In a recent discussion (Kaynes v. BP, PLC 2014 ONCA 580), the Ontario Court of Appeal stayed a
proposed class action against BP, PLC for secondary market
misrepresentation on the principle of forum non conveniens. The Court
concluded that while Ontario Courts had jurisdiction to hear the class action,
there was another forum that was clearly more appropriate for the adjudication
of the plaintiff's claim and of the claims of foreign exchange purchasers of BP's
securities.
The plaintiff's claim rose out of the Deep Water Horizon oil
spill that occurred in the Gulf of Mexico in April of 2010. The plaintiff
alleged that BP made certain misrepresentations in its public disclosures,
before and after the spill, related to its operations, safety programs, and the
accident that impacted the price of BP's shares. His claim was based on part
XXIII.1 of the Ontario Securities Act which provides a statutory cause of action
for secondary market misrepresentation.
The plaintiff, a resident of Ontario, purchased his shares
over the New York Stock Exchange. The proposed class included all residents of
Canada who acquired BP securities between relevant dates wherever those
securities were purchased.
BP's challenge of Ontario's jurisdiction to hear the class
action was dismissed by a motion Judge. BP appealed that decision to the
Court of Appeal. The Court of Appeal agreed with the motion judge that Ontario
did have jurisdiction simpliciter, but concluded that the motion Judge
had erred in principle in failing to decline jurisdiction on the basis of forum non conveniens.
The Court of Appeal held that there was a real and
substantial connection between BP, or the subject matter of the claim and the
forum despite the fact that BP was a UK corporation headquartered in London,
England and did not own any real or personal property in Canada, nor did it
carry on business in Canada. BP's common shares were listed for trading on the
London Stock Exchange, the Frankfurt Stock Exchange and the New York Stock
Exchange. They had never been listed on the Toronto Stock Exchange.
However, BP was a "reporting issuer" under Ontario
securities regulations when the plaintiff purchased what is known as American
Depository Shares ("ADS") a form of equity security currently listed
for trading only on the New York Stock Exchange. BP was a reporting issuer
during the period when ADS were traded on the TSX. In 2009 after ADS were
delisted from the TSX, BP ceased to be a reporting issuer in Ontario and other
Canadian provinces on the undertaking that it would continue to send relevant investor
documents to its shareholders in Canada.
BP did not dispute that it was required by the undertaking
send the plaintiff the documents that contained the alleged misrepresentations. The Court of Appeal held that when BP
released the documents, BP knew
by virtue of the undertaking it had given that even if the initial point of
release was outside Ontario, the documents were "certain to find (their) way to
Ontario and to its Ontario shareholders". Accordingly, by releasing such
documents, BP committed an act that had an immediate and direct connection with
Ontario. That was sufficient to establish a real and substantial connection between the claim
and Ontario.
Accordingly, the Court of Appeal agreed with the motion
judge that such connection was a presumptive connecting
factor for a tort committed in Ontario and therefore there was jurisdiction simpliciter
in Ontario.
However the Court of Appeal indicated that a court has
discretion to decline to exercise its jurisdiction under the forum non
conveniens doctrine if the defendant showed that another forum was clearly
more appropriate for the adjudication of the action.
In this case, BP argued that Ontario should decline
jurisdiction in favour of the United States and the United Kingdom. Laws of both countries related to jurisdiction over such claims was based on the principle that securities
litigation should take place in forum where the securities transaction took
place. Their approach to jurisdiction over securities litigation was based
principle of comity.
The Court of Appeal held that the motion Judge had erred in
failing to take to account the principle of comity and erred in law with respect
to a related issue of avoiding a multiplicity proceedings.
Both the US and the UK reserved jurisdiction on
the basis of the location of stock exchange where the securities are traded. US law goes one step
further and provides for the exclusive jurisdiction of the US courts over such
claims. In keeping with the principle of comity, the court is obliged to
consider that claim of exclusive jurisdiction. The Court of Appeal held that asserting
Ontario's jurisdiction over the plaintiff's claim would be inconsistent with the approach
taken under both US and UK law with respect jurisdiction over claims for
secondary market misrepresentation. The principle of comity strongly favoured
declining jurisdiction.
In addition, avoiding a multiplicity of proceedings
means that what should be avoided is litigation in more than one jurisdiction
over the same claims of the same parties. Proposed class parties who have not
opted out of the US proceedings would be problematic in that regard.
As a result, the Court stayed the proposed class proceeding.
Regards,
Blair
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