There are several important issues that bear watching in the Canadian courts in connection with class actions.
1. Limitation period under the Ontario Securities Act
On August 7, 2014, the Supreme Court of Canada granted leave to appeal in three Ontario securities class action cases: Green v Canadian Imperial Bank of Commerce, Silver v IMAX and Celestica v Trustees of the Millwright Regional Council of Ontario Pension Trust Fund.
These cases address how the three year limitation period under the Ontario Securities Act applicable to secondary market class actions should be applied. To bring a secondary market class action under the Ontario Securities Act, leave of the court is required. Pursuant to section 138.14, the action must be commenced within three years. Securities legislation in the other provinces contain similar provisions.
On February 16, 2012, in Sharma v Timminco, the Ontario Court of Appeal interpreted this provision to mean that plaintiffs must obtain leave from the court within the three year period to commence the action. This was a surprising and, for many securities class action plaintiffs, an unfortunate decision, as in many pending cases the plaintiffs not obtained leave within the three years, but had simply applied for leave, and the three year period had already expired.
In the wake of Timminco, there were several diverging decisions. On February 3, 2014, in Green v Canadian Imperial Bank of Commerce, a rare five judge panel of the Ontario Court of Appeal reversed its own decision in Timminco (with companion decisions in Silver v IMAX and Celestica v Millwright). The Court of Appeal found that articulating an intention to seek leave to commence the secondary market claim under the Securities Act was sufficient to suspend the limitation period, even though leave had not yet been granted to commence such an action.
It is now down to the Supreme Court for the final say on how this three year limitation period is to be applied. The Supreme Court’s decision will have a significant impact on numerous securities class actions already before the courts and those to come.
2. Bank faces liability for breach of privacy
On June 6, 2014, in Evans v Bank of Nova Scotia, the Ontario Superior Court at first instance has certified a class action against the Bank of Nova Scotia for vicarious liability for, among other claims, the tort of intrusion upon seclusion: in effect, for the breach of privacy rights of customers of the bank whose personal financial information had been disclosed illegally to hackers by an employee of the bank.
This is the first time such a class action has been brought against a financial institution in connection with this tort. The tort of intrusion upon seclusion is relatively new, having been recognized by the Ontario Court of Appeal in 2012 in Jones v Tsige. A necessary element of the tort is that the underlying conduct must be intentional, which includes reckless conduct. The plaintiffs did not allege that the bank acted intentionally but instead alleged that the bank was vicariously liable for its employee’s intentional and wrongful actions against over 600 customers. Vicarious liability per se would attach due to the relationship of the bank to the wrongdoer not due to its own conduct. The bank has vigourously contested whether it can be vicariously liable for the employees actions.
If the claim is maintained, it opens up an additional exposure for banks and other entities which possess and control financial and personal information. While the non-pecuniary damages for breach of this tort are capped at $20,000 per person, this can be signigficant when hundreds of people are affected.
3. Court of Appeal closes door on Canadian claims involving foreign investors
The decision of the United States Supreme Court in Morrison v National Australia Bank was a landmark in securities class litigation, in that it ruled that foreign investors in foreign companies who purchased their securities on foreign exchanges had no right of action under US securities laws.
Until recently, some Canadian courts had agreed to accept jurisdiction in similar situations, where they found that there was a “real and substantial connection” between the action and the jurisdiction, and had certified “global” classes – although not all agreed (e.g. McKenna v Gammon Gold). In the wake of Morrison, some wondered whether Canada would become the go-to jurisdiction for foreign investors whose own jurisdictions did not have similar remedies or the means of bringing class actions.
On August 14, 2014 the Ontario Court of Appeal rendered its decision in Kaynes v BP, plc. The representative plaintiff, an Ontario resident who purchased his BP American Depositary Shares (“ADS”) on the New York Stock Exchange (“NYSE”), sought to certify a class of all Canadian BP shareholders who purchased their shares between May 2007 and May 2010 regardless of which stock exchange was involved. He asserted a statutory right of action for misrepresentation under the Ontario Securities Act, arguing that BP, as a “reporting issuer”, was subject to Ontario securities legislation. BP, a UK corporation headquartered in London, sought to have the action of those plaintiffs who purchased their securities on an exchange outside Canada dismissed for lack of jurisdiction.
The trial court had dismissed BP’s motion. However, the Court of Appeal reversed that decision, finding that while the Ontario courts did have jurisdiction simpliciter, they should decline that jurisdiction on grounds of forum non conveniens. It examined the remedies available to security holders under US and UK law, noting that there was a parallel shareholder class action by BP shareholders in the US. It also noted the relative volume of shares traded in the three jurisdictions, and found that 0.0005% of BP shares had traded on the TSX. Remarking that the US and the UK assert jurisdiction on the basis of the exchange where the securities are traded, the Court ruled that “[a]sserting Ontario jurisdiction over the plaintiff’s claim would be inconsistent with the approach taken under both US and UK law …” and that “the principle of comity 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 where cross-border transactions are routine and the maintenance of an orderly and predictable regime for the resolution of claims is imperative”. As for the consequences to the plaintiffs, the Court stated that “[i]t would surely come as no surprise to purchasers who used foreign exchanges that they should look to the foreign court to litigate their claims”.
Given BP’s concession that the Ontario court did have jurisdiction over the claims of those members of the class who had purchased their shares on the TSX, the Court granted leave to amend the claim accordingly. It seems unlikely, however, that those plaintiffs will pursue the claim, given that of the total of 83,945 ADS which had traded on the TSX, the number held through the end of the proposed class period was somewhere between 14 and 7,477.