. No. 4506, 2013 ONCA 601, 4 C.C.L.T. (4th) 175, 24 C.L.R. (4th) 27, 46 C.P.C. (7th) 60, 310 O.A.C. 391, 234 A.C.W.S. (3d) 630, consd
Other cases referred to
Currie v. McDonald's Restaurants of Canada Ltd. (2005), 2005 CanLII 3360 (ON CA), 74 O.R. (3d) 321, [2005] O.J. No. 506, 250 D.L.R. (4th) 224, 195 O.A.C. 244, 7 C.P.C. (6th) 60, 137 A.C.W.S. (3d) 250 (C.A.); Gould v. Western Coal Corp., [2012] O.J. No. 4291, 2012 ONSC 5184, 7 B.L.R. (5th) 19, 221 A.C.W.S. (3d) 789 (S.C.J.); Hilton v. Guyot, 159 U.S. 113, 16 S. Ct. 139, 40 L. Ed. 95 (1895); In re: BP Plc Securities Litigation, 4:10-md-2185 (S.D. Tex., Dec. 2013); Morguard Investments Ltd. v. De Savoye, 1990 CanLII 29 (SCC), [1990] 3 S.C.R. 1077, [1990] S.C.J. No. 135, 76 D.L.R. (4th) 256, 122 N.R. 81, [1991] 2 W.W.R. 217, J.E. 91-123, 52 B.C.L.R. (2d) 160, 46 C.P.C. (2d) 1, 15 R.P.R. (2d) 1; Prince v. ACE Aviation Holdings Inc. (2014), 120 O.R. (3d) 140, [2014] O.J. No. 1792, 2014 ONCA 285, 319 O.A.C. 163, 373 D.L.R. (4th) 109, 55 C.P.C. (7th) 75, 239 A.C.W.S. (3d) 629; Silver v. IMAX Corp., [2013] O.J. No. 1276, 2013 ONSC 1667, 36 C.P.C. (7th) 254, 227 A.C.W.S. (3d) 23 (S.C.J.)
Statutes referred to
Securities Act, R.S.O. 1990, c. S.5, Part XXIII.1 [as am.], ss. 138.1 [as am.], 138.3 [as am.], (1) [as am.]
Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq., s. 27
Authorities referred to
U.S. Securities and Exchange Commission, Study of the Cross-Border Scope of the Private Right of Action under Section 10(b) of the Securities Exchange Act of 1934 (Washington, D.C.: U.S. Securities and Exchange Commission, 2012)
APPEAL from the order of Conway J. (2013), 2013 ONSC 5802, 117 O.R. (3d) 685, [2013] O.J. No. 4566 (S.C.J.) dismissing a motion to stay or dismiss an action. [page164]
Larry P. Lowenstein, Laura K. Fric and Kevin O'Brien, for appellant.
Joseph Groia, Andrew Morganti and Matthew Stroh, for respondent.
The judgment of the court was delivered by
1SHARPE J.A.: — In this proposed class action, the respondent plaintiff alleges that the appellant, BP, PLC ("BP"), made misrepresentations in documents it sent to shareholders. The plaintiff asserts the statutory cause of action for secondary market misrepresentation conferred by Part XXIII.1 of the Securities Act, R.S.O. 1990, c. S.5.
2The plaintiff purchased his shares over the New York Stock Exchange ("NYSE"). The proposed class definition includes all residents of Canada who acquired BP securities between May 9, 2007 and May 28, 2010 wherever those securities were purchased. The issue raised on this appeal is whether Ontario has or should assert jurisdiction over the plaintiff's claim and the claims of proposed class members who purchased BP shares on foreign exchanges.
3BP concedes that Ontario has jurisdiction to entertain the claims of those members of the proposed class who purchased their shares on the Toronto Stock Exchange ("TSX"), but contends that there is no real and substantial connection between Ontario and the claims of Canadian residents who, like the plaintiff, purchased their shares on foreign exchanges. Alternatively, BP argues that even if there is jurisdiction simpliciter, Ontario should decline to exercise that jurisdiction on grounds of forum non conveniens.
4The motion judge dismissed BP's jurisdictional challenge. For the following reasons, I agree with the motion judge that Ontario does have jurisdiction simpliciter, but I respectfully conclude that she erred in principle in failing to decline jurisdiction on grounds of forum non conveniens.
Facts
5The plaintiffs claim relates to the April 2010 Deep Water Horizon oil spill that occurred in the Gulf of Mexico. The plaintiff alleges that BP made certain misrepresentations in its public disclosures, before and after the spill, related to its operations, safety programs and the accident that impacted the price of BP shares.
6The plaintiff owns 1,404 BP American depository shares ("ADS"), a form of equity security currently listed for trading [page165] only on the NYSE. The plaintiff purchased all his shares over the NYSE. ADS were formerly listed on the TSX but were delisted on August 15, 2008 due to low trading volume. BP's common shares are listed for trading on the London Stock exchange ("LSE") and the Frankfurt Stock Exchange (collectively, the "European exchanges") but they have never been listed on the TSX.
7BP, a U.K. corporation headquartered in London, England, does not own any real or personal property in Canada, nor does it carry on business in Canada. However, BP was a "reporting issuer" under Ontario's securities regulatory regime during the period when ADS were traded on the TSX. In January 2009, after ADS were delisted from the TSX, BP ceased to be a reporting issuer in Ontario and other Canadian provinces on the following condition that it undertake to continue to send relevant investor documents to its shareholders in Canada:
[BP] undertakes to continue to send or provide to its security holders in Canada all disclosure material that it is required to send or provide to U.S. resident holders of [BP's] securities of the same class or series, in the same manner and at the same time that such material is required to be sent or provided to US resident security holders under applicable US federal securities laws or exchange requirements.
8While there is some dispute as to what documents the plaintiff actually received, BP does not dispute that it was required by the undertaking to send him the documents specified in the undertaking.
9The proposed class consists of all residents of Canada who acquired BP equity securities, whether common shares or ADS, between May 9, 2007 and May 28, 2010 and who held some or all of those securities through the end of the proposed class period.
10The proposed class excludes those who purchased shares on the NYSE and do not opt out of a parallel proceeding currently underway in the United States District Court for the Southern District of Texas. That proceeding is based upon the same alleged misrepresentations. Certification in the U.S. proceedings was denied in December 2013 on the ground that the plaintiffs had failed to demonstrate that damages could be determined on a class basis in accordance with binding authority from the United States Supreme Court: In re: BP Plc Securities Litigation, 4:10-md-2185 (S.D. Tex, Dec. 2013). However, the plaintiffs were given leave to make a second attempt at establishing the elements necessary for certification.
Legislation
11The plaintiff's claim is based upon Part XXIII.1 of the Securities Act, the relevant portions of which are as follows: [page166]
138.1 In this Part,
"responsible issuer" means,
(a) a reporting issuer, or
(b) any other issuer with a real and substantial connection to Ontario, any securities of which are publicly traded[.]
138.3(1) Where a responsible issuer or a person or company with actual, implied or apparent authority to act on behalf of a responsible issuer releases a document that contains a misrepresentation, a person or company who acquires or disposes of the issuer's security during the period between the time when the document was released and the time when the misrepresentation contained in the document was publicly corrected has, without regard to whether the person or company relied on the misrepresentation, a right of action for damages[.]
Decision of the Motion Judge
12The motion judge found that, for the purposes of analyzing whether there is a real and substantial connection between Ontario and the plaintiff's claim in accordance with the decision of the Supreme Court of Canada in Club Resorts Ltd. v. Van Breda, [2012] 1 S.C.R. 572, [2012] S.C.J. No. 17, 2012 SCC 17, the cause of action created by the Securities Act , s. 138.3 should be classified as a statutory tort.
13She found that there was nothing in the broad language of s. 138.3 to restrict the statutory cause of action to investors who had purchased their shares on an Ontario exchange.
14The motion judge also reasoned that s. 138.3 is remedial legislation designed to overcome the element of reliance necessary to make out a claim of the negligent misrepresentation at common law. The location of the common law tort is the place where the misrepresentation is received and relied upon and, she reasoned, by analogy, as s. 138.3 deems the investor to rely on this misrepresentation when purchasing shares, the statutory tort must be considered to have been committed in Ontario.
15The motion judge also referred to the decision of this court in Abdula v. Canadian Solar Inc. (2012), 110 O.R. (3d) 256, [2012] O.J. No. 1381, 2012 ONCA 211, affirming jurisdiction over a claim involving shares not publicly traded in Canada against a non-reporting issuer.
16The motion judge rejected BPs argument that the court should decline to exercise jurisdiction on the basis of forum non conveniens. She held that accepting that argument would result [page167] in the claim of the proposed class being litigated in three different jurisdictions. As BP conceded jurisdiction over the claims of TSX purchasers, this action will proceed in any event. Moreover it would be premature to stay the Ontario action for NYSE purchasers as the U.S. action had not yet been certified. With respect to purchasers from European exchanges, there was evidence that individual actions would be required and accordingly there was no other clearly more appropriate forum for the claims of the proposed class.
Issues
17Two issues are raised on this appeal:
(1) Did the motion judge err in finding that Ontario has jurisdiction over the claims of those class members who purchased their shares on foreign exchanges?
(2) If the answer to the first question is no, did the motion judge err in refusing to stay those claims on the basis of forum non conveniens?
Analysis
(1) Did the motion judge err in finding that Ontario has jurisdiction over the claims of those class members who purchased their shares on foreign exchanges?
18Van Breda holds that to establish a real and substantial connection between either the defendant or the subject matter of the claim and the forum, the plaintiff must establish one of four "presumptive connecting factors" or establish a new connecting factor.
19The first two presumptive connecting factors identified in Van Breda relate to the connection between the forum and the defendant. A presumptive connecting factor to Ontario as the forum is made out where the defendant is (i) domiciled or resident in Ontario, or (ii) carries on business in Ontario. It is not disputed that BP lacks a sufficient presence in Ontario to establish either of these presumptive connecting factors.
20The second two presumptive factors relate to the connection between the forum and the plaintiff's claim. A presumptive connecting factor is made out where (iii) the claim is for a tort committed in Ontario, or (iv) a contract connected with the dispute was made in Ontario. The plaintiff does not argue that the securities he and other class members purchased on foreign exchanges can be said to arise from a contract connected with the dispute that was made in Ontario. It follows, accordingly, [page168] that the only presumptive connecting factor capable of supporting jurisdiction in this case is if the claim is for a tort committed in Ontario.
21BP submits that the motion judge erred in finding that, on the facts alleged by the plaintiff, it committed the statutory cause of action created by s. 138.3(1) in Ontario. For convenience, I repeat here the relevant statutory language:
138.3(1) Where a responsible issuer or a person or company with actual, implied or apparent authority to act on behalf of a responsible issuer releases a document that contains a misrepresentation, a person or company who acquires or disposes of the issuer's security during the period between the time when the document was released and the time when the misrepresentation contained in the document was publicly corrected has, without regard to whether the person or company relied on the misrepresentation, a right of action for damages[.]
(Emphasis added)
22BP's two central arguments are based on the words I have underlined in s. 138.3(1).
23First, BP focuses on the requirement that the responsible issuer release a document containing a misrepresentation. BP contends that for the statutory tort to be committed in Ontario, the document containing the alleged misrepresentation must be released in Ontario. BP does not have a presence in Ontario and the point of the initial release of the documents was outside the province. Therefore, it cannot be said BP did something in Ontario that could amount to the commission of the statutory tort.
24BP's second central submission is that as the effect of the statute is to do away with the element of reliance, the motion judge erred by adopting by analogy the test for the situs of the common law tort of negligent misrepresentation, namely, the place where the negligent misrepresentation was received and relied upon. BP submits that the net effect of the motion judge's focus on deemed reliance by Ontario investors is to base jurisdiction on nothing more that the plaintiff's place of residence, a connecting factor said in Van Breda to be insufficient to ground jurisdiction.
25In my view, accepting BP's submissions would revert to a long-rejected test for determining the place of commission of a tort, ignore the purpose of s. 138.3 and unduly restrict its ordinary meaning.
26BP's shares are no longer listed on a Canadian exchange and BP has ceased to be a reporting issuer but BP has undertaken to continue to make disclosure to its Ontario shareholders. When it released the documents that contain the alleged [page169] misrepresentations, BP knew by virtue of the undertaking it had given that, even if the initial point of release was outside Ontario, the document was certain to find its way to Ontario and to its Ontario shareholders.
27Since Dickson J.'s landmark decision in Moran v. Pyle National (Canada) Ltd., 1973 CanLII 192 (SCC), [1975] 1 S.C.R. 393, [1973] S.C.J. No. 149, Canadian courts have rejected the rigid and unduly mechanical "place of acting" test for determining the place of commission of a tort for purposes of determining jurisdiction. Moran v. Pyle involved a defective light bulb that was manufactured in Ontario and that caused injury in Saskatchewan. The defendant did not carry on business in Saskatchewan, all its manufacturing and assembly operations were in Ontario and it did not directly sell it products in Saskatchewan. The Supreme Court held that the tort was committed in Saskatchewan. As Dickson J. explained, at p. 409 S.C.R.:
[W]here a foreign defendant carelessly manufactures a product in a foreign jurisdiction which enters into the normal channels of trade and he knows or ought to know both that as a result of his carelessness a consumer may well be injured and it is reasonably foreseeable that the product would be used or consumed where the plaintiff used or consumed it, then the forum in which the plaintiff suffered damage is entitled to exercise judicial jurisdiction over that foreign defendant. . . . By tendering his products in the market place directly or through normal distributive channels, a manufacturer ought to assume the burden of defending those products wherever they cause harm as long as the forum into which the manufacturer is taken is one that he reasonably ought to have had in his contemplation when he so tendered his goods.
28In my view, the same line of reasoning applies here. By releasing a document outside Ontario that BP knew it was required to send to Ontario shareholders, BP committed an act with sufficient connection to Ontario to qualify as the commission of a tort in Ontario.
29I find the reasons of Goudge J.A. in Central Sun Mining Inc. v. Vector Engineering Inc. (2013), 117 O.R. (3d) 313, [2013] O.J. No. 4506, 2013 ONCA 601 instructive on this issue. That case involved a claim for negligent misrepresentation based on reports prepared in the United States and sent to the plaintiff's office in Vancouver. Decisions relying on those reports were made by senior executives of the plaintiff located in Ontario. There was some question as to whether the reports had been sent to Ontario. This court found that even if they had not, there was a sufficient connection with Ontario to establish a real and substantial connection for purposes of jurisdiction (at para. 33):
The respondents foresaw that their studies would be received by the appellant and acted on in Toronto. They should have expected to be called to [page170] account in Ontario. In the modern world where corporations have various offices in various locations, corporate defendants should not escape liability simply because they send their studies to an office of the plaintiff outside Ontario with the clear understanding that it will be acted on in Ontario.
30While the present case does not involve a claim for negligent misrepresentation, I see no reason not to hold, by analogy, that when BP released documents that it was legally required to provide its Ontario shareholders, it committed an act that had an immediate and direct connection with Ontario, an act that is sufficient to establish a real and substantial connection between the claim of this plaintiff and Ontario. In my view, the legislature could not have intended that a foreign corporation such as BP could avoid the reach of Ontario's securities regime simply because the initial point of release of the document was outside Ontario.
31I do not accept BP's argument that the motion judge erred in her interpretation of Abdula or that Abdula stands as authority for the proposition that for purposes of s. 138.3(1), the point of release of the documents must be Ontario. The defendant in Abdula was a federally incorporated company with offices, including its principal executive office in Ontario. Its shares were publicly traded on the NASDAQ exchange in the United States but not on any Canadian exchange. The issue on appeal was whether the defendant was a "responsible issuer" as defined by s. 138.1. The defendant was not a "reporting issuer" so the question was whether the defendant fell within s. 138.1(b): "any other issuer with a real and substantial connection to Ontario, any securities of which are publicly traded". Writing for the court, Hoy J.A. reviewed the history and purpose of the continuous disclosure regime under the Securities Act and the statutory cause of action created by s. 138.3. She concluded, at para. 72, that "the words 'publicly traded' in paragraph (b) of the definition of 'responsible issuer' do not mean 'publicly traded in Canada'". The real and substantial connection that brought the defendant in Abdula within the reach of s. 138.1 was its presence in Ontario and the fact that the documents were, in the words of Hoy J.A., at para. 89, "released or presented" in Ontario (emphasis added).
32The decision in Abdula does not establish the proposition that the word "releases" in s. 138.3(1) requires that the actual point of release of the document be in Ontario. Abdula recognizes, at para. 88, that "[e]xtra-territorial application is specifically envisaged by the paragraph (b) of the definition of 'responsible issuer' with its reference to issuers with a 'real and substantial connection' to Ontario". Abdula also stands for the [page171] proposition that the liability created by s. 138.3 extends to securities traded on foreign exchanges. And most importantly, Abdula equates documents "released" with documents "presented" in Ontario.
33In my view, the reasoning and result in Abdula is entirely consistent with, and supportive of, the proposition that BP's actions in providing Ontario shareholders with information as required by U.S. securities law pursuant to its undertaking were sufficient to establish the presumptive connecting factor of a tort committed in Ontario.
34For these reasons, I reject BP's submission that the motion judge erred in concluding that, based on the facts alleged by the plaintiff, the statutory tort of secondary market misrepresentation was committed in Ontario.
(2) Did the motion judge err in refusing to stay the claims of class members who purchased their shares on foreign exchanges on the basis of forum non conveniens?
35It is well established that if the plaintiff succeeds in demonstrating that Ontario has jurisdiction, the court has the discretion to decline to exercise that jurisdiction under the forum non conveniens doctrine as was explained in Van Breda, at paras. 103-105. The defendant bears the burden "to show why the court should decline to exercise its jurisdiction and displace the forum chosen by the plaintiff". To succeed in discharging that burden, "[t]he defendant must identify another forum that has an appropriate connection under the conflicts rules and that should be allowed to dispose of the action" and "must demonstrate why the proposed alternative forum should be preferred and considered to be more appropriate". The doctrine "tempers the consequences of a strict application of the rules governing the assumption of jurisdiction" and [at para. 104] "requires a court to go beyond a strict application of the test governing the recognition and assumption of jurisdiction". The forum non conveniens doctrine is a "flexible concept" which "cannot be understood as a set of well-defined rules, but rather as an attitude of respect and deference to other states": Van Breda, at para. 74. Forum non conveniens recognizes that there is "a residual power to decline to exercise its jurisdiction in appropriate, but limited, circumstances in order to assure fairness to the parties and the efficient resolution of the dispute": Van Breda, at para. 104.
36The Supreme Court insisted that it would be impossible to draw up an exhaustive list of factors to be considered when deciding whether to exercise the forum non conveniens doctrine, [page172] but referred to a non-exhaustive list of factors that includes the law to be applied to issues in the proceeding; the desirability of avoiding multiplicity of legal proceedings; fairness to the parties and the efficient resolution of claims; and the desirability of avoiding conflicting decisions in different courts: Van Breda, at para. 105.
37Van Breda, at para. 74, identified the centrality of the principle of comity in the modern conflicts regime, and the goal of facilitating "exchanges and communications between people in different jurisdictions that have different legal systems". In Prince v. ACE Aviation Holdings Inc. (2014), 120 O.R. (3d) 140, [2014] O.J. No. 1792, 2014 ONCA 285, at para. 63, Strathy J.A. observed that "the principle of comity . . . underlies the forum non conveniens analysis". Van Breda states, at para. 112, in relation to forum non conveniens, that "comity and an attitude of respect for the courts and legal systems of other countries, many of which have the same basic values as us, may be in order" and that "the court must engage in a contextual analysis, but refrain from leaning too instinctively in favour of its own jurisdiction".
38In Morguard Investments Ltd. v. De Savoye, 1990 CanLII 29 (SCC), [1990] 3 S.C.R. 1077, [1990] S.C.J. No. 135, at p. 1096 S.C.R., La Forest J. adopted the definition of comity expressed in Hilton v. Guyot, 159 U.S. 113, 16 S. Ct. 139 (1895), at pp. 163-64 U.S.:
[T]he recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws[.]
39In support of its forum non conveniens argument that Ontario decline jurisdiction in favour of the U.S. and the U.K., BP led expert evidence regarding the securities law regimes in those jurisdictions. That evidence was not contradicted.
40In the U.S., there is a well-established regime governing class actions for secondary market misrepresentation. As I have already noted, there is a pending class action in the U.S. based upon very similar allegations, covering substantially the same period and embracing the claims of all BP shareholders, including the plaintiff, who purchased their shares on a U.S. exchange.
41U.S. law relating to jurisdiction over such claims is based on the principle that securities litigation should take place in the forum where the securities transaction took place. By statute, actions for secondary market misrepresentation under U.S. securities law may only be brought by those who purchased their shares on a U.S. exchange. In addition, the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq., s. 27, provides that the U.S. district courts have "exclusive jurisdiction of violations [page173] of this title or the rules and regulations thereunder" including claims for secondary market misrepresentation. U.S. law precludes U.S. courts from entertaining private actions involving securities transactions outside the U.S.
42The U.S. approach to jurisdiction over securities litigation is based on the principle of comity. The SEC's Study of the Cross-Border Scope of the Private Right of Action under Section 10(b) of the Securities Exchange Act of 1934 (Washington, D.C.: U.S. Securities and Exchange Commission, 2012) recognizes that in cross-border securities transactions, each state "may have an interest in applying its legal regime" but cautions that "[i]nternational comity requires each jurisdiction to recognize the laws and interests of other jurisdictions with respect to persons and activities outside its territory" to ameliorate "potential conflicts among the jurisdictions".
43The law of the U.K. appears to be less favourable to claimants than that of Ontario or the U.S. U.K. law allows for secondary market misrepresentation claims, but the plaintiff is required to prove reliance. There is no class action procedure available in the U.K., although provision is made for grouping claims, representative orders and consolidation of claims. As in the U.S., the statutory cause of action under U.K. law is only available to those who purchase securities on certain designated markets in the European Union, including the European exchanges. There does not appear to be ongoing litigation in the U.K. involving claims against BP for the alleged misrepresentations relied on by the plaintiff in this case.
44BP also led evidence as to the reported trade volume of BP shares in the three jurisdictions during the proposed class period. The overwhelming majority of Canadians who acquired BP equity shares made their purchases through foreign exchanges. Similarly, the volume of ADS traded in the TSX was dwarfed by the trading in ADS on foreign exchanges. On the TSX, 83,945 ADS were traded, compared with 9 billion on the NYSE and 8.7 billion on the LSE. Of the 83,945 ADS traded on the TSX, the number held through the end of the proposed class period was somewhere between 14 and 7,477.
45I recognize that the motion judge's decision on forum non conveniens is discretionary and attracts deference on appeal absent an error of law or principle or serious factual error: Van Breda, at para. 112. In my respectful view, however, the motion judge erred in law and in principle on two counts. First, she failed to take into account the principle of comity in assessing the effect of exercising Ontario jurisdiction over claims arising from foreign traded securities. Second, she erred in [page174] law with respect to the related issue of avoiding a multiplicity of proceedings.
46The plaintiff's claim must be considered in the full international context of the securities law regimes of Ontario, the United States and the United Kingdom, and the trading of BP securities in those jurisdictions. It seems to me that the inevitable conclusion is that while the minimal standard for jurisdiction simpliciter is made out, this is a case where the court should go beyond the strict application of that minimal standard and exercise its discretion to decline jurisdiction.
47By statute, both the U.S. and the U.K. regimes assert jurisdiction on the basis of the exchange where the securities are traded. U.S. law goes one step further and provides for the exclusive jurisdiction of the U.S. district courts over claims for secondary market misrepresentation under U.S. securities law and precludes suits relating to transactions on foreign exchanges. That claim of exclusive jurisdiction it is a factor that, in keeping with the principle of comity, the court is obliged to consider: see Gould v. Western Coal Corp., [2012] O.J. No. 4291, 2012 ONSC 5184 (S.C.J.), at para. 338. The assertion of exclusive jurisdiction under U.S. law is particularly pertinent to the claim of the plaintiff, a NYSE purchaser. BP's status as a reporting issuer within the meaning of s. 138.3 ended in January 2009. Accordingly, the plaintiff's claim rests to a significant degree upon BP's undertaking to continue to make the disclosure to Canadian shareholders "in the same manner and at the same time that such material is required to be sent or provided to US resident security holders under applicable US federal securities laws or exchange requirements" (emphasis added).
48Asserting Ontario jurisdiction over the plaintiff's claim would be inconsistent with the approach taken under both U.S. and U.K. law with respect to jurisdiction over claims for secondary market misrepresentation. As the plaintiff's claim rests to a significant degree upon the disclosure obligations imposed by U.S. securities law, the assertion of Ontario jurisdiction would also fly in the face of the U.S. claim to exclusive jurisdiction. In these circumstances, the principle of comity strongly favours declining jurisdiction. Ontario is not, of course, obliged to follow slavishly the jurisdictional standards of other countries. However, the principle of comity requires the court to consider [the] implications of departing from the prevailing international norm or practice, particularly in an area such as the securities market where cross-border transactions are routine and the maintenance of an orderly and predictable regime for the resolution of claims is imperative. Moreover, where, as here, the plaintiff's [page175] claim rests to a significant degree on foreign law, the case for assuming jurisdiction is considerably weakened.
49The other important contextual factor is that the number of BP shareholders who acquired their shares on a Canadian exchange is dwarfed by those who used a foreign exchange. I agree with BP's submission that permitting the plaintiff to use BP's negligible relative trading on the TSX (all of which ended two years prior to the end of the proposed class period and the Deep Water Horizon incident) as a toehold for bringing foreign exchange purchasers under the jurisdiction of an Ontario court would be both opportunistic and a classic example of the "tail wagging the dog".
50It would surely come as no surprise to purchasers who used foreign exchanges that they should look to the foreign court to litigate their claims. Van Breda recognizes fairness to the parties as a relevant factor bearing upon the forum non conveniens analysis. As this court stated in obiter in Currie v. McDonald's Restaurants of Canada Ltd. (2005), 2005 CanLII 3360 (ON CA), 74 O.R. (3d) 321, [2005] O.J. No. 506 (C.A.), at para. 18:
an Ontario resident . . . who buys securities on a foreign stock exchange . . . has engaged in a cross-border transaction with a foreign entity. The cause of action arises at least in part in the foreign jurisdiction. It would not be unreasonable, from the perspective of the Ontario resident, to expect that legal claims arising from the transaction could be properly litigated in the foreign jurisdiction.
51In Silver v. IMAX Corp., [2013] O.J. No. 1276, 2013 ONSC 1667, 36 C.P.C. (7th) 254 (S.C.J.), a class proceeding involving shares purchased on both Canadian and U.S. exchanges, this principle was applied to exclude the class of those shareholders who had used NASDAQ to purchase their shares on the ground that they would have a reasonable expectation that their claims would be adjudicated in the United States.
52This brings me to the related issue of avoiding a multiplicity of proceedings. The motion judge concluded that as BP conceded jurisdiction over the claims of TSX purchasers, BP's argument that declining jurisdiction as a way to avoid a multiplicity of proceedings should be rejected. I agree that given the prevailing U.S. and U.K. rules pertaining to jurisdiction over claims for secondary market misrepresentation, litigation in more than one jurisdiction is inevitable. However, the matter of avoiding a multiplicity of proceedings does not end there. What should be avoided is litigation in more than one jurisdiction over the same claims of the same parties. I recognize that the proposed class excludes parties who have not opted out of the U.S. proceedings but that merely serves to highlight the fact that if [page176] Ontario asserts jurisdiction, there would be more than one action pending in relation to the same class of claims. In my view, when the issue of avoiding a multiplicity of proceedings is considered in the light of the entire context of the jurisdictional standards prevailing elsewhere, it weighs heavily in favour of declining jurisdiction. Order and fairness will be achieved by adhering to the prevailing international standard tying jurisdiction to the place where the securities were traded and a multiplicity of proceedings involving the same claims or class of claims will be avoided.
53It is not clear at this point that there would be a loss of juridical advantage if the plaintiff's action is stayed and he is forced to litigate in the U.S. Neither the U.S. nor the Ontario proceedings have been certified so it would be speculative to say that Ontario offers any procedural advantage. U.K. law appears to be less favourable to secondary market misrepresentation claimants than Ontario law and does not afford the advantage of class proceedings. However, as the Supreme Court of Canada held in Van Breda, at para. 112, "comity and an attitude of respect for the courts and legal systems of other countries" will often prevail over any perceived loss of juridical advantage. I would also point out that as the claim has yet to be certified, it would be premature to place undue emphasis on loss of juridical advantage to those potential class members who acquired their shares on the European exchanges who are not yet before the court.
54In my view, when all the factors relevant to the forum non conveniens analysis are taken into account, the inevitable conclusion is that BP has demonstrated that there is another forum that is clearly more appropriate for the adjudication of the plaintiff's claim and the claims of foreign exchange purchasers.
Disposition
55For these reasons, I would allow the appeal and stay the plaintiff's claim. Given BP's concession regarding Ontario jurisdiction over claims of shareholders who used the TSX, I would grant leave to amend the claim accordingly.
56BP is entitled to its costs of the motion and of this appeal in the amounts agreed to by the parties, namely, $75,000 for the motion and $50,000 for the appeal, both amounts inclusive of disbursements and taxes.
Appeal allowed.
End of Document
