Ontario Is Not A 'Universal Jurisdiction' Under The Ontario Securities Act: Leave To The SCC Denied In Yip v. HSBC Holdings

On March 28, 2019, the Supreme Court of Canada denied leave to appeal in Yip v. HSBC Holdings plc, 2019 CanLII 23866, leaving standing the Ontario Court of Appeal's decision in Yip v. HSBC Holdings plc, 2018 ONCA 626, affirming Yip v. HSBC Holdings plc, 2017 ONSC 5332.

The case serves as an important precedent for future securities class actions, in addition to cross-border claims against financial services defendants and other cases where plaintiffs seek to ground jurisdiction over foreign entities based on their ownership of, and involvement with, Canadian subsidiaries.

Background

This was a proposed secondary market securities class action against HSBC Holdings plc ("Holdings") and its former Head of Group Compliance alleging misrepresentations in public disclosure. Holdings has no offices, assets, or employees in Canada. Its shares have never traded on any Canadian exchange, and it has never been a reporting issuer in any Canadian jurisdiction. The representative plaintiff, Mr. Yip, resides in Markham and used his home computer to purchase HSBC Holdings common shares using Hong Kong dollars and through an online Hong Kong brokerage account.

Holdings successfully brought a preliminary motion to challenge the action on jurisdictional and forum non conveniens grounds.

The Court of Appeal affirmed the lower court decision that the Ontario court lacked jurisdiction simpliciter over both defendants, and that Ontario was forum non conveniens, given that the U.K. and Hong Kong were more appropriate locations to hear the claim.

Canada is Not a Universal Jurisdiction - Secondary Market Claims

The Plaintiff's theory was that Ontario Securities Act creates a statutory cause of action for secondary market misrepresentations by a "responsible issuer", because this term refers not just to reporting issuers (which Holdings is not), but also to any other issuer with a real and substantial connection to Ontario, any securities of which are publicly traded. This, by his own admission, would have made Ontario a universal jurisdiction for secondary market misrepresentations made anywhere in the world.

The Court of Appeal dismissed the Plaintiff's theory that the Ontario Securities Act creates a statutory cause of action for secondary market misrepresentations by any issuer with a real and substantial connection to Ontario with securities which are publicly traded and made it clear that the Act should not be used to create "universal jurisdiction" in...