Yip v. HSBC Holdings plc

[Indexed as: Yip v. HSBC Holdings plc]

Ontario Reports

Court of Appeal for Ontario

Lauwers, Benotto and Nordheimer JJ.A.

July 11, 2018

141 (3d) 641

2018 ONCA 626

Case Summary

Civil procedure — Class proceedings — Costs

Plaintiff bringing proposed class action in which he asserted statutory claim for secondary market misrepresentation and common law claim for negligent misrepresentation. Motion judge dismissing statutory claim and staying common law claim on basis that Ontario court did not have jurisdiction. Plaintiff's appeal from costs award allowed in part. No award of costs not being appropriate as action was not public interest litigation and did not raise novel point of law. Motion judge failing to consider reasonableness of defendant's expert fees in terms of hours and rates. Costs award reduced from $1,000,455.22 to $800,000.

Conflict of laws — Forum non conveniens

Plaintiff bringing proposed class action in which he asserted statutory claim for secondary market misrepresentation and common law claim for negligent misrepresentation. Defendant having head office in England. Defendant's securities not traded on any Canadian stock exchange. Plaintiff buying his shares on Hong Kong Stock Exchange using Hong Kong bank account. Motion judge not erring in finding that Ontario was not forum conveniens. Comity being key consideration in forum conveniens analysis. More appropriate forum for secondary market claim generally being forum where securities transaction took place.

Conflict of laws — Jurisdiction — Real and substantial connection

Plaintiff bringing proposed class action in which he asserted statutory claim for secondary market misrepresentation and common law claim for negligent misrepresentation. Defendant having head office in England. Defendant's securities not traded on any Canadian stock exchange. Plaintiff buying his shares on Hong Kong Stock Exchange using Hong Kong bank account which he accessed using his home computer in Ontario. Defendant not having real and substantial connection to Ontario. Defendant not carrying on business in Ontario simply because plaintiff could access its disclosure information using his home computer in Ontario. Defendant having presumptive real and substantial connection to Ontario by virtue of possibly committing misrepresentation-based tort in Ontario but that presumptive connecting factor being rebutted because downloading materials from issuer was extremely weak connection.

Securities regulation — Misrepresentation — Statutory cause of action — Responsible issuer

Legislature intending common law test for "real and substantial connection" to apply in context of s. 138.1 of Securities Act. Non-reporting issuer not having real and substantial connection to Ontario merely because it knew or ought to have known that its investor information was made available to Canadian investors. Securities Act, R.S.O. 1990, c. S.5, s. 138.1.

Facts

The plaintiff brought a proposed class action in which he asserted a statutory claim for secondary market misrepresentation under Part XXIII.1 of the Securities Act against the defendant as a "responsible issuer" and a common law negligent misrepresentation claim. The defendant's head office was in London, England, and its securities were not traded on any Canadian stock exchange. The plaintiff bought his shares on the Hong Kong Stock Exchange using a Hong Kong bank account which he accessed through his home computer in Ontario. The motion judge dismissed the Securities Act claim and stayed the common law claim, holding that Ontario did not have jurisdiction simpliciter and that, even if it did, Ontario was not the appropriate forum. He awarded $1,000,455.22 in costs. The plaintiff appealed.

Held

The jurisdiction appeal should be dismissed; the costs appeal should be allowed in part.

Section 138.1 of the Securities Act defines a responsible issuer to mean (a) a reporting issuer or (b) any other issuer with a real and substantial connection to Ontario, any securities of which are publicly traded. It was common ground that the defendant was not a reporting issuer. The legislature intended the common law test for "real and substantial connection" to apply in the context of s. 138.1. A non-reporting issuer does not have a real and substantial connection to Ontario merely because it knows or ought to know that its investor information is being made available to Canadian investors. To hold otherwise would make Ontario the default jurisdiction for issuers around the world whose securities were purchased by residents of Ontario. The legislature did not intend to create universal jurisdiction.

The plaintiff did not meet the common law test for establishing that the defendant had a real and substantial connection to Ontario. The motion judge did not err in finding that the defendant did not carry on business in Ontario. The defendant could not be said to be carrying on business in Ontario simply because the plaintiff could access its disclosure information using his home computer in Ontario. The motion judge did not err in finding that, while the defendant had a presumptive real and substantial connection to Ontario by virtue of possibly committing a misrepresentation-based tort in Ontario, that presumptive connecting factor was rebutted because downloading materials from an issuer is an extremely weak connection and does not point to any real relationship between the subject matter of the litigation and Ontario.

The motion judge accurately applied the forum non conveniens doctrine. Comity continues to be a key consideration in the forum non conveniens analysis. The more appropriate forum for secondary market claims will generally be the forum where the securities transaction took place. The defendant could not reasonably have expected that it would be subject to the regulation of the law of Ontario. The motion judge was right to conclude that Ontario was forum non conveniens.

This was not an appropriate case for no award of costs. It was not public interest litigation and did not raise a novel point of law.

There was no basis to interfere with the motion judge's finding that the expert evidence produced by the defendant was necessary for the motion. However, it was not clear whether the motion judge considered the reasonableness of the expert fees charged in terms of hours spent and hourly rates imposed. A class action defendant does not have carte blanche to unreasonably spend money on experts. The obligation of reasonableness in the expenditure of funds on experts is an aspect of ensuring access to justice, one of the principle purposes of class actions. The costs award should be reduced to $800,000.

Appeal from the Order of Perell J.

[2017] O.J. No. 4729, 2017 ONSC 5332 (S.C.J.) on jurisdiction and from the costs order, [2017] O.J. No. 6037, 2017 ONSC 6848 (S.C.J.).

Counsel:

Paul J. Bates, John Archibald and Earl A. Cherniak, Q.C., for appellant.

Paul Steep, Brandon Kain and Bryn Gray, for respondents.

Decision

A. The Jurisdiction Appeal

1. Nature of the Claim and Pertinent Facts

[1] BY THE COURT: -- Mr. Yip, the proposed class representative and appellant, brought this action under the Class Proceedings Act, 1992, S.O. 1992, c. 6. He asserts a statutory claim for secondary market misrepresentation under Part XXIII.1 of the Securities Act, R.S.O. 1990, c. S.5 against HSBC Holdings plc, as a "responsible issuer", and David Bagley, former head of group compliance at HSBC Holdings. He also asserts a common law negligent misrepresentation claim against HSBC Holdings.

[2] The motion judge dismissed the claim under the Securities Act and stayed the common law claim. He held that an Ontario court did not have jurisdiction simpliciter and, even if it did, Ontario was not the appropriate forum. He awarded $1,000,455.22 in costs on a partial indemnity scale, all inclusive.

[3] We dismiss the jurisdiction appeal because we are in substantial agreement with the reasons of the motion judge. However, we make jurisprudential observations in three general areas arising from the appellant's arguments: (i) the proper interpretation of the definition of "responsible issuer" in s. 138.1 of the Securities Act; (ii) the application of the jurisdiction simpliciter test to the common law and statutory tort claims of misrepresentation; and (iii) the application of the doctrine of forum non conveniens. We allow the costs appeal in part.

2. Background Facts

[4] We begin with a brief review of the nature of the claim and some of the pertinent facts.

[5] HSBC Holdings is the parent holding company of an international banking conglomerate with its head office in London, U.K. The foreign element of the case arises because the securities have never traded or been listed on any Canadian stock exchange. They are traded on the London and the Hong Kong Stock Exchanges with secondary listings on the Bermuda Stock Exchange and the Paris Euronext Stock Exchange. HSBC Holdings' ADRs (American depository receipts) also trade on the New York Stock Exchange. HSBC Holdings has about 220,000 shareholders in 129 countries, including Canada.

[6] Mr. Yip bought his shares in HSBC Holdings using a Hong Kong bank account on the Hong Kong Stock Exchange, which he accessed using his home computer in Markham, Ontario. He accessed HSBC Holdings' disclosure documents from its website and not from the website of its banking subsidiary, HSBC Canada.

[7] Mr. Yip asserts that he and other purchasers of HSBC Holdings' shares or ADRs were misled by HSBC Holdings' continuous disclosure documents and public statements in two primary respects: (i) that it had complied with anti-money laundering and anti-terrorist financing laws; and (ii) that it had not participated in an illegal scheme to manipulate certain international benchmark interest rates. The motion judge proceeded on the assumption that these misrepresentations occurred.

[8] Mr. Yip asserts that these misrepresentations caused investors in HSBC Holdings to suffer about US$7 billion in losses because they purchased HSBC Holdings' shares or ADRs at artificially inflated prices. This is the basis of his statutory and common law tort claims for misrepresentation.

[9] The motion judge heard two motions. HSBC Holdings and Mr. Bagley moved to dismiss or stay Mr. Yip's action because the Ontario court lacks jurisdiction simpliciter and because Ontario is forum non conveniens. Mr. Yip cross-moved for a declaration that HSBC Holdings is a responsible issuer under s. 138.8 of the Securities Act. The motion judge dismissed Mr. Yip's Securities Act action and stayed the common law misrepresentation claim. He dismissed Mr. Yip's cross-motion.

3. The Appellant's Arguments

[10] Mr. Yip argues, first, that this court should adopt a statute-specific and unique interpretation of the words "real and substantial connection" in the definition of responsible issuer in s. 138.1 of the Securities Act. His second argument is that, even if the common law test for a real and substantial connection applies to the statutory definition of a responsible issuer, the motion judge erred in his application of the common law test for a real and substantial connection. His third argument is that the motion judge erred in his application of the doctrine of forum non conveniens.

[11] We reject all three arguments for the reasons that follow.

4. The Proper Interpretation of the Definition of Responsible Issuer in s. 138.1 of the Securities Act

[12] Mr. Yip argues that the court should interpret the provisions of Part XXIII.1 of the Securities Act, on which he bases his case, in a purposive manner.

[13] We acknowledge the purposes of the Securities Act set out in s. 1.1, which are "to provide protection to investors from unfair, improper or fraudulent practices"; "to foster fair and efficient capital markets and confidence in capital markets"; and "to contribute to the stability of the financial system and the reduction of systemic risk". In furtherance of those purposes, Part XXIII.1 of the Securities Act, which was enacted in 2005, imposes civil liability for secondary market misrepresentations. "Part XXIII.1 is remedial legislation intended to promote the twin purposes of facilitating and enhancing access to justice for investors and deterring corporate misconduct and negligence": Canadian Imperial Bank of Commerce v. Green, [2015] 3 S.C.R. 801, [2015] S.C.J. No. 60, 2015 SCC 60, at para. 178.

[14] Mr. Yip's statutory tort claim is based on s. 138.3, which is also found in Part XXIII.1. It gives investors a statutory cause of action against a responsible issuer for a misrepresentation in a "document" released by it (or by a person with authority to act on its behalf) or contained in a public oral statement. Section 138.1 defines a responsible issuer to mean "(a) a reporting issuer, or (b) any other issuer with a real and substantial connection to Ontario, any securities of which are publicly traded" (emphasis added). The emphasized words are critical to this decision. It is common ground that HSBC Holdings is not a reporting issuer.

[15] Mr. Yip argues that even though HSBC Holdings is not a reporting issuer, as an issuer whose securities are publicly traded (although not in Canada), it is a responsible issuer under para. (b) of the definition in s. 138.1 and in light of this court's ruling in Abdula v. Canadian Solar Inc. (2012), 110 O.R. (3d) 256, [2012] O.J. No. 1381, 2012 ONCA 211, leave to appeal to S.C.C. refused [2012] S.C.C.A. No. 246. He urges this court to find specifically that "[a]n issuer that knows or ought to know that its investor information is being made available to Canadian investors has a securities regulatory nexus" with Ontario sufficient to establish the real and substantial connection under part (b) of the definition for a responsible issuer in s. 138.1. Mr. Yip submits that this would be a purposive interpretation consistent with the Securities Act's goal of protecting investors from fraudulent practices. In the alternative, the appellant submits that this court should identify a new presumptive connecting factor for cases of secondary market misrepresentation.

[16] The appellant's proposed wording deliberately tracks the language of Moran v. Pyle National (Canada) Ltd., [1975] 1 S.C.R. 393, [1973] S.C.J. No. 149, a products liability tort action, in which the expression, "real and substantial connection", was first used by the Supreme Court of Canada. Justice Dickson formulated a rule Mr. Yip argues should apply to his case, with necessary modifications. To paraphrase Moran, at p. 409 S.C.R.: Where the misrepresentation made "in a foreign jurisdiction" then "enters into the normal channels of trade" in circumstances and the issuer "knows or ought to know both that" an investor "may well be injured and it is reasonably foreseeable" that the misrepresentation will be acted upon, "then the forum in which the plaintiff suffered damage is entitled to exercise judicial jurisdiction over that foreign defendant".

[17] The evidence upon which Mr. Yip relies to meet his proposed test is that HSBC Holdings released documents containing misrepresentations, authorized its subsidiary HSBC Canada to make available on its website the HSBC Holdings' documents, and authorized Mr. Bagley to make public oral misrepresentations. Mr. Yip asserts that HSBC Holdings must have known that people like him and the putative class members would access the information and use it to their detriment.

[18] Accordingly, Mr. Yip argues that the motion judge erred in declaring that HSBC Holdings is not a responsible issuer as defined in s. 138.1 of the Securities Act because it does not have a real and substantial connection to Ontario. The case, he says, is a short step away from Kaynes v. BP, PLC (2014), 122 O.R. (3d) 162, [2014] O.J. No. 3731, 2014 ONCA 580, at paras. 31-34, leave to appeal to S.C.C. refused [2014] S.C.C.A. No. 452, in which this court found BP to be a responsible issuer.

[19] In oral argument, counsel conceded that his proposed formulation of the test might make Ontario a universal jurisdiction for secondary market misrepresentations made anywhere in the world. That is precisely the problem that leads us to reject his argument, as we will explain.

5. Analysis of Responsible Issuer Definition

[20] It is trite law that the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act and the intention of the legislature. See Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559, [2002] S.C.J. No. 43, 2002 SCC 42, at para. 26; and Rizzo & Rizzo Shoes Ltd. (Re) (1998), 36 O.R. (3d) 418, [1998] 1 S.C.R. 27, [1998] S.C.J. No. 2, at para. 21, quoting Elmer A. Driedger, Construction of Statutes, 2nd ed. (Toronto: Butterworths, 1983), at p. 87.

[21] What was the legislature's intention in adopting a definition of "responsible issuer" that requires the issuer to have a real and substantial connection to Ontario? We consider first the legislative, and then the judicial histories of the expression "real and substantial connection".

The Legislative History

[22] The legislative history of para. (b) of the definition in s. 138.1 of the Securities Act was reviewed by Hoy J.A. in Abdula. That case concerned the interpretation of the phrase within para. (b) that states: "any other issuer . . . , any securities of which are publicly traded". She rejected the argument that there was an implicit requirement that the securities must be "publicly traded in Canada": at para. 72. She noted: "The concept of restricting a responsible issuer to an issuer whose securities were publicly traded in the jurisdiction in question was flagged by the Allen Committee, but not included in Bill 149", at para. 68. She concluded from the legislative history that the enacted language: "reflects a conscious decision on the part of the legislature" not to restrict the definition to issuers whose securities traded in Canada.

[23] Omnibus Bill 198 was introduced in the Ontario legislature in October 2002. Part XXVII, of the original Bill 198, proposed amendments to the Securities Act to provide for civil liability for secondary market disclosure through the addition of Part XXIII.1. The proposed definition for responsible issuer was "any other issuer with a substantial connection to Ontario, any securities of which are publicly traded". This wording was retained in the enacted version of Bill 198, which was never proclaimed.

[24] Omnibus Bill 149 was introduced in the Ontario legislature in November 2004. It came into force on December 31, 2005. Schedule 34 amended the Securities Act and enacted the current definition of responsible issuer, which changed the wording in the definition from that in Bill 198. Bill 149 added the words "real and" before the word "substantial", resulting in the expression "a real and substantial connection to Ontario".

[25] In our view, Bill 149's addition of the words "real and" to the words "substantial connection to Ontario", originally found in Bill 198, reinforces the inference that, by introducing civil liability for secondary market misrepresentations, the legislature did not intend that Ontario would become the default jurisdiction for issuers around the world whose securities were purchased by residents of Ontario.

[26] Nor do we consider it likely that the legislature's adoption of the very language in which the common law jurisdiction simpliciter test is framed was accidental. By 2005, when Part XXIII.1 of the Securities Act was enacted, which included the definition of responsible issuer, the common law test for jurisdiction simpliciter was well entrenched, and it was specifically aimed at preventing jurisdictional overreach. We observe that the concern about jurisdictional overreach is so strong that it affects the assessment at three levels of the common law test for determining whether a Canadian court will assume jurisdiction (i) requiring the presence of a presumptive connecting factor; (ii) determining whether the factor has been rebutted; and (iii) in applying the forum non conveniens doctrine.

The Judicial History

[27] We turn next to the judicial history. Justice Binnie gave a brief summary statement of the governing principle underlying the real and substantial connection test in Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers, [2004] 2 S.C.R. 427, [2004] S.C.J. No. 44, 2004 SCC 45, at para. 60:

From the outset, the real and substantial connection test has been viewed as an appropriate way to "prevent overreaching . . . and [to restrict] the exercise of jurisdiction over extraterritorial and transnational transactions" (La Forest J. in Tolofson v. Jensen, [1994] 3 S.C.R. 1022, at p. 1049). The test reflects the underlying reality of "the territorial limits of law under the international legal order" and respect for the legitimate actions of other states inherent in the principle of international comity (Tolofson, at p. 1047).

[28] The origin of the expression "real and substantial connection" was explained by Sharpe J.A. in Muscutt v. Courcelles (2002), 60 O.R. (3d) 20, [2002] O.J. No. 2128, at paras. 30-44. Justice Dickson, in Moran, derived the expression from Indyka v. Indyka, [1969] 1 A.C. 33 (U.K. H.L.), at p. 105, in relation to the recognition of a foreign divorce decree. After Dickson J. referred to it in Moran, it was adopted as part of the jurisdiction simpliciter test in Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077, [1990] S.C.J. No. 135, and has since consistently been used.

[29] The test "was simply intended to capture the idea that there must be some limits on the claims to jurisdiction", said La Forest J. in explaining his Morguard decision in Hunt v. T&N plc, [1993] 4 S.C.R. 289, [1993] S.C.J. No. 125, at p. 325 S.C.R. He then added in Tolofson v. Jensen, [1994] 3 S.C.R. 1022, [1994] S.C.J. No. 110, at p. 1049 S.C.R.: "This test has the effect of preventing a court from unduly entering into matters in which the jurisdiction in which it is located has little interest." Other courts, including this court, have made similar observations. Justice Sharpe referred to the need for "jurisdictional restraint" in Muscutt, at paras. 34 and 38. He used the same words in Currie v. McDonald's Restaurants of Canada Ltd. (2005), 74 O.R. (3d) 321, [2005] O.J. No. 506 (C.A.), at para. 10.

[30] The governing precedent for determining whether a real and substantial connection exists is still the Supreme Court's decision in Club Resorts Ltd. v. Van Breda, [2012] 1 S.C.R. 572, [2012] S.C.J. No. 17, 2012 SCC 17. Justice LeBel expressed similar concerns in his formulation of the factors a court is to consider in determining whether a real and substantial connection exists in a tort case. He repeatedly expressed one of the primary aims of the test: to reduce the "risk of jurisdictional overreach" (at para. 22); to "prevent improper assumptions of jurisdiction" (at para. 26); to prevent "courts from overreaching by entering into matters in which they had little or no interest" (at para. 38); and to reduce the risk of "sweeping into that jurisdiction [,] claims that have only a limited relationship with the forum" (at para. 89). In his view, a judicial approach that leads to "universal jurisdiction" should be avoided.

The Proper Interpretation of the Real and Substantial Connection Test in the Definition of "Responsible Issuer"

[31] The legislative and judicial histories lead us to conclude that the legislature fully intended to prevent jurisdictional overreach. The legislature did not intend to create universal jurisdiction.

[32] We infer from the legislative and judicial histories that the legislature made a conscious decision to use the language of the common law test to determine whether a real and substantial connection exists for the purposes of s. 138.1 of the Securities Act. We also infer that the legislature was content to allow the common law to develop in the ordinary course, as it did with Van Breda, which is still the governing authority. In our view, the legislature had no expectation that the test for a real and substantial connection, in relation to securities matters, would diverge over time from the common law test. The legislature's deliberate use of the same common law language that governed at the time compels the opposite conclusion.

[33] Accordingly, we reject the appellant's argument that, on purposive grounds, the interpretation of the expression must be different than its common law meaning in the jurisdiction simpliciter cases. To the contrary, a purposive interpretation leads us to reject the appellant's proposed test and the appellant's alternative argument that this court should recognize a new presumptive connecting factor for this type of statutory claim. We do not agree that an issuer that knows or ought to know that its investor information is being made available to Canadian investors, by that level of engagement alone, has a securities regulatory nexus sufficient to establish a real and substantial connection to Ontario.

[34] In determining whether an issuer is a responsible issuer under the Securities Act, courts are generally to apply the common law test for a real and substantial connection.

6. The Proper Application of the Common Law Test for a Real and Substantial Connection

[35] The Ontario Superior Court has jurisdiction over a foreign defendant in a tort action if the plaintiff establishes that a real and substantial connection exists between the subject matter of the litigation and Ontario. In Van Breda, the Supreme Court formulated four rebuttable presumptive connecting factors, at para. 90:

[I]n a case concerning a tort, the following factors are presumptive connecting factors that, prima facie, entitle a court to assume jurisdiction over a dispute:

(a) the defendant is domiciled or resident in the province;

(b) the defendant carries on business in the province;

(c) the tort was committed in the province; and

(d) a contract connected with the dispute was made in the province.

[36] The appellant asserts that HSBC Holdings is caught by two of the presumptive connecting factors: it committed a tort in Ontario and it carries on business in Ontario.

Analysis

[37] The motion judge concluded that HSBC Holdings does not carry on business in Ontario, even though it has and must comply with Canadian banking regulations under the Bank Act, S.C. 1991, c. 46, and even though its subsidiary, HSBC Canada, does carry on business in Ontario.

[38] The appellant contends that the motion judge erred by requiring HSBC Holdings to have a physical presence in Ontario.

[39] We disagree. The motion judge found that "HSBC Holdings' business, as distinct from the businesses of the corporations that it owns directly or [in]directly, is that of managing a global enterprise of a group of commonly bannered banks to the extent of setting global standards for a global enterprise" (para. 189). This is not only a factual finding that is entitled to deference; it is also a finding with which we agree.

[40] In Van Breda, LeBel J. made several pertinent observations about the presumptive connecting factor of carrying on business in the jurisdiction, at para. 87, that apply to this case:

Carrying on business in the jurisdiction may also be considered an appropriate connecting factor. But considering it to be one may raise more difficult issues. Resolving those issues may require some caution in order to avoid creating what would amount to forms of universal jurisdiction in respect of tort claims arising out of certain categories of business or commercial activity. Active advertising in the jurisdiction or, for example, the fact that a Web site can be accessed from the jurisdiction would not suffice to establish that the defendant is carrying on business there.

[41] HSBC Holdings could not be said to be carrying on business in Ontario simply because the appellant could access a non-reporting issuer's disclosure information using his home computer in Ontario. This would give rise to the universal jurisdiction that LeBel J. explicitly rejected in Van Breda.

[42] The motion judge held [at para. 211] that HSBC Holdings does have a presumptive real and substantial connection to Ontario by virtue of possibly committing a misrepresentation-based tort in Ontario. Despite this holding, he concluded that this presumptive connecting factor was rebutted because downloading materials from an issuer "is an extremely weak connection and . . . does not point to any real relationship between the subject-matter of the litigation and Ontario".

[43] The appellant submits that the motion judge erred in concluding that the presumptive connecting factor had been rebutted. He states that it is very difficult to rebut the presumptive connecting factor of a tort that is committed in the province and that the motion judge did not refer to any case law to support his analysis.

[44] We disagree.

[45] A defendant can rebut a presumptive connecting factor by establishing "facts which demonstrate that the presumptive connecting factor . . . points only to a weak relationship between them": Van Breda, at para. 95. Justice LeBel added that a weak relationship exists where "it would . . . not be reasonable to expect that the defendant would be called to answer proceedings in that jurisdiction": Van Breda, at para. 97. The Supreme Court has repeatedly cautioned against creating an "irrebuttable" presumption of jurisdiction: Van Breda, at para. 95; and Haaretz.com v. Goldhar, [2018] S.C.J. No. 28, 2018 SCC 28, at para. 42.

[46] The motion judge concluded that downloading HSBC Holdings' material from a website was an "extremely weak connection" and that "HSBC Holdings had no reason to believe that it was obliged" to comply with or would be subject to securities regulation in Ontario (at para. 212).

[47] The motion judge did not explicitly name a case in the four paragraphs in which he concluded that this presumptive connecting factor had been rebutted. However, the motion judge did refer to LeBel J. and articulated the correct test as laid out in Van Breda.

[48] The appellant invokes Abdula, but it does not assist him. The question in Abdula was whether a non-reporting issuer could be a responsible issuer under Part XXIII.1 of the Securities Act. In that case, this court held: "The definition of a 'responsible issuer' is not confined to persons who are reporting issuers in Ontario and therefore have a continuous disclosure obligation in Ontario": at para. 88. The issue was not, like in this case, whether there is a real and substantial connection to Ontario.

[49] In Abdula, the issuer was found to be a responsible issuer because there was a real and substantial connection to Ontario, at para. 88. The issuer had been incorporated in Ontario; its executive offices as well as some business and governance operations were in Ontario; and it had held its annual meeting in Ontario. Here, HSBC Holdings' management business is distinct from the businesses it manages. Very few, if any, activities of HSBC Holdings' business have ever occurred in Ontario; it has no fixed place of business in Canada; and there is no agent of HSBC Holdings doing its management business in Ontario.

[50] We agree with the motion judge's analysis of this presumptive connecting factor and his conclusion that it was rebutted on the evidence.

Conclusions on the Definition of Responsible Issuer

[51] The motion judge accurately articulated and applied the proper test. HSBC Holdings is not a responsible issuer under the Securities Act because it has no real and substantial connection to Ontario.

7. The Proper Application of the Forum Non Conveniens Doctrine

[52] A court may decline jurisdiction on the basis that there is another more appropriate forum under the forum non conveniens doctrine, even if it finds it has jurisdiction simpliciter. Given our conclusion that Ontario courts do not have jurisdiction simpliciter, it is, strictly speaking, unnecessary to consider the forum non conveniens doctrine. However, the appellant's arguments about the interaction between this court's decisions in Kaynes (2014) and Kaynes v. BP P.L.C. (2016), 133 O.R. (3d) 29, [2016] O.J. No. 4058, 2016 ONCA 601 suggest that a response would be helpful.

[53] In our view, the motion judge accurately expressed and applied the principles in the forum non conveniens analysis. His discretionary determination that Ontario is forum non conveniens attracts deference: see Van Breda, at para. 112; Goldhar, at paras. 49, 177.

[54] The motion judge agreed with Mr. Yip that "there is no place of trading requirement under Part XXIII.1 of the Ontario Securities Act" (at para. 114). His purchase of securities on the Hong Kong exchange did not preclude relief. However, the motion judge did conclude that, in secondary market claims, courts should generally favour the forum where the trade took place. He stated: "The place of trading qualification for actions for misrepresentations in a prospectus reflects the prevailing international standard that securities litigation should take place in the forum where the securities transaction took place" (at para. 271). He considered this point to be of influence to his holding, at para. 273:

In the case at bar, the forum non conveniens factors and the comity factors overwhelmingly favour Mr. Yip bringing his misrepresentation claim in England or Hong Kong, which is the jurisdiction in which he purchased his shares. In the case at bar, even if there was jurisdiction simpliciter to open the door to an Ontario court to reach across the world to protect Canadian and non-Canadians investors, there is nothing unfair to expect Mr. Yip and all of the putative Class Members who used foreign exchanges to look to the foreign courts to litigate their claims where the defendant is a foreign corporation whose securities do not trade on a Canadian stock exchange.

[55] The appellant challenges this holding. He submits that the motion judge placed too much emphasis on the place of the trade in identifying the United Kingdom or Hong Kong as the better forum. In particular, the appellant submits that this court's statement in Kaynes (2014) -- "the prevailing international standard tying jurisdiction to the place where the securities were traded" (at para. 52) -- is wrong. He submits that the correct approach is set out in Kaynes (2016): a plaintiff should not be deprived of the right to have his or her claim asserted as part of a class action.

[56] The appellant also submits that the motion judge failed to take due account of the factor of juridical advantage in his forum non conveniens analysis.

Analysis

[57] Van Breda sought to reduce the exercise of "case-by-case" and "on the fly" judicial discretion on whether to assume jurisdiction; the Supreme Court recognized the need for "certainty and predictability" and "security, stability and efficiency" in private international law: see paras. 70, 73 and 93-94. We address first the appellant's argument on Kaynes (2014), and then the argument on juridical advantage.

The Kaynes Holdings

[58] Kaynes (2014) and Kaynes (2016) involved a proposed class action against BP under Part XXIII.1 of the Securities Act for misrepresentations that were allegedly made by BP before and after the April 2010 Deep Water Horizon explosion and oil spill in the Gulf of Mexico.

[59] In Kaynes (2014), this court held that Ontario did have jurisdiction simpliciter because there was a real and substantial connection. BP had undertaken to continue to make disclosure to its Ontario shareholders. However, this court declined to exercise its jurisdiction under the forum non conveniens doctrine. BP had demonstrated that there was clearly another more appropriate forum. There was "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": at para. 40.

[60] In his analysis of the various factors, in Kaynes (2014) Sharpe J.A. emphasized the role of comity and suggested that courts generally favour the forum where the trading took place. He noted, at paras. 37, 47-48 and 52-53:

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."

By statute, both the U.S. and the U.K. regimes assert jurisdiction on the 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. . . . [T]he principle of comity strongly favours declining jurisdiction . . . [and] 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[.]

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 . . . will be avoided.

[Comity] will often prevail over any perceived loss of juridical advantage.

[61] Justice Sharpe added, at para. 50:

It 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), 74 O.R. (3d) 321, [2005] O.J. No. 506 (C.A.), at para. 18:

[A]n 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.

[62] For these reasons, this court stayed the plaintiff's claim in Kaynes (2014).

[63] After that decision, Mr. Kaynes commenced a class proceeding in the U.S. District Court asserting a claim under the Ontario Securities Act for pre-explosion misrepresentations. The U.S. District Court judge dismissed Mr. Kaynes' Ontario Securities Act claim -- but not on the merits. Mr. Kaynes brought a motion before this court to lift the stay because of these new circumstances.

[64] In Kaynes (2016), the same panel of this court lifted the stay it imposed in Kaynes (2014) in order to allow the appellant to have his claim adjudicated on its merits. The panel did not suggest that the framework it set out in Kaynes (2014) was wrong. The law did not change in Kaynes (2016); the facts changed. The court in Kaynes (2016) stated, at para. 16:

In our view, these developments, taken as a whole, are sufficient to justify lifting the stay. It was certainly not brought to our attention or in our contemplation that the moving party's claim would be dismissed in the U.S. District Court simply because it had not been advanced by the lead plaintiffs in the U.S. class action. That is a purely procedural barrier that prevents the moving party from having his claim heard on the merits.

[65] We reject the appellant's argument that there is any inconsistency between this court's decisions in Kaynes (2014) and Kaynes (2016).

The Role of Juridical Advantage

[66] The appellant submits that the motion judge failed to give due weight to the loss of juridical advantage he would suffer if Ontario declined jurisdiction, and he asserts: "There is no authority for the proposition relied on by the motions judge that juridical advantage should be viewed as a 'weak and problematic factor'" (emphasis in original). This is incorrect.

[67] The Supreme Court noted that the juridical advantage factor is problematic in the forum non conveniens analysis, both as a matter of comity and as a practical matter: Breeden v. Black, [2012] 1 S.C.R. 666, [2012] S.C.J. No. 19, 2012 SCC 19, at para. 27; Van Breda, at para. 112; and Haaretz.com, at para. 76.

[68] As a matter of comity, secondary market trading is international and involves numerous jurisdictions. Comity is particularly important to maintain an orderly and predictable regime for dispute resolution. As stated by LeBel J. in Van Breda: "Comity cannot subsist in private international law without order, which requires a degree of stability and predictability in the development and application of the rules governing international or interprovincial relationships" (at para. 74).

[69] As a practical matter, the Supreme Court stated in Amchem Products Inc. v. British Columbia (Workers' Compensation Board), [1993] 1 S.C.R. 897, [1993] S.C.J. No. 34, at p. 933 S.C.R.: "Any loss of advantage to the foreign plaintiff must be [weighed] as against the loss of advantage, if any, to the defendant in the foreign jurisdiction if the action is tried there rather than in the domestic forum."

[70] Comity was central in Kaynes (2014). The importance of comity did not change in Kaynes (2016). In Kaynes (2014), this court showed respect for the U.S. court, which was already adjudicating similar claims. When the U.S. District Court judge dismissed the claim on a "purely procedural barrier", there was no decision on the merits that this court could recognize: Kaynes (2016), at para. 16. In addition, given that Mr. Kaynes had commenced his claim in Ontario in time, it was unfair that this be a basis for preventing the claim from being heard on its merits.

[71] Thus, in Kaynes (2016), this court did not elevate the juridical advantage of asserting a claim as a class action to the status of an inviolable right. Rather, it applied the Kaynes (2014) framework to a new set of facts.

[72] In this case, the motion judge properly expressed and applied the forum non conveniens principles. HSBC Holdings could not reasonably have expected that it would be subject to the regulation of the law of Ontario. The motion judge was right to conclude that Ontario was forum non conveniens.

8. Conclusions on the Jurisdiction Appeal

[73] First, the legislative and judicial histories of the expression "real and substantial connection" in para. (b) of the definition of responsible issuer demonstrate the desire to avoid jurisdictional overreach. There was no legislative intention to create universal jurisdiction for Ontario in secondary market liability. An Ontario court's jurisdiction for a claim under Part XXIII.1 of the Securities Act against a responsible issuer is circumscribed by the common law real and substantial connection test.

[74] Second, where it is unreasonable to expect a defendant to be called to answer a proceeding in a jurisdiction, then a weak relationship exists. There is no irrebuttable presumption of jurisdiction.

[75] Third, the framework in Kaynes (2014) for the forum non conveniens analysis in the context of secondary market liability was not reversed by Kaynes (2016). Comity continues to underlie the forum non conveniens analysis. Other factors in the forum non conveniens analysis must be considered, but comity is a key consideration. As such, the more appropriate forum for secondary market claims will often favour the forum of the exchange(s) where the securities trade.

B. The Costs Appeal

[76] The appellant seeks leave to appeal the costs award of $1,000,455.22 made against him by the motion judge. He submits that there should have been no award of costs or that the costs awarded should have been substantially reduced ($150,000 was suggested) because this is public interest litigation and/or because the action raises a novel point of law. These are considerations expressly contemplated by s. 31(1) of the Class Proceedings Act, 1992.

[77] The motion judge accurately set out the law on these points and properly considered them. We agree with the conclusions that he reached that neither of those factors apply to the case here.

[78] First, we do not accept that this litigation is appropriately characterized as public interest litigation, as that term is used in the costs context. As Rosenberg J.A. said in Pearson v. Inco Ltd. (2006), 79 O.R. (3d) 427, [2006] O.J. No. 991 (C.A.), an action constitutes public interest litigation within the meaning of s. 31(1) "if the class proceeding has a 'some specific, special significance for, or interest to, the community at large beyond the members of the proposed class'": at para. 9. There is no such specific or special significance of this case beyond the putative class members. Ontario's investors, capital markets and the financial system will not likely benefit from creating a universal jurisdiction for secondary market misrepresentations.

[79] Second, we do not accept that this litigation raised a novel issue. The central issues were jurisdictional. The proper jurisdiction for Ontario residents to seek relief arising from their purchase of shares in foreign companies on foreign exchanges was directly addressed by this court's decision in Kaynes (2014). As discussed above, Kaynes (2016) did not change the framework set out in Kaynes (2014). Moreover, in Airia Brands Inc. v. Air Canada, [2017] O.J. No. 5347, 2017 ONCA 792, 11 C.P.C. (8th) 35, this court treated Kaynes (2014) as good law, even though it was distinguished on its facts. Whatever variations on the jurisdictional issues that might be raised by this case, and we do not immediately see any, they would not constitute novel issues.

[80] All of that said, we do disagree with the motion judge where, in considering these issues, he drew a distinction between "altruistic" litigation and "entrepreneurial" litigation. Class actions are generally entrepreneurial litigation: Fantl v. Transamerica Life Canada (2009), 95 O.R. (3d) 767, [2009] O.J. No. 1826, 2009 ONCA 377, at para. 66. That aspect of class proceedings is part of ensuring access to justice, especially where the individual claims are for relatively small amounts. The fact that the litigation is entrepreneurial is not a proper basis to impose different costs consequences. The existing principles applicable to the awarding of costs are sufficient without adding this issue as another element.

[81] In terms of the quantum of costs awarded, it is important to remember that fixing costs is a matter of discretion, and a judge's exercise of that discretion is entitled to significant deference: Feinstein v. Freedman (2014), 119 O.R. (3d) 385, [2014] O.J. No. 1496, 2014 ONCA 205, at para. 52. It is important to recognize that almost half of the award reflected disbursements, principally fees paid to experts.

[82] We do not see any basis to interfere with the motion judge's conclusion that the fees sought by the respondent were fair and reasonable in the circumstances. We agree with the motion judge's point that the appellant ought to have expected that a claim of this size would be vigorously contested by the respondent, especially the issue of jurisdiction. Given what was involved leading up to the hearing of the motion and cross-motion, including the volume of material filed, the number of cross-examinations, and the expert evidence, we are not prepared to interfere with the motion judge's conclusion that "[t]he Defendants did not commit more resources than were necessary to reasonable and fairly test and challenge the Ontario court's jurisdiction". We would caution, however, that costs awards of this magnitude should be exceptional.

[83] In terms of the expert fees, the motion judge correctly identified that the approach to determining the reasonableness of expert fees is similar to the approach to counsel fees, in the sense that expert fees must be fair and reasonable.

[84] The motion judge plainly found that the expert evidence produced by the respondent was necessary for the motion. There is no basis for this court to interfere with his conclusion.

[85] What is not clear, however, is whether the motion judge considered the reasonableness of the expert fees charged in terms of hours spent and hourly rates imposed. In our review of the expert's accounts, it appears that they were simply charged at the amount that the expert billed. We also note that there does not appear to be any information provided for three of the six experts in terms of the hours spent or the rates charged. That significantly constrains a review of the fees charged.

[86] In 3664902 Canada Inc. v. Hudson's Bay Co., [2003] O.J. No. 950, 169 O.A.C. 283 (C.A.), this court noted that "reasonably necessary" experts' fees should not be reduced to reflect the fact that "the award is intended to be only partial indemnification": at para. 15. This court drew a distinction between disbursements, of which expert fees are a part, and legal fees, which are to be treated differently: at paras. 20-21.

[87] The court noted, at para. 17:

To be explicit, it is our experience that both under the party-and-party costs regime and the newer partial indemnity regime, disbursements, including witness fees, are assessed upon the basis of what was actually spent, reduced if appropriate to what is reasonably spent.

[88] In doing so, the court invoked the language of para. 26 of Part II of Tariff A-Disbursements, which currently provides:

For experts' reports that were supplied to the other parties as required by the Evidence Act or these rules and that were reasonably necessary for the conduct of the proceeding, a reasonable amount.

[89] In 3664902 Canada Inc., this court disapproved part of the approach in Pearson v. Inco Ltd., [2002] O.J. No. 3532, 27 C.P.C (5th) 171 (S.C.J.), which used a partial indemnity rationale for reducing expert fees, but this court did not reject the idea that a reviewing court should consider what is fair in terms of hours and rates as well as the overall amount in fixing an award that it is reasonable for the losing party to pay with respect to experts' fees: Pearson, at para. 20. This includes experts' fees.

[90] Several Superior Court decisions have taken this approach. See Hamfler v. 1682787 Ontario Inc., [2011] O.J. No. 6190, 2011 ONSC 3331, 38 C.P.C. (7th) 398 (S.C.J.), approved in R & G Draper Farms (Keswick) Ltd. v. Nature's Finest Produce Ltd. (2016), 133 O.R. (3d) 395, [2016] O.J. No. 4332, 2016 ONCA 626, at para. 20; Andersen v. St. Jude Medical Inc., [2004] O.J. No. 3102, 28 C.P.C. (6th) 199 (S.C.J.); Roberts v. Morana (1997), 37 O.R. (3d) 342, [1997] O.J. No. 4999 (Gen. Div.); and Eastwalsh Homes Ltd. v. Anatal Development Corp., [1995] O.J. No. 565, 37 C.P.C. (3d) 374 (Gen. Div.).

[91] In our view, a class action defendant does not have carte blanche to unreasonably spend money on experts; we see this obligation of reasonableness in the expenditure of funds on experts as an aspect of ensuring access to justice, one of the principle purposes of class actions.

[92] While we could remit this matter back to the motion judge for reconsideration, we believe it would be fairer and more expeditious for us to directly address the matter, especially since we have the same material as the motion judge had.

[93] While experts fees are not to be arbitrarily reduced to reflect partial indemnity costs (see 3664902 Canada Inc.), proportionality is a matter of general principle in applying the Rules of Civil Procedure, R.R.O. 1990, Reg. 194: see rule 1.04(1.1). The fees allowed must still be reasonable in terms of hours and rates charged in proportion to the matter at issue. The motion judge referred to, but did not apply, this test. Having reviewed the record available to us, we reduce the costs award from $1,000,455.22 to $800,000 to reflect these considerations as they relate to the disbursements.

C. Disposition

[94] For the foregoing reasons, we dismiss the appeal on jurisdiction; we grant leave to appeal the costs award, and vary it by reducing it from $1,000,455.22 to $800,000. We fix the costs of the appeal payable by the appellant to the respondents at $40,000 all-inclusive.

Jurisdiction appeal dismissed; costs appeal allowed in part.

End of Document