Top 5 Civil Appeals From The Court Of Appeal - January 2017

Excalibur Special Opportunities LP v. Schwartz Levitsky Feldman LLP, 2016 ONCA 916 (Cronk, Blair and MacFarland JJ.A.), December 6, 2016 Carter v. Intact Insurance Company, 2016 ONCA 917 (Laskin, Pepall and Brown JJ.A.), December 6, 2016 Canadian Imperial Bank of Commerce v. Deloitte & Touche, 2016 ONCA 922 (Hoy A.C.J.O., Benotto and Huscroft JJ.A.), December 8, 2016 Greenberg v. Nowack, 2016 ONCA 949 and 2363523 Ontario Inc. v. Nowack, 2016 ONCA 951 (Strathy C.J.O., LaForme and van Rensburg JJ.A.), December 16, 2016 Awan v. Levant, 2016 ONCA 970 (Feldman, Simmons and Rouleau JJ.A.), December 22, 2016 1. Excalibur Special Opportunities LP v. Schwartz Levitsky Feldman LLP, 2016 ONCA 916 (Cronk, Blair and MacFarland JJ.A.), December 6, 2016

In this case, a majority of the Court of Appeal certified a global class action despite 98% of the proposed class members being non-residents of Ontario.

Excalibur Special Opportunities LP ("Excalibur") was one of 57 investors (50 of which were American) that lost money in a high-risk investment in an American corporation, Southern China Livestock International Inc. ("Southern China"). Excalibur invested US $950,000.00 after reviewing a Private Placement Memorandum that included an audit report prepared by the defendant, a Montreal and Toronto based accounting firm, "page for page, word for word." However, approximately one year later, Southern China filed a mandated report that revealed its shares were worthless. As the motion judge described it, "Southern China Livestock went dark, and its shares and warrants are now worthless".

Excalibur sought to certify a class action against the defendant accounting firm for negligence and negligent misrepresentation over the audit report. The motion judge dismissed Excalibur's certification motion for two reasons.

First, the class definition criterion under s. 5(1)(b) of the Class Proceedings Act, 1992 was not satisfied. Although Excalibur and the defendant were both based in Ontario, the remaining proposed plaintiffs were non-residents of Ontario, Southern China was based in the United States, and the transactions were governed by American law. As a result, the motion judge concluded that it would not be appropriate to certify a global class action as there was no real and substantial connection to Ontario.

Second, the preferable procedure criterion under s. 5(1)(d) was not met. The representative plaintiff had a nearly US $1,000,000.00 claim, and if it joined with the other top 10 investors, their combined claim would be worth approximately US $3,000,000.00. The motion judge held this would justify the risk of litigation and have the same corrective effect as a class action without the additional procedural hurdles. Joinder was therefore a more appropriate mechanism for resolving the plaintiffs' claims.

Excalibur appealed to the Divisional Court. The majority deferred to and affirmed the motion judge's decision. However, in dissent, Sachs J. held: (a) the motion judge erred in failing to find a real and substantial connection between Ontario and the proposed action; and (b) 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.

Excalibur appealed with leave to the Court of Appeal. The majority allowed the appeal, set aside the order of the Divisional Court, and substituted an order certifying the action as a class proceeding.

Justice MacFarland (for the majority) held that the motion judge erred in law in failing to assume jurisdiction over the global class for three reasons. First, the test to determine whether to take jurisdiction over foreign class members begins with applying the real and substantial test, on the principles set out in Club Resorts Ltd v. Van Breda, 2012 SCC 17. The motion judge erred by considering as an independent factor whether it would be reasonable for the non-resident class members to expect that their rights would be determined by a foreign court.

Second, the motion judge compounded that error by finding that an Ontario court should approach the issue of taking jurisdiction with restraint. Justice MacFarland found that considerations of order and fairness were not seriously challenged in this case. The identity of all class members but one was known and they could be notified directly about the claim and their opt-out options. This was not a situation where there were unknown and indeterminate class members.

Finally, the motion judge mischaracterized the nature of the claim Excalibur sought to certify and, in doing so, fell into error in his jurisdictional analysis. The motion judge improperly characterized the nature of the proposed action by focusing on the transaction in the United States instead of the defendant's preparation of the audit report in Ontario. The claim was an action in auditor's negligence against an Ontario auditor who performed the work out of its Ontario office. Justice MacFarland held that if the motion judge properly characterized the claim, then he would have concluded there was a real and substantial connection to Ontario.

The majority also held that the preferability requirement was met. It concluded that if the motion judge had conducted the access to justice analysis through the lens that Ontario had a real and substantial connection to the investors' claims, he could not have concluded that joinder was a preferable mechanism. Justice MacFarland also held that: (a) a plaintiff is not required to establish that a class proceeding is necessary - rather than preferable to other methods - to obtain access to justice; and (b) joinder is not the "default" procedure against which the merits of a class proceeding should be assessed.

Justice Blair dissented. He held that: (a) the motion judge did not err in law and did not commit any palpable and overriding error in refusing to...