Overview

A claimant’s failure to prove standing as a British Columbia resident under section 2(1) of the Class Proceedings Act, RSBC 1996, c. 50 (CPA), can result in the certification application being struck by the Court. The British Columbia Supreme Court recently considered this issue in MM Fund v. Excelsior Mining Corp., 2022 BCSC 1541.

Who is a resident under s. 2(1) of the CPA?

Following the commencement of proceedings, the plaintiff, MM, filed its certification application. MM was a mutual fund (a trust) established under the laws of, and based in, Ontario. MM was managed by another Ontario entity as its trustee, investment fund manager and portfolio manager. MM did not have a registered office nor a place of business in B.C. The defendant, Excelsior, a copper production company listed on the Toronto Stock Exchange, sought an order to strike MM’s certification application on the basis that MM was not a resident of B.C. for the purposes of s. 2(1) of the CPA.

MM argued that it was a B.C. resident for a variety of reasons, including that it was governed by the Securities Act, RSBC 1996, c. 418; that it was a “responsible issuer” under the Securities Act which gave rise to a “real and substantial connection” to B.C.; that MM made its securities available to investors in B.C.; and that it reported to the B.C. Securities Commission.

Excelsior relied on the Supreme Court of Canada’s decision in Fundy Settlement v. Canada, 2012 SCC 14, which considered the question of the residency of a trust, like MM. The BCSC adopted the SCC’s position that the “residence of a trust should be determined by where its real business is carried on, which is where the central management and control of the trust actually takes place” (Fundy, para. 15). The BCSC took note of the fact that Ontario, not B.C., was the jurisdiction where MM was registered to do business, where MM’s central management and control was located and where its trustee’s central management and control was located. The BCSC said that MM had no physical connection to B.C. other than the fact that it sold its securities to some B.C. residents through B.C. dealers who are registered in B.C. However, this limited “connection” was insufficient to establish MM as a B.C. resident under s. 2(1) of the CPA.

In making this finding, the BCSC also referred to the Court Jurisdiction and Proceedings Transfer Act, SBC 2003 c. 28, which deals with “ordinary residency” requirements for corporations, partnerships and unincorporated associations, and similarly states that residency is established through a registered office, location, business address, place of business or central management in B.C. or an officer who is ordinarily resident in B.C.

The BCSC acknowledged that a person or corporation may have more than one place of residence and that being a resident of Ontario did not automatically preclude MM from being a resident of B.C. as well. However, the Court found on the evidence that MM had failed to demonstrate that it was a B.C. resident.

Scheduling of applications in class proceedings

MM also argued that the BCSC’s decision on the residency issue should be deferred to the hearing of the certification application. However, relying on the well-established Shaver factors that apply to the scheduling of applications in class proceedings (referred to by the British Columbia Court of Appeal in British Columbia v. Apotex Inc., 2021 BCCA 219), the BCSC decided not to defer the residency issue to certification. In so doing, the BCSC emphasized that a determination that MM was not a B.C. resident had the potential to dispose entirely of the proceedings as a class proceeding and that a lingering uncertainty on the residency issue would put Excelsior to unnecessary costs of a certification hearing. The BCSC further emphasized that a determination of the residency issue prior to certification would be in the interests of economy and judicial efficiency and that MM would not be prejudiced in any manner if the class proceeding was scaled down to an individual action.

In conclusion, the BCSC found that MM was not a B.C. resident under s. 2(1) of the CPA and struck its certification application. The Court further ordered MM to remove the pleadings related to advancing a class proceeding under the CPA against Excelsior on the basis that they were unnecessary and vexatious. Excelsior was also awarded its costs of the application in any event of the cause.

Takeaways

The BCSC’s decision affirms the importance of the residency requirement in s. 2(1) of the CPA. Defendants to putative class proceedings should be mindful of the plaintiffs’ onus to prove that they have standing as a B.C. resident under s. 2(1) and may wish to consider preliminary challenges in the event that this threshold criterion is not satisfied. The Excelsior decision also confirms the B.C. Court’s willingness to adjudicate the residency status of the plaintiff prior to certification, avoiding the uncertainty and unnecessary expense of a full certification application.