Uncertain Implications For Global Class Certification: The Ontario Court Of Appeal's Decision In Excalibur Special Opportunities

In December 2016, the Ontario Court of Appeal had an opportunity to clarify the requirements for certifying a global class in Excalibur Special Opportunities LP v. Schwartz Levitsky Feldman LLP. 1 In a series of decisions over three levels of court, Ontario judges adopted shifting analyses of the global class issue, and a majority of the Court of Appeal appears to have further complicated the law on this issue by using language which suggests that it applied the conventional test for assumed jurisdiction over an individual action to the separate issue of whether to certify a global class. With a strong dissent, the law is ripe for further development in the future.

American Investors Rely on a Canadian Audit Report about a Chinese Hog Farm

Excalibur Special Opportunities LP ("Excalibur"), a Toronto-based partnership, was one of fifty seven investors in a Nevada corporation that owned and operated hog farms in China. In addition to Excalibur, only one other investor was based in Canada (in British Columbia). The vast majority (50 of 57) of the investors were based in the United States. Excalibur and the other investors allegedly relied on an audit report prepared by a Toronto and Montreal-based accounting firm, Schwarts Levitsky Feldman LLP ("SLF"), when deciding to invest.

After certain American securities disclosures, the investors lost all of their money. Excalibur sought to certify a global class action against SLF in Ontario for negligence and negligent misrepresentation for alleged false statements contained in the audit report on which they allegedly relied to invest.

The Motion Judge Denies Certification and the Divisional Court Agrees

At first instance, Perell J. denied Excalibur's motion for certification. After canvassing the law on certification of global classes, 2 Perell J. outlined several factors that, in his view, ought to be considered when determining whether it is appropriate to certify a global class:

whether the Ontario court has jurisdiction simpliciter over the defendant; whether the Ontario court can assume jurisdiction over a non-resident Class Member, which largely depends upon whether Ontario has a real and substantial connection with the subject matter of the claim and on principles of order and fairness and comity; whether it would be reasonable for the non-resident Class Member to expect that his or her rights would be determined by a foreign court; whether the non-resident plaintiff can be accorded procedural...