Excalibur Special Opportunities LP v. Schwartz Levitsky Feldman LLP, 2016 ONCA 916

COURT OF APPEAL FOR ONTARIO

CITATION: Excalibur Special Opportunities LP v. Schwartz Levitsky Feldman LLP, 2016 ONCA 916

DATE: 20161206

DOCKET: C61321

Cronk, Blair and MacFarland JJ.A.

BETWEEN

Excalibur Special Opportunities LP

Plaintiff

(Appellant)

and

Schwartz Levitsky Feldman LLP

Proceeding Under the Class Proceedings Act, 1992

Defendant

(Respondent)

Linda R. Rothstein, Margaret L. Waddell and Odette Soriano, for the appellant

Tim Farrell and Jordan Page, for the respondent

Heard: June 15, 2016

On appeal from the order of the Divisional Court (Justices Sidney N. Lederman and Thomas R. Lederer, Justice Harriet E. Sachs dissenting), dated June 15, 2015, with reasons reported at 2015 ONSC 1634, 45 B.L.R. (5th) 46, affirming the order of Justice Paul M. Perell of the Superior Court of Justice, dated July 8, 2014, with reasons reported at 2014 ONSC 4118, 31 B.L.R. (5th) 46.

MacFarland J.A.:

[1] The appellant, Excalibur Special Opportunities LP, was one of 57 investors that lost money in an expressly high-risk investment. It sought to certify a class action against the respondent, Schwartz Levitsky Feldman LLP (“SLF”), an accounting firm, for negligence and negligent misrepresentation over an audit report that Excalibur and the other investors claimed to have relied on in deciding to invest. The motion judge denied Excalibur’s motion for certification. A majority of the Divisional Court upheld the motion judge’s order. Excalibur now appeals with leave to this court.

BACKGROUND

Southern China Livestock and the Private Placement Memorandum

[2] Southern China Livestock International Inc., incorporated in Nevada, USA, owned or operated hog farms in China through various subsidiary corporations. Seeking to raise capital to expand its operations, Southern China Livestock retained a New York-based investment bank, Rodman & Renshaw LLP, to solicit investors.

[3] In 2010, Rodman & Renshaw put out a 230-page Private Placement Memorandum (the “Memorandum”) to accredited investors – individuals with a net worth of at least US$1 million or two years of income over US$200,000.

[4] One of the exhibits to the Memorandum was a one-page audit report prepared by SLF for the fiscal years 2008 and 2009. SLF is a Montreal and Toronto-based accounting firm with stated expertise in auditing Chinese companies. The audit report stated that the financial statements fairly represented Southern China Livestock’s financial position for those years, in accordance with generally accepted accounting principles.

[5] SLF’s audit report is the basis for the proposed class action. It reads in full:

Schwartz Levitsky Feldman LLP

CHARTERED ACCOUNTANTS

LICENSED PUBLIC ACCOUNTANTS

TORONTO - MONTREAL

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of Southern China Livestock International Inc.

We have audited the consolidated balance sheets of Southern China Livestock International Inc. as at September 30, 2009 and 2008 and the consolidated statements of income and comprehensive income, stockholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the management of Southern China Livestock International Inc. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The company is not required to have nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal controls over financing reporting. Accordingly, we express no such opinion.

In our opinion, these consolidated financial statements referred to above present fairly, in all material respects, the financial position of Southern China Livestock International Inc. as of September 30, 2009 and 2008 and the results of its operations and its cash flows for the years then ended in accordance with generally accepted accounting principles in the United States of America.

Toronto, Ontario, Canada

January 28, 2010

1167 Caledonia Road

Toronto, Ontario, M6A 2X1

Tel: 416 785 5353

Fax: 416 785 5663

[6] SLF was paid $45,000 for preparing the audit report.

Excalibur Special Opportunities LP

[7] Excalibur is a limited partnership organized in Manitoba and operating as an investment fund based in Toronto. It invests in small-cap private and public companies. After reviewing the Memorandum “page for page, word for word”, Excalibur invested a total of US$950,000 in Southern China Livestock between March and November 2010.

The Other Investors

[8] Southern China Livestock raised a total of US$7.6 million through the private placement from a total of 57 investors. Excalibur was one of only two Canadian investors and the only from Ontario (the other was from British Columbia). 50 of the 57 investors were American. All told, 98% of the proposed class members were non-residents of Ontario:

Number of investors (57)

Residence

50

U.S.

2

Canada

1

Cayman Islands

1

Samoa

1

Malaysia

1

United Kingdom

1

Unknown

[9] The majority of investors invested under US$100,000. With its US$950,000 investment, Excalibur was by far one of the most heavily-invested:

Number of investors (57)

Amount invested

19

$1 to $49,000

12

$50,000 to $99,000

8

$100,000 to $199,000

7

$200,000 to $399,000

3

$400,000 and over

8

(unclear)

The Downfall of Southern China Livestock

[10] In December 2010, Southern China Livestock filed a report mandated under U.S. securities law that Excalibur later described as “shocking”. The report revealed that:

• Hogs were sold primarily for cash by farm employees;

• The employees maintained corporate funds in bank accounts under their own names;

• Southern China Livestock had little or no control over the employees’ activities;

• Disclosure controls were ineffective; and

• Internal controls over financial reporting were not effective.

[11] In June and July 2011, Southern China Livestock’s North American directors resigned. A month later, Southern China Livestock withdrew its preliminary prospectus from the Securities and Exchange Commission. As the motion judge described it, at para. 52: “Southern China Livestock went dark, and its shares and warrants are now worthless.”

The Proposed Class Action

[12] In October 2012, Excalibur commenced a proposed class action against SLF on behalf of the 57 investors, seeking damages equal to the value of their investments. The essence of the claim is that in light of the true state of Southern China Livestock’s financial affairs in 2008 and 2009 – i.e. that it had little control over the revenue and expenses of its all-cash business – SLF could not have provided a clean audit report in accordance with generally accepted accounting principles, as it had professed to do.

The Motion Judge’s Certification Decision

[13] The motion judge dismissed Excalibur’s certification motion on two bases.

[14] First, he held that the class definition criterion under s. 5(1)(b) of the Class Proceedings Act, 1992, S.O. 1992, c. 6, was not met because the proposed claim lacked a real and substantial connection to Ontario. While Excalibur and SLF are both based in Toronto, the remaining proposed plaintiffs are all non-residents of Ontario, the company in which they invested was based in the United States, and the transactions were governed by American law.

[15] Second, the motion judge held that the preferable procedure criterion under s. 5(1)(d) was not met because joinder was a more appropriate mechanism for resolving the plaintiffs’ claims. The motion judge contrasted this case with what he called “the quintessential economic loss case”, where a class proceeding is the only way for plaintiffs to achieve the goals of access to justice, behaviour modification and judicial economy. By contrast, in this case, Excalibur itself has a nearly US$1 million claim, and if it joined with just the other top 10 investors, their combined claims would be worth about US$3 million. This, he held, would amply justify the litigation risk and would have the same corrective effect as a class action, without the additional procedural hurdles.

[16] In all other respects, the motion judge was of the view that, with modifications to some of the proposed common issues, the remaining requirements of s. 5(1) of the Class Proceedings Act, 1992, were met.

The Appeal to Divisional Court

[17] Excalibur appealed to the Divisional Court, where the majority deferred to and affirmed the motion judge’s decision.

[18] Justice Sachs in dissent was of the view that the motion judge erred in failing to find a real and substantial connection between Ontario and the proposed action. That error informed his preferable procedure analysis, in which he fell into further error by failing to conduct the comparative access to justice analysis mandated by the Supreme Court of Canada in AIC Limited v. Fischer, 2013 SCC 69, [2013] 3 S.C.R. 949.

ISSUES ON APPEAL

[19] There are two issues before this court. The first is whether the Divisional Court majority erred in deferring to the motion judge’s determination that there was no real and substantial connection between Ontario and the subject matter of the dispute. The second is whether the majority further erred in deferring to the motion judge’s determination that joinder was the preferable procedure to advance the issues raised in the pleadings. Indeed, the Divisional Court went so far as to describe joinder as the “default” procedure and cautioned that: “[w]e should be careful to use class proceedings when they are needed, not just because they can be made to apply and appear convenient”: at para. 26.

[20] Although SLF challenges some of Excalibur’s proposed common issues, it does not contest that the common issues criterion is satisfied generally. I proceed on the basis that all other requirements of s. 5(1) of the Act are satisfied, with the exception of those which are the subject of this appeal.

[21] For the following reasons I would allow the appeal essentially for the reasons articulated by Sachs J. in the Divisional Court.

ANALYSIS

(1) The motion judge erred in failing to find a real and substantial connection between Ontario and the subject matter of the dispute

[22] As I have explained, of the 57 known investors who formed the putative class, only one was resident in Ontario. The vast majority of investors who lost money in Southern China Livestock were U.S. residents. The motion judge concluded that, in these circumstances, it would not be appropriate to certify a global class proceeding because there was no real and substantial connection between Ontario and the dispute.

[23] The motion judge explained that in defining class membership, there must be a rational relationship between the class, the causes of action, and the common issues, and the class must not be unnecessarily broad or over-inclusive: at para. 102.

[24] He also accepted, at para. 107, that there is jurisdiction under the Class Proceedings Act, 1992 to certify a national or global class action where the class members will include persons and corporations from across Canada and around the world. The issue for the motion judge was not whether there could be a global class action, but whether it was appropriate to certify one in this case: at para. 109.

[25] The motion judge set out the factors that in his view governed whether or not to certify a national or global class, at para. 111:

a) whether the Ontario court has jurisdiction simpliciter over the defendant;

b) whether the Ontario court can assume jurisdiction over a non-resident class member, which largely depends on whether Ontario has a real and substantial connection with the subject matter of the action and on principles of order, fairness and comity between courts;

c) whether it would be reasonable for the non-resident class members to expect that their rights would be determined by what to them would be a foreign court; and

d) whether the non-resident plaintiffs can be accorded procedural fairness, including adequate notice and a meaningful opportunity to opt out.

[26] The motion judge held that the third factor was fatal to Excalibur’s motion. Relying on this court’s decision in Currie v. McDonald’s Restaurants of Canada Ltd. (2005), 2005 CanLII 3360 (ON CA), 74 O.R. (3d) 321, the motion judge held, at paras. 124 and 129, that he had to approach the question whether there was a real and substantial connection between the cause of action and the Ontario court with “restraint”, having regard to the reasonable expectations of the foreign plaintiffs.

[27] With this in mind, the motion judge held that from the class members’ perspective, “it is hard to imagine a case where it would be less reasonable to expect that his or her legal claims had a real and substantial connection to Ontario”: at para. 128.

[28] The motion judge explained, at para. 130:

The investors in the case at bar 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. Although the transaction included an Audit Report from an Ontario auditor, the standard of care associated with that audit would largely be determined by the American accounting standards under which the Audit Report was provided. It would be to exercise no restraint at all to conclude that Ontario had a substantial connection with this American financing and corporate reorganization.

[29] The Divisional Court majority deferred to this conclusion.

[30] On appeal, Excalibur takes no issue with factors (a), (b) and (d), but submits that the motion judge erred by including factor (c) as an independent consideration for the court in determining whether to take jurisdiction in a global class proceeding. It submits that the motion judge further erred in relying on this court’s decision in Currie for the proposition that he had to exercise “restraint” in applying the real and substantial connection test.

[31] I agree with these submissions.

[32] Currie was concerned with the enforcement of an American settlement agreement that purported to bind Canadian class members. The jurisdictional issue in that case involved the order and fairness implications of enforcing that judgment against the absent Canadian class members. As Excalibur notes in its factum, at para. 50:

When Sharpe J.A. stated, “embedded in the principles of order and fairness is also the notice of jurisdictional restraint,” he was observing that fairness includes the foreign court having had a real and substantial connection to the cause of action or the parties, as well as having afforded adequate procedural rights to the non-resident class members. His concern was re-iterated as “Before enforcing a foreign class action judgment against Ontario residents, we should ensure that the foreign court had a proper basis for the assertion of jurisdiction and that the interests of Ontario residents were adequately protected.”

[33] I agree with Excalibur that Currie does not stand for the proposition that an Ontario court should approach the issue of taking jurisdiction in a restrained manner. To the extent that the motion judge found that it did, he erred, as did the Divisional Court majority in upholding that determination.

[34] The test to determine whether to take jurisdiction over foreign class members begins with an inquiry into jurisdiction simpliciter, on the principles set out in Club Resorts Ltd. v. Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572.

[35] There cannot be much question that the court has jurisdiction simpliciter in this case. This is an action for negligence and negligent misrepresentation against a defendant who resides in Ontario, carries on business in Ontario and did the audit report, the subject of the dispute, in Toronto. Thus, three of the four presumptive connecting factors outlined in Van Breda are present on the facts of the case as pleaded.

[36] When the motion judge concluded, at para. 147, that Ontario did not have a real and substantial connection with the claims of 56 of the 57 investors and had only a “modest if not trivial” connection with Excalibur, he focused incorrectly on the private placement transaction in the U.S., instead of SLF’s preparation of the audit report in Ontario.

[37] At para. 60 of her dissenting reasons in the Divisional Court, Sachs J. stated:

If the action was against the people who were in charge of arranging or promoting the financing for the American corporation that made the investment in question, I would agree with the motion judge’s assessment of the connection between Ontario and the proposed action. However, this is not the action that the representative plaintiff is proposing to pursue. Its action is a claim against a firm of accountants that resides in Ontario and actively conducts business here in relation to an audit that the firm performed in Ontario. Conceived of in this way, it cannot be said that the action does not have a real and substantial connection with Ontario.

[38] I agree with these comments. The motion judge misconceived the nature and substance of the proposed claim and in so doing, fell into error in his jurisdictional analysis. It is for the plaintiffs to plead their case as they see fit and to succeed or fail on that basis. It is not the court’s role to re-write the claim advanced. The following excerpts from Excalibur’s statement of claim make it clear that the motion judge mischaracterized the claim it sought to certify:

22. Through the Private Placement Memorandum, SLF and International represented to potential investors that International’s audited financial statements were prepared under US generally accepted accounting principles and that the initial audit of International’s financial statements performed by SLF was in accordance with PCAOB [Public Company Accounting Oversight Board] standards.

23. In 2010, SLF held itself out as experienced and capable of providing audit services for Chinese companies looking to enter the North American public markets. It represented that it concluded its audits of Chinese companies in accordance with the standards of the PCAOB and in accordance with GAAS [generally accepted accounting standards].

24. SLF knew that the Private Placement Memorandum was an offering that was made and distributed to an exclusive group of selected and qualified investors such as the Plaintiff and the other Class Members. SLF knew that the Private Placement Memorandum, inclusive of the Auditor’s Report, would be relied upon by all prospective investors when making their decision to purchase the Units.

25. The Auditor’s Report was prepared by SLF for the specific purpose of improving the investment decisions of prospective investors in the Company, and with the intent that investors would rely upon the information in the audit.

26. SLF consented to the inclusion of its Auditors’ Report in Private Placement Memorandum and the dissemination of its Auditors’ Report to prospective investors, including the Class Members, as part of the Private Placement Memorandum in connection with Financing.

27. SLF knew that all investors, including the Plaintiff and the Class Members, would reasonably rely on SLF’s knowledge and skill and on SLF’s opinion in the Auditors’ Report for purposes of making a decision about whether to purchase the securities of International through the Financing.

[39] At paras. 57-62 of the statement of claim, the particulars of the alleged negligence on the part of SLF are set out. They include:

57. In light of the true state of affairs regarding International's operations in 2008 and 2009, and as described in detail below, SLF could not have obtained the degree of comfort and verification required under GAAS and the PCAOB standards to complete an audit of International without significant reservations and qualifications, if SLF could complete any audit at all.

58. International's financial statements were, in no way, a fair presentation of International's financial position for the periods stated. The Representation was materially false, inaccurate and misleading. Excalibur and the Class Members relied on the clean Auditors' Report to their detriment, and have suffered the loss of their investments as a result, Excalibur and the Class would never have invested in the Units absent the assurance of a clean audit report by SLF.

59. SLF was negligent in failing to exercise the requisite care, skill and diligence of a reasonably competent auditor of a public company in carrying out its audit to ensure that the Auditors' Report accurately presented International's financial condition and performance, all as described below.

60. SLF was also negligent in permitting the Auditors' Report to be included as an exhibit to the Private Placement Memorandum when it knew or ought to have known that it did not exercise the requisite care, skill and diligence of a reasonably competent auditor of a public company in carrying out the audit of International.

61. SLF was negligent in the preparation of the Auditors' Report in that, among other things:

(a) it failed to conduct its audits in accordance with GAAS;

(b) it failed to properly supervise its audit staff;

(c) it failed to ensure that the financial statements were prepared in accordance with GAAP;

(d) it failed to obtain an adequate understanding of International's business operations and control systems prior to conducting its audit procedures;

(e) it failed to detect significant weaknesses in International's governance and internal controls;

(f) it failed to detect significant weaknesses in International's risk management system;

(g) it failed to report that the financial statements did not fairly present International's financial position in accordance with applicable accounting principles;

(h) it failed in its duty to warn of facts discovered, or that ought to have been discovered by the application of ordinary diligence, care, skill and GAAS, and other facts indicative of dishonesty, negligence or unreliability of certain senior management of International;

(i) it failed to comply with the rules and standards of the PCAOB to which its audit was subject:

(i) in failing to adequately assess the risk of material misstatement and to compensate by formulating sufficient, appropriate and alternative audit procedures;

(ii) by failing to adequately supervise the audit, particularly in circumstances where all of the field work was carried out in China;

(iii) in failing to obtain appropriate audit evidence;

(iv) by failing to identify weaknesses in internal controls and carrying out necessary audit testing;

(v) by failing to sufficiently pursue and evaluate related party transactions;

(j) it failed to seek or require sufficient and appropriate audit evidence about payables and receivables including the proper supervision and follow-up of the confirmation process; and

(k) it failed to obtain an adequate or sufficient and appropriate audit evidence in accordance with GAAS.

62. SLF received total audit and audit-related fees of approximately $365,000 for its services to International.

[40] On the claims as pleaded, there is little question that the substance of this dispute, focused as it is on the Auditor’s Report prepared by SLF, does have a real and substantial connection to Ontario. This is an auditors’ negligence case, involving Ontario auditors in the context of a private placement in the United States. At its core, it does not concern the regulation of such placements in the United States.

[41] Considerations of order and fairness are not seriously challenged here. The identity of all class members but one is known and they can be notified directly about the claim and their opt-out options. This is not a situation where there are unknown and indeterminate class members.

[42] In my view, had the motion judge properly characterized the nature of the proposed action he could not have concluded that Ontario’s connection to the claim was either “modest” or “trivial”.

[43] Indeed, the majority in the Divisional Court acknowledged as much at para. 33 of their reasons:

[The motion judge] and counsel for the plaintiff see the circumstances of this case quite differently. For the judge, the case is founded on the financing of an American Corporation. It concerns investors, not resident in Ontario, making substantial investments in American dollars in that corporation. For counsel, the case is about an audit done in Ontario by an auditor whose business is located in Toronto and Montreal. The proposition is that, if the perspective of the judge is correct, there is no real and substantial connection to Ontario but, if counsel is right, there is. [Citation omitted.]

[44] The majority concluded that it did not have to resolve the issue in light of its decision to uphold the motion judge’s preferable procedure analysis, but noted that “[d]eference would suggest” the motion judge’s analysis of the real and substantial connection issue should be left to stand: at para. 36.

[45] I respectfully disagree. There was in my view a clear error here on the part of the motion judge, which displaces the deference normally accorded to judges on motions for certification. He disregarded the pleadings in describing the nature of the claim.

[46] I also agree with the conclusion of Sachs J. on this issue, at paras. 51-54 and 60 of her dissent:

The motion judge found that Ontario had only a “modest if not trivial” connection to the representative plaintiff’s claim, and an even weaker connection to the other 56 non-resident investors’ claims. As such, according to the motion judge, it would not have been contemplated by the class that their rights arising out of the investment they made would be adjudicated in Ontario. Therefore, order and fairness dictated that the foreign class members not be included in an Ontario class proceeding. As put by the motion judge, at paras. 129 and 130 of his reasons:

[129] The residence of [the defendant] in Ontario is essentially the only connection with Ontario and while that connection certainly gives the Ontario court jurisdiction over [the defendant] and while Ontario courts would welcome foreigners to sue in Ontario that is a different thing from Ontario courts exercising the restraint required of them under the principles of order and fairness in assuming jurisdiction when the foreign plaintiff would have expected to pursue his or her rights in a court that did have a substantial connection with the subject matter of the litigation.

[130] The investors in the case at bar 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. Although the transaction included an Audit Report from an Ontario auditor, the standard of care associated with that audit would largely be determined by the American accounting standards under which the Audit Report was provided. It would be to exercise no restraint at all to conclude that Ontario had a substantial connection with this American financing and corporate reorganization.

In assessing the motion judge’s reasoning on this issue, it is important to recognize several key points. The proposed class action is an action against a firm of accountants that is resident in Ontario and actively carries on business here. Its only other office is in Montreal. It has no assets in the United States.

The subject of the action is the audit work done in Ontario by this accounting firm. The partner who did the work is a partner in the firm’s Toronto office.

The proposed representative plaintiff is a Toronto-based investment fund that is registered in Manitoba. The investment in question was made out of their Toronto office.

If the action was against the people who were in charge of arranging or promoting the financing for the American corporation that made the investment in question, I would agree with the motion judge’s assessment of the connection between Ontario and the proposed action. However, this is not the action that the representative plaintiff is proposing to pursue. Its action is a claim against a firm of accountants that resides in Ontario and actively conducts business here in relation to an audit that the firm performed in Ontario. Conceived of in this way, it cannot be said that the action does not have a real and substantial connection with Ontario.

(2) The motion judge erred in holding that a class proceeding was not the preferable procedure

[47] In addition to finding that a global class was inappropriate, the motion judge concluded that a joinder of claims was preferable to a class action, “which, although manageable would be and has shown itself to be more procedurally cumbersome and protracted than a regular action”: at para. 216. While the motion judge adverted to the Supreme Court’s decision in AIC Limited v. Fischer and the five questions to be considered in the preferability analysis, he did not conduct the comparative analysis that case prescribes. He simply concluded that this case was far removed from what he described as the “quintessential economic loss case”, in which an individual action is “out of the question” because of the high cost of litigation relative to the low value of the claim: at para. 203.

[48] By contrast, in this case, the motion judge noted that Excalibur itself has an almost $1 million claim. He proposed that if Excalibur was joined “by just the other top 10 investors in an action against SLF (which would not need to be certified and for which there would be no doubt about the court’s jurisdiction simpliciter), the action would have the heft of being a claim for around USD $3 million”: at para. 206.

[49] In short, the motion judge concluded, at paras. 206 and 208:

Excalibur itself does not genuinely need a class action to obtain access to justice.

Perhaps, with a few exceptions, the Class Members also do not need a class action in order to obtain access to justice. The Class Members, even the smaller ones, are “accredited investors” which means they are, by definition, not without resources to litigate.

[50] The majority in the Divisional Court deferred to the motion judge’s conclusion on this point, and went further, stating, at para. 13: “[j]oinder is not simply an alternative, it is the default position in considering whether a class proceeding is or is not the preferable procedure.”

[51] If the motion judge meant to suggest that a plaintiff must establish that a class proceeding is necessary to obtain access to justice, rather than preferable to other methods, he erred in doing so. Further, the Divisional Court majority erred in describing joinder as the “default” procedure against which the merits of a class proceeding should be assessed. The majority cite no authority for this assertion, which appears to contradict the Supreme Court’s jurisprudence on the preferable procedure criterion.

[52] For example, at para. 35 of AIC Limited v. Fischer, under the heading “What Are the Alternatives to Class Proceedings?”, the Supreme Court instructs:

The motions court must identify alternatives to the proposed class proceedings. As McLachlin C.J. held in Hollick, “the preferability analysis requires the court to look to all reasonably available means of resolving the class members’ claims, and not just at the possibility of individual actions”: para. 31 (emphasis added). Here, the court considers both other potential court procedures (such as joinder, test cases, consolidation and so on: Hollick, at para. 28) and non-court proceedings.

[53] The court is to look at “all reasonably available means of resolving the class members’ claims”. To me this contradicts any suggestion that joinder is “the default” position.

[54] Beyond this, I agree with Sachs J. that the motion judge’s error in his real and substantial connection analysis tainted his analysis of the preferable procedure, as demonstrated by his conclusion, at para. 217 of his reasons:

Like all of the [criteria] for certification, the preferable procedure criterion sets a very low and easy to satisfy standard, but it is not so low that it is satisfied automatically because a representative plaintiff can form a group of claimants with manageable common issues, which is more or less all that Excalibur has done in the case at bar. And in the case at bar, the formation of the class is without showing that Ontario has a real and substantial connection to the investors' claims and is without showing that a class action is necessary to overcome any barriers to access to justice. In the case at bar, a class action is not necessary to achieve behaviour modification and a class action would not be particularly helpful in providing judicial economy. [Emphasis added by Sachs J.]

[55] Justice Sachs held that if the motion judge had conducted the access to justice analysis mandated by AIC Limited v. Fischer through a lens that accepted that Ontario had a real and substantial connection to the investors’ claims, he could not have concluded that joinder was a preferable mechanism. She offered several reasons why.

[56] First, Sachs J. noted, at para. 79, that there was no evidence before the motion judge that joinder was available as an alternative procedure. In particular, there was no evidence that the other class members would be prepared to assume the burdens, risks and responsibilities of commencing their own claims, that they would want or be able to retain the same counsel, or that the defendant would retain the same counsel to defend the hypothetical actions.

[57] Second, contrary to the instruction in AIC Limited v. Fischer, the motion judge did not properly consider the barriers to access to justice for all the proposed class members, choosing to focus instead on those with the highest value claims. Justice Sachs explained that 19 of the proposed class members’ claims are for under $50,000, and another 12 claims are for between $50,000 and $99,000. As she put it, at para. 82: “[t]he cost of pursuing these claims individually would dwarf the potential recovery for these investors.” The foreign plaintiffs also face the spectre of motions for security for costs.

[58] Third, there was no evidence before the motion judge that the proposed class members are a cohesive group who would or could agree on a form of joint retainer and an allocation of the costs of the litigation. And, since SLF had not acknowledged its willingness to attorn to any jurisdiction, even a successful foreign judgment would pose further jurisdictional challenges.

[59] On the other hand, a class action will allow the members with smaller claims to have the most contentious and costly part of their claims determined in the common issues trial. If successful, these plaintiffs will have an Ontario judgment that they will be able to enforce in Ontario against a defendant who resides in Ontario. While a class action requires the additional procedural burden of certification, joinder brings with it its own procedural challenges.

[60] Finally, Sachs J. noted that class actions have been recognized as having a greater effect than individual actions in supplementing and enhancing the regulatory oversight of companies seeking to raise capital: Green v. Canadian Imperial Bank of Commence, 2014 ONCA 90, 118 O.R. (3d) 641, varied 2015 SCC 60, [2015] 3 S.C.R. 801, at paras. 35-36.

[61] Justice Sachs concluded, at para. 95:

Again, while I recognize that a motion judge’s finding with respect to the preferable procedure criterion is one to which deference is owed, I find that, in this instance, the motion judge’s analysis cannot stand as his analysis was driven by his error in finding that Ontario was not the proper forum for the adjudication of the foreign class members’ claims.

[62] I would adopt this reasoning. In my view, on the basis of the foregoing analysis the preferability requirement is met and the Divisional Court majority erred in deferring to the motion judge’s holding to the contrary. Even the motion judge here recognized that a resolution of the common issues on the facts of this case would make a “substantial contribution” to resolving the class members’ claims: at para. 210.

(3) This court should certify the common issues as reframed by Sachs J.

[63] Although the motion judge refused to certify Excalibur’s class proceeding, he went on to consider its proposed common issues in the event of an appeal. He held that several of the proposed common issues were redundant and that others were defective because they required adjudication on a case-by-case basis, specifically on those issues that claimed reliance on SLF’s allegedly negligent misrepresentations. Nevertheless, the motion judge held that several of the proposed common issues were properly certifiable.

[64] The Divisional Court majority declined to deal with SLF’s objections to the motion judge’s treatment of the common issues (which the majority held was mischaracterized as a “cross-appeal”) given its ultimate decision to uphold the motion judge’s determinations on the global class and preferable procedure criteria.

[65] Justice Sachs considered the common issues in light of her conclusion that the motion judge had misconceived the nature of Excalibur’s action, leading him to err in his global class and preferable procedure analyses. At paras. 103-138, she carefully considered each of the proposed common issues. She agreed with the motion judge’s reformulation of some of the common issues and restored or modified others.

[66] On appeal, Excalibur asks that this court certify the common issues as Sachs J. did in her dissenting reasons. I would grant this request. I agree with Sachs J.’s conclusions on the common issues and would adopt her reasoning.

CONCLUSION

[67] For the foregoing reasons I would allow the appeal, set aside the order of the Divisional Court, and substitute in its place an order certifying the action as a class proceeding in relation to the common issues as set out in Schedule A to Excalibur’s notice of appeal.

[68] As per the parties’ agreement, I would award Excalibur $60,000 in costs, inclusive of the costs of the appeal and the motion for leave to appeal. The parties did not address the disposition of costs in the courts below. If the parties cannot agree on that issue, they may make brief written submissions (no more than 3 pages) to the court within 15 days of the release of these reasons.

“J. MacFarland J.A.”

“I agree. E.A. Cronk J.A.”

R. A. Blair J.A. (dissenting):

[69] I have had the opportunity to review the draft reasons of my colleague, Justice MacFarland. Respectfully, I disagree with her determination of the appeal.

[70] In my view, Perell J. did not err in law, nor did he commit any palpable and overriding error of fact or of mixed fact and law in refusing to certify a global class or in determining that a class proceeding was not the preferable procedure. His determinations are entitled to deference, which the majority of the Divisional Court properly accorded him. I would dismiss the appeal.

[71] More particularly, my colleague, and the dissenting justice in the Divisional Court, conclude that the motion judge erred in law by:

(i) mischaracterizing the plaintiff’s claim by focusing on the private placement issue in the United States instead of treating the claim as a simple action in auditor’s negligence against an Ontario auditor who performed the work out of its Ontario office;

(ii) taking into account, in determining whether the Ontario court should assume jurisdiction, whether it would be reasonable for the non-resident class members to expect that their rights would be determined by what to them would be a foreign court; and by

(iii) failing to conduct a proper preferable procedure analysis, concluding that a joinder of actions was an acceptable alternative, and therefore failing to hold that a class proceeding was the preferable procedure in the circumstances.

[72] I come to a different conclusion for the following reasons.

Discussion and Analysis

[73] My colleague has succinctly summarized the background facts. I need not expand on them further except as may be necessary in the context of the analysis.

[74] I agree that the issue on this appeal is whether the majority in the Divisional Court erred in deferring to the motion judge’s decisions with respect to the certification of a global class and the preferable procedure issue. However, if the motion judge committed no reversible legal error and made no palpable and overriding error of fact or of mixed fact and law – which, on my analysis of his reasons, is the case – his decisions in that regard are entitled to deference and may not be overturned simply because judges at a different level might have arrived at different conclusions. Hence the focus of the analysis here is rightly on the decision of the motion judge.

The Identifiable Class Analysis

[75] Much of my disagreement with my colleague’s reasoning, and that of the dissenting justice in the Divisional Court, stems from what I see as a misplaced emphasis, here and below, on the expression “real and substantial connection”. It is important in this case, I think, to focus on what the motion judge was doing, rather than concentrating too closely on the language he used in explaining what it was that he was doing.

[76] In the post-Club Resorts Ltd. v. Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572 era, “real and substantial connection” has a particular connotation. Where one or more of the four presumptive factors outlined by the Supreme Court of Canada in that case are established, a real and substantial connection between the jurisdiction and the subject matter of the proceeding – the hallmark of a court’s competence to assume jurisdiction over a case with a foreign element – is presumed to exist and the court acquires jurisdiction simpliciter. That is not the end of the matter, however. The presumptive factors may be rebutted, and, even if they are not, the court may still go on to consider whether, in spite of the fact that it has jurisdiction, it should take the next step and assume jurisdiction over the foreign element in the proceeding.

[77] Here, there has never been any dispute that the Ontario court has jurisdiction simpliciter over the proposed class action, and therefore that there is a real and substantial connection in the Van Breda sense; the action is brought against an auditor defendant that is domiciled, resident and carrying on business in Ontario and that at least performed the impugned audit out of its Toronto office. The motion judge recognized this. The parties accept it.

[78] The motion judge undeniably articulated his reasons in terms of a real and substantial connection. But as I read those reasons as a whole, it is clear that he was not using the term in the Van Breda sense, nor was he seeking to analyse whether a Van Breda type of connection existed or denying that it did. The purpose of his analysis was to determine whether the Ontario court should, not whether it could assume jurisdiction over a global class, and what he was searching for was whether there was a sufficient connection between Ontario and the subject matter of the dispute for that purpose.

[79] The motion judge’s review of the evidence and his conclusion that Ontario had a connection but not a real and substantial connection to the action must be read with that in mind.

[80] That this was the thrust of the motion judge’s approach to the global class decision is evident from a number of passages in his reasons, including the following:

[109] In the immediate case, the question to be decided is not whether there can be a global class action, the question is when is it appropriate to certify a global class.

[117] Upon reflection, it now strikes me that this discussion[^1] misses the point because the issue about whether there should be a global class is not so much whether a class proceeding procedure would be unfair to the defendant but more about whether including the foreigners in the Ontario proceeding would be fair to the foreigners. In that regard, the question of whether a foreign court would enforce the unfavourable foreign judgment begs the question because as noted by Justice Strathy in Ramdath v. George Brown College of Applied Arts and Technology, supra,[^2] it generally can be assumed that the foreign court will enforce the Ontario judgment if it was fair for the Ontario court to extend its jurisdiction to the foreign Class Members.

[118] Thus, determining the likelihood of the enforceability of the Ontario judgment in a foreign court begs the question of whether the Ontario court should extend its jurisdiction to a foreigner represented by the Representative Plaintiff. I think, however, the discussion of the likely enforceability of the Ontario judgment is useful because it focusses attention on the issue of when would it be fair for an Ontario court to assume jurisdiction and bind a foreigner to its judgment.

[123] Justice Sharpe[^3] discussed the topic of national and international class actions and how the principles of conflicts of law should apply in circumstances where there were non-resident plaintiffs in a global class action. Justice Sharpe appreciated that the underlying issue was when should a domestic court assume jurisdiction over foreign plaintiffs and purport to bind them. [Emphasis and footnotes added.]

[81] It was from this perspective that the motion judge viewed his task of determining whether to certify the proposed global class here – a class more than 98% of which would be comprised of non-resident members. And it was from this perspective that the motion judge concluded it was appropriate to consider, in the course of performing that task, whether it would be reasonable for the non-resident class member to expect that his or her rights would be determined in and by a foreign court. His concern was to ensure that it was fair and appropriate in the circumstances for the Ontario court to assume jurisdiction over the non-resident members of the proposed class.

[82] While it may be that the motion judge erred, or at least strayed, in casting his analysis in the language of “real and substantial connection”, it is not an error that affects the validity of the outcome of his analysis. Viewed in the foregoing manner, and as I shall explain below, I see no error in his consideration of the reasonable expectation of the non-resident members of the proposed class or in his characterization of the proposed class action in broader terms than that of a straightforward auditor’s negligence case brought against an Ontario auditor in Ontario.

[83] On the other hand, I respectfully suggest that my colleague and the dissenting justice in the Divisional Court concentrate too narrowly on the notion that the motion judge erred in failing to find a real and substantial connection between Ontario and the subject matter of the dispute in the Van Breda sense. They conclude that the motion judge erred in taking this approach and that he compounded this error by adapting the cautionary note of Sharpe J.A. in Currie, to the effect that courts should approach the issue of taking jurisdiction with restraint, to the circumstances of this case. I am unable to accept this critique, however.

[84] As I have explained above, the motion judge did not fail to find a real and substantial connection between Ontario and the subject matter of the dispute in the Van Breda sense. He accepted that Ontario had jurisdiction simpliciter.

[85] Likewise, the idea that a court should exercise restraint in assuming jurisdiction over a case with a foreign element is not new. Indeed, I would argue that it is deeply-rooted in our entire approach to that issue. Sharpe J.A. merely reflected this state of affairs when he said, in Currie at para. 10, that “embedded in the principles of order and fairness is also the notion of jurisdictional restraint”. In doing so, he referenced the following comment of La Forest J. in Morguard Investments Ltd. v. De Savoye, 1990 CanLII 29 (SCC), [1990] 3 S.C.R. 1077, at p. 1103:

[I]t hardly accords with principles of order and fairness to permit a person to sue another in any jurisdiction, without regard to the contacts that jurisdiction may have to the defendant or the subject-matter of the suit … Thus, fairness to the [party against whom enforcement is sought] requires that the judgment be issued by a court acting through fair process and with properly restrained jurisdiction. [Emphasis added.]

[86] The notion of restraint is reinforced by the provisions in the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 dealing with service of defendants outside of Ontario. Rule 17 permits such service without leave of the court in a defined list of circumstances but requires leave of the court in other circumstances. In either event, it permits the foreign party served the originating process to move for an order setting aside the service or staying the proceeding before delivering a defence. This is consistent with the approach whereby courts do not willy-nilly assume jurisdiction over a case with a foreign element. There is a built-in restraint to that approach.

[87] One of the mechanisms through which that restraint is exercised is through the need to find a real and substantial connection between the jurisdiction and the subject matter of the dispute. Van Breda has clarified, and taken some of the uncertainty out of, the process of determining whether such a connection exists by establishing a set of presumptive factors. I accept that the notion of restraint may not apply to a determination of whether one or more of the presumptive factors exist, but I observe that even the presumptive factors are subject to rebuttal which is consistent with the underlying concept of jurisdictional restraint.

[88] The notion of restraint is further evident in common law courts’ long-standing power to decline to assume jurisdiction over a foreign party, even though they have the jurisdiction to do so, on the basis of the forum non conveniens doctrine. This is a second step if jurisdiction continues to be challenged after one or more of the presumptive factors establishing a real and substantial connection have been found to exist. As LeBel J. put it in Van Breda, at para. 104:

When it is invoked, the doctrine of forum non conveniens requires a court to go beyond a strict application of the test governing the recognition and assumption of jurisdiction. It is based on a recognition that a common law court retains 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. [Emphasis added.]

[89] It was in this context that the motion judge invoked the notion of restraint and undertook his consideration of whether the proposed non-resident class members would reasonably expect that their rights would be dealt with in the Ontario courts. I do not read his reasons as suggesting that a court must exercise restraint in finding that it has jurisdiction, once the existence of a presumptive factor has been found to exist, but rather as focusing on the need for a restrained approach (perhaps better described as a balanced approach) when deciding whether the court should assume jurisdiction over a global class. I see no error in this approach.

[90] The dissenting justice in the Divisional Court observed, correctly, that several of the Van Breda presumptive factors were present in this case. She concluded that the motion judge erred in not finding that there was a real and substantial connection between Ontario and the proposed action because he mischaracterized the plaintiff’s action. There are two responses to this.

[91] First, as noted above, although he used the “real and substantial connection” language, the motion judge was not addressing the concept in the Van Breda sense of jurisdiction simpliciter. He was addressing whether the court should assume jurisdiction over the non-resident class members and whether there was a sufficient connection between Ontario and the subject matter of the dispute for that purpose.

[92] The appellant asserts that the respondent did not argue forum non conveniens before the motion judge and points to Van Breda for the proposition that once a presumptive factor has been established and the court has jurisdiction, it cannot decline to exercise that jurisdiction unless the defendant invokes forum non conveniens.

[93] I would not give effect to that submission here. As the respondent submits, while there are overlapping concepts and analytical considerations between jurisdiction and whether the court should certify a global class, the two are not identical. The argument below focussed on the underlying issue of “order and fairness” which is important to the question of when a domestic court will assume jurisdiction over foreign plaintiffs and purport to bind them. It was not essential to invoke the magic phrase “forum non conveniens” in order to conduct the analysis in these circumstances.

[94] Secondly, he did not err, in my view, by mischaracterizing the subject matter of the proposed class proceeding. The dissenting justice in the Divisional Court chose to characterize that subject matter narrowly: as a simple claim in auditor’s negligence against an Ontario auditor. The motion judge – properly in my view – approached it more broadly because he was attempting to resolve not the narrower issue of whether the court had jurisdiction but the wider issue of whether it should assume jurisdiction over a global class. To adopt the language of respondent’s counsel in its factum, “[a] Court will not certify a class over which it has no jurisdiction, but it will not necessarily certify a global class just because it can assert jurisdiction.”

[95] It was in that regard that the motion judge asked himself about the reasonable expectations of the proposed non-resident class members, and stated the following at paras. 129-130:

The residence of SLF in Ontario is essentially the only connection with Ontario and while that connection certainly gives the Ontario court jurisdiction over SLF and while Ontario courts would welcome foreigners to sue in Ontario that is a different thing from Ontario courts exercising the restraint required of them under the principles of order and fairness in assuming jurisdiction when the foreign plaintiff would have expected to pursue his or her rights in a court that did have a substantial connection with the subject matter of the litigation.

The investors in the case at bar 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. Although the transaction included an Audit Report from an Ontario auditor, the standard of care associated with that audit would largely be determined by the American accounting standards under which the Audit Report was provided. It would be to exercise no restraint at all to conclude that Ontario had a substantial connection with this American financing and corporate reorganization. [Emphasis added.]

[96] Respectfully, I see no error in the motion judge’s approach to the broader “whether to assume jurisdiction over a global class action” question or in his broader characterization of the subject matter of the proposed class proceeding for the purpose of addressing the reasonable expectations of the proposed non-resident class members. It may be that at one level the proposed action is simply a claim in negligence against an Ontario auditor. That claim cannot be determined, however, outside of the almost entirely foreign-related factual matrix alluded to by the motion judge and cited above. Keep in mind, as well, that Excalibur is the only member of the proposed class that is resident in Ontario.

[97] The motion judge was not establishing new law when he considered, as one of the circumstances when it would be fair to join foreign plaintiffs to an Ontario action, the question of whether it would be reasonable for the non-resident class member to expect that his or her rights would be determined by what to him or her would be a foreign court. Other courts, including this Court in Currie, have done so. See also, for example, Ramdath. In addressing this issue, he was entitled to take a broader view of the subject matter of the proposed class proceeding.

[98] The dissenting justice in the Divisional Court did a comparative analysis between the present case and Currie. She distinguished Currie on the basis that certain procedural protections that were lacking in the foreign proceeding for the Ontario plaintiffs that were to be bound by the settlement could be satisfied here, essentially because the unnamed non-residents were known and could be notified of these proceedings. I do not think this assists, however. The motion judge did not resort to or rely on Currie for its procedural protection component. He relied on it for the restraint proposition on which – for the reasons I have outlined above – he was entitled to proceed for purposes of determining whether the Ontario court should assume jurisdiction.

[99] Absent error in law or palpable and overriding error of fact or of mixed fact and law, his decision is entitled to deference. I see no such error here. There is, therefore, no basis to interfere with his determination that it was not appropriate to certify a global class in this proceeding, as the majority in the Divisional Court concluded.

The Preferable Procedure Analysis

[100] What I have already said affects my view of the motion judge’s treatment of the preferable procedure criterion too. Because I am not persuaded that he erred in arriving at his decision not to certify a global class, his analysis of the preferable procedure issue cannot be tainted by viewing the preferable procedure analysis through the wrong lens.

[101] Nor do I accept, as my colleague concludes, that the motion judge did not conduct the comparative analysis mandated by the Supreme Court of Canada in AIC Limited v. Fischer, 2013 SCC 69, [2013] 3 S.C.R. 949. Absent any such error, it is not for an appellate court to conduct its own Fischer analysis and substitute its own view of the preferable procedure criterion for that of the motion judge.

[102] Respectfully, the motion judge did not simply conclude that this case was far removed from the “quintessential economic loss case” in which an individual action was “out of the question” because of the high cost of litigation to the low value of the claim, as my colleague asserts. His Fischer analysis occupies over 20 paragraphs of his reasons. It acknowledges that “the preferability analysis must be conducted through the lens of judicial economy, behaviour modification and access to justice” (para. 196) – the touchstones underpinning the rationale for class proceedings. It specifically addresses the five Fischer questions that are to be answered when considering whether processes will achieve access to justice (para. 197) and directly or indirectly explores the application of each of those questions to the access to justice issue on the facts before him (paras. 198-218). This includes a canvassing of:

• any economic, psychological, social, or procedural barriers to access to justice (he found none);

• the need to ensure the ultimate remedy provides substantive justice;

• whether behaviour modification was needed beyond the behaviour modification that would come from a normal tort action or another alternative (again, he found no such need); and

• the need to consider the alternatives to a class proceeding and whether the alternative has the potential to provide effective redress for the substance of the plaintiffs’ claims in a manner that accords suitable procedural rights.

[103] The motion judge concluded that a joinder of claims was an alternative that satisfied the foregoing requirements in the circumstances of this case. He summarized his conclusions in this regard in the following fashion (paras. 215 and 216):

In the case at bar, the alternative of a joinder of claims would provide effective redress for Excalibur and [any] other investors who could join the action as co-plaintiffs. A joinder of claims would provide suitable procedural rights. A joinder of claims would have avoided a certification motion, although perhaps not a motion to challenge the jurisdiction of the Ontario court as forum non conveniens given that the United States would be the expected venue for all of the investors. In comparison to a class action, a joinder of claims would provide access to justice for those class members with meritorious claims, promote adequate behaviour modification of the defendant and provide a similar amount of judicial economy to that which would be achieved by a class action.

In my opinion, in the circumstances of the case at bar, a joinder of claims is preferable to a class action, which, although manageable would be and has shown itself to be more procedurally cumbersome and protracted than a regular action. With the benefit of hindsight, this almost two-year old action might be past discoveries and be ready to set down for trial if it had not been delayed by the pursuit of certification under the Class Proceedings Act, 1992.

[104] Then, in an observation with which I substantially agree, he concluded:

Like [each] of the criterion for certification, the preferable procedure criterion sets a very low and easy to satisfy standard, but it is not so low that it is satisfied automatically because a representative plaintiff can form a group of claimants with manageable common issues, which is more or less all that Excalibur has done in the case at bar. And in the case at bar, the formation of a class is without showing that Ontario has a real and substantial connection[^4] to the investors’ claims and is without showing that a class action is necessary to overcome any barriers to access to justice. In the case at bar, a class action is not necessary to achieve behaviour modification and a class action would not be particularly helpful in providing judicial economy. [Footnote added.]

[105] Certification is not the automatic or default outcome of an application for certification of a class action. As the majority in the Divisional Court pointed out, “[t]here is no inherent right to proceed on a class basis”. Section 5(1) of the Class Proceedings Act, 1992, sets out the requirements for certification and the onus is on the moving party to show that those requirements, including that a class proceeding would be the preferable proceedings, have been met.

[106] We charge trial judges to exercise the responsibility of gatekeepers in this process, and substantial deference is owed to their certification decisions. Appellate intervention should be restricted to matters of general principle. See Anderson v. Wilson (1999), 1999 CanLII 3753 (ON CA), 175 D.L.R. (4th) 409 (Ont. C.A.), at para. 12, leave to appeal to S.C.C. refused, [1999] S.C.C.A. No. 476; Markson v. MBNA Canada Bank, 2007 ONCA 334, 282 D.L.R. (4th) 385, at para. 33, leave to appeal to S.C.C. refused, [2007] S.C.C.A. No. 346.

[107] Here, there was a basis in the record for the motion judge’s determination that a class proceeding was not the preferable procedure in the circumstances of this case. The appellant complains that he failed to conduct a comparative analysis and argues, for example, that he failed to look at the potential negative aspects of the joinder alternative. However, his reasons show that the motion judge did consider comparative factors and the fact that he did not specifically mention potential difficulties with a joinder proceeding does not mean that he failed to consider them (he recognized, for example, that a joinder of claims might not have avoided a jurisdictional challenge).

[108] Although the motion judge did refer, during his comparative analysis, to what he viewed as the quintessential case of a class proceeding for economic loss, he made it clear that the preferable procedure analysis must be conducted in relation to the case at bar, even though it was far from the quintessential case, and he recognized that class proceedings have been certified in other – even similar – cases involving economic loss. At paras. 211- 214 of his reasons he said:

That the case at bar is far from the quintessential economic loss class action, however, does not mean that it does not satisfy the preferable procedure criterion. Similar pure economic cases with self-sufficient representative plaintiffs have been certified.

So the preferable procedure analysis must go forward to determine whether the case at bar although far from the quintessential economic loss case, nevertheless, is the preferable procedure for the Class Members’ claims.

In making a preferable procedure analysis, it is necessary to consider the alternatives to a class action. The preferable procedure analysis recognizes that a class action is not the only way for a group to litigate.

As noted above in AIC Limited v. Fischer, supra, the Supreme Court stated that when considering alternatives to a class action, the question is whether the alternative has potential to provide effective redress for the substance of the plaintiffs’ claims and to do so in a manner that accords suitable procedural rights. [Citations omitted.]

[109] It was just this analysis that the motion judge conducted.

[110] Before leaving this aspect of the appeal, I should say that I agree with the appellant and with my colleague that the majority of the Divisional Court erred in stating that “[j]oinder is not simply an alternative, it is the default position in considering whether a class proceeding is or is not the preferable procedure” (para. 13). Nothing in the Class Proceedings Act or in the jurisprudence justifies such an observation, in my view. However, the motion judge did not proceed on that basis. He conducted the Fischer exercise, including a comparative analysis of a class proceeding and joinder. For the reasons cited above, he was not persuaded that the appellant had met the onus of showing the preferable procedure criterion was satisfied.

[111] Again, in the absence of reversible error in law or principle or a palpable and overriding error of fact or of mixed fact and law – none of which exist here – it is not for an appellate court to re-do the preferable procedure analysis and substitute its own views for that of the motion judge, whose decision is entitled to deference. Whether there may be credible arguments favouring a different result on the preferable procedure analysis is not the question.

[112] I would not give effect to this ground of appeal.

Disposition

[113] For the foregoing reasons, I would dismiss the appeal. Given that disposition, it is not necessary for me to deal with the way in which the motion judge framed the common issues.

[114] The Divisional Court refused to grant the appellant leave to appeal a portion of the costs award in favour of the respondent. That issue is therefore not properly before this court.

Released: December 6, 2016 (RAB)

“R.A. Blair J.A.”

[^1]: This passage followed a review of certain authorities dealing with principles of comity and the circumstances in which foreign courts may or may not recognize Ontario judgments.

[^2]: 2010 ONSC 2019, 93 C.P.C. (6th) 106.

[^3]: In Currie v. McDonald’s Restaurants of Canada Ltd. (2005), 2005 CanLII 3360 (ON CA), 74 O.R. (3d) 321 (C.A.).

[^4]: I have already explained that, in my view, the motion judge was not referring to “real and substantial connection” in the sense of jurisdiction simpliciter as set out in Van Breda when using that language.