Ontario Court Of Appeal Declines Jurisdiction Over Securities Claim Against Foreign Issuer For Shares Traded On Foreign Exchange

Following prevailing international standards tying jurisdiction to where securities are traded, Ontario's highest appellate court in Kaynes v. BP, PLC1 has exercised its discretion to decline jurisdiction over proposed claims of Canadian residents who bought their shares of a foreign issuer on a foreign exchange and based on foreign law.

The decision strikes a blow to class action plaintiffs who seek to use trades on the TSX as a toehold for bringing securities class actions in Ontario encompassing much larger volumes of trades on a foreign exchange of a foreign issuer. Describing such actions as "opportunistic" and a classic example of the "tail wagging the dog," Ontario's Court of Appeal stayed claims against BP based on trades on foreign exchanges.

In so doing, the Court of Appeal has established that:

Presumptive jurisdiction in Ontario can be based on where the alleged misrepresentation was received for Part XXIII.1 secondary market misrepresentation claims. The term "release" under s. 138.3(1) of the Ontario Securities Act (OSA) includes not only documents circulated from Ontario but also documents received in Ontario. In determining whether to nonetheless decline jurisdiction based on forum non conveniens, Ontario courts should consider the implications of departing from the norms and practices of other countries concerning jurisdiction over secondary market misrepresentation claims, particularly given cross-border transactions are routine and maintaining an orderly and predictable regime for resolving claims is imperative. Proposed class action

The plaintiff commenced a proposed securities class action in Ontario asserting an action for secondary market misrepresentation under Part XXIII.1 of the OSA. The suit arose from the Deep Water Horizon oil spill in the Gulf of Mexico. It alleged that BP Plc made various misrepresentations in documents sent to its shareholders. The action sought to represent all Canadian residents who acquired BP securities between May 9, 2007, and May 28, 2010, (Class Period) wherever those securities were purchased. Parallel proposed class proceedings in the US, based on the same allegations, were also pending certification.

Listing of BP shares

BP is a UK corporation. It is headquartered in London and does not own any property or carry on business in Canada. Its common shares are listed on two European exchanges. They have never been listed on the Toronto Stock Exchange. BP also issued American Depository Shares (ADS), which trade on the New York Stock Exchange and London Stock Exchange. The plaintiff purchased BP ADS on the...