Excalibur Special Opportunities LP v. Schwartz Levitsky Feldman LLP, 2015 ONSC 1634

• Judge: Lederman, Sachs and Lederer, JJ.
• Court: Superior Court of Justice of Ontario (Canada)
• Case Date: February 11, 2015
• Jurisdiction: Ontario
• Citations: 2015 ONSC 1634;(2015), 337 O.A.C. 123 (DC)

Excalibur Special v. Schwartz Levitsky (2015), 337 O.A.C. 123 (DC)

MLB headnote and full text

Temp. Cite: [2015] O.A.C. TBEd. AU.001

Excalibur Special Opportunities LP (plaintiff/appellant) v. Schwartz Levitsky Feldman LLP (defendant/respondent)

(360/14; CV-12-466694-00CP; 2015 ONSC 1634)

Indexed As: Excalibur Special Opportunities LP v. Schwartz Levitsky Feldman LLP

Court of Ontario

Superior Court of Justice

Divisional Court

Lederman, Sachs and Lederer, JJ.

June 15, 2015.

Summary:

A Canadian investment fund (Excalibur Special Opportunities LP) was one of 57 investors who, in response to a Private Placement Memorandum, purchased shares of a Chinese hog producer (South China Livestock). The Private Placement Memorandum included a "clean" audit report prepared by a Canadian accounting firm (Schwartz Levitsky Feldman LLP (SLF)). South China Livestock went out of business a short time later and the investors lost their investment. Excalibur sued SLF for negligence and negligent misrepresentation and moved to have its claim certified as a class action on behalf of the investors.

The Ontario Superior Court, in a decision with neutral citation 2014 ONSC 4118, dismissed the motion. The court subsequently awarded costs to SLF (see 2014 ONSC 4751). The costs award included $107,660.26 USD, which was the amount SLF had incurred to obtain two affidavits from a senior lawyer in New York with expertise in American securities law. Excalibur appealed the dismissal of its motion and, if unsuccessful, appealed the costs award.

The Ontario Divisional Court, Sachs, J., dissenting, dismissed the appeal.

Conflict of Laws - Topic 7605

Torts - Jurisdiction - Real and substantial connection - [See Practice - Topic 209.22 ].

Courts - Topic 584

Judges - Duties - To determine issues - [See first Practice - Topic 209.3 ].

Practice - Topic 209

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - General principles - The Ontario Divisional Court stated that "The Class Proceedings Act is a procedural statute. Proceeding under its ambit does not affect the cause or substance of the action. Nothing which is not negligence within a more typical proceeding suddenly becomes negligence just because the case is framed as a class proceeding. The legislation presents a means to conduct litigation. It does not apply every time a 'person', individual or group that finds herself, himself or itself harmed or damaged in common with others. There is no inherent right to proceed on a class basis. The procedure offered by the legislation is in furtherance of understood policy objectives: (1) access to justice; (2) behaviour modification; and, (3) judicial economy." - See paragraph 6.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Certification - Considerations (incl. when class action appropriate) - A Canadian investment fund (Excalibur Special Opportunities) was one of 57 investors who, in response to a Private Placement Memorandum, purchased shares of a Chinese hog producer (South China Livestock) - The Private Placement Memorandum included a "clean" audit report prepared by a Canadian accounting firm (Schwartz Levitsky Feldman (SLF)) - South China Livestock went out of business a short time later - Excalibur sued SLF for negligence and negligent misrepresentation and moved to have its claim certified as a class action on behalf of the investors - The motion judge dismissed the motion, concluding that a class proceeding was not the preferable procedure and that joinder was available, appropriate and preferable - Excalibur appealed, arguing that the motion judge erred by favouring joinder when it was not a procedure raised or commented on by the parties - The Ontario Divisional Court rejected this argument - The Class Proceedings Act was a procedural statute - The court had a responsibility to find the "preferable procedure" - Joinder was not simply an alternative - It was the default position in considering whether a class proceeding was the preferable procedure - The motion judge did not impose joinder on the parties - He simply observed that, absent a class proceeding, the traditional procedures which were in place to deal with such situations remained and were available - See paragraphs 11 to 16.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Certification - Considerations (incl. when class action appropriate) - A Canadian investment fund (Excalibur Special Opportunities) was one of 57 investors who, in response to a Private Placement Memorandum, purchased shares of a Chinese hog producer (South China Livestock) - The Private Placement Memorandum included a "clean" audit report prepared by a Canadian accounting firm (Schwartz Levitsky Feldman (SLF)) - South China Livestock went out of business a short time later - Excalibur sued SLF for negligence and negligent misrepresentation and moved to have its claim certified as a class action on behalf of the investors - The motion judge dismissed the motion, concluding that a class proceeding was not the preferable procedure and that joinder was available, appropriate and preferable - The Ontario Divisional Court dismissed Excalibur's appeal - The motion judge's decision respecting the preferable procedure was entitled to particular deference - Class proceedings should be used when they were needed, not just because they could be made to apply and appeared convenient - The motion judge's decision reflected this concern - He found that the action could be carried forward in a way that did not impinge on the underlying policy concerns (access to justice, behaviour modification and judicial economy), and without the added procedural requirements of a class proceeding - See paragraphs 17 to 27.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Certification - Considerations (incl. when class action appropriate) - [See Practice - Topic 209.22 ].

Practice - Topic 209.9

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Appeals - [See second Practice - Topic 209.3 and Practice - Topic 209.22 ].

Practice - Topic 209.22

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Members of class - Non-resident class members (incl. jurisdiction) - A Canadian investment fund (Excalibur Special Opportunities) was one of 57 investors who, in response to a Private Placement Memorandum provided by American promoters and marketers, purchased shares of a Chinese hog producer (South China Livestock) - The Private Placement Memorandum included a "clean" audit report prepared by a Canadian accounting firm (Schwartz Levitsky Feldman (SLF)) - South China Livestock went out of business a short time later - Excalibur sued SLF for negligence and negligent misrepresentation and moved to have its claim certified as a class action on behalf of the investors - Of the 57 investors, 50 were American, five were from around the world, and two were Canadian - The motion judge dismissed the motion, finding that the claim failed to meet the identifiable class criterion - He noted that the investors were non-residents of Ontario making substantial investments in American dollars in an American corporation in a transaction that was governed by American corporate and securities law - The standard of care associated with the audit report would largely be determined by American accounting standards - The motion judge concluded that "It would be to exercise no restraint at all to conclude that Ontario had a substantial connection with this American financing and corporate reorganization." - The Ontario Divisional Court dismissed Excalibur's appeal - The motion judge did not forget that the action was against a Canadian-based accounting firm - Looking at the facts as a whole, he determined that this was not sufficient to demonstrate a real and substantial connection to Ontario - Deference suggested that this finding should be left to stand - See paragraphs 28 to 36.

Practice - Topic 210.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Costs - A Canadian investment fund (Excalibur Special Opportunities) was one of 57 investors who, in response to a Private Placement Memorandum provided by American promoters and marketers, purchased shares of a Chinese hog producer (South China Livestock) - The Private Placement Memorandum included a "clean" audit report prepared by a Canadian accounting firm (Schwartz Levitsky Feldman (SLF)) - South China Livestock went out of business a short time later - Excalibur sued SLF for negligence and negligent misrepresentation and moved to have its claim certified as a class action on behalf of the investors - The motion judge dismissed the motion and awarded costs to SLF - The costs award included $107,660.26 USD which SLF had incurred to obtain two affidavits from a senior lawyer in New York with expertise in American securities law - The motion judge stated that "... in the context of defending a proposed action that involved an overwhelming number of American investors, it was within the reasonable expectation of Excalibur that SLF would obtain expert advice about the potential application of American law and how it might influence the proposed class action" - The Ontario Divisional Court dismissed Excalibur's appeal from the costs award - The motion judge made no error in principle - See paragraphs 37 to 40.

Practice - Topic 376

Parties - Joinder of parties - Joinder of plaintiffs - General - [See first Practice - Topic 209.3 ].

Practice - Topic 7139.3

Costs - Party and party costs - Disbursements - Fees of special or additional counsel - [See Practice - Topic 210.3 ].

Cases Noticed:

New Brunswick (Board of Management) v. Dunsmuir, [2008] 1 S.C.R. 190; 372 N.R. 1; 329 N.B.R.(2d) 1; 844 A.P.R. 1; 2008 SCC 9, refd to. [para. 7, footnote 9].

H.L. v. Canada (Attorney General) et al., [2005] 1 S.C.R. 401; 333 N.R. 1; 262 Sask.R. 1; 347 W.A.C. 1; 2005 SCC 25, refd to. [para. 7, footnote 9].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 7, footnote 10].

Kafka et al. v. Allstate Insurance Co. of Canada et al. (2012), 289 O.A.C. 292; 2012 ONSC 1035 (Div. Ct.), refd to. [para. 8, footnote 11].

Cassano et al. v. Toronto-Dominion Bank (2007), 230 O.A.C. 224; 87 O.R.(3d) 401; 2007 ONCA 781, refd to. [para. 8, footnote 11].

Anderson et al. v. Wilson et al. (1999), 122 O.A.C. 69; 44 O.R.(3d) 673; 1999 CanLII 3753 (C.A.), refd to. [para. 8, footnote 11].

Markson v. MBNA Canada Bank (2007), 224 O.A.C. 71; 85 O.R.(3d) 321; 2007 ONCA 334, leave to appeal refused (2007), 383 N.R. 381; 248 O.A.C. 396 (S.C.C.), refd to. [para. 8, footnote 11].

Cloud et al. v. Canada (Attorney General) et al. (2004), 192 O.A.C. 239; 73 O.R.(3d) 401 (C.A.), leave to appeal refused (2005), 344 N.R. 192 (S.C.C.), refd to. [para. 10, footnote 13].

AIC Ltd. v. Fischer - see Fischer et al. v. IG Investment Management Ltd. et al.

Fischer et al. v. IG Investment Management Ltd. et al., [2013] 3 S.C.R. 949; 452 N.R. 80; 312 O.A.C. 128; 2013 SCC 69, refd to. [para. 10, footnote 14; para. 78].

Chadha v. Bayer Inc. et al. (2001), 147 O.A.C. 223; 54 O.R.(3d) 520 (Div. Ct.), affd. (2003), 168 O.A.C. 143; 63 O.R.(3d) 22 (C.A.), leave to appeal refused (2003), 320 N.R. 399 (S.C.C.), refd to. [para. 10, footnote 15].

Hryniak v. Mauldin (2014), 453 N.R. 51; 314 O.A.C. 1; 2014 SCC 7, refd to. [para. 10, footnote 17].

L.C. et al. v. Grenville Christian College et al., [2012] O.T.C. Uned. 2995; 2012 ONSC 2995, dist. [para. 11, footnote 19].

L.C. v. Grenville Christian College et al. (2013), 304 O.A.C. 163; 2013 ONCA 139, refd to. [para. 11, footnote 19].

Cavanaugh et al. v. Haig Estate et al., [2014] O.A.C. Uned. 109; 2014 CanLII 7350; 2014 ONSC 290 (Div. Ct.), dist. [para. 11, footnote 19].

Hollick v. Metropolitan Toronto (Municipality) et al., [2001] 3 S.C.R. 158; 277 N.R. 51; 153 O.A.C. 279; 2001 SCC 68, refd to. [para. 13, footnote 23].

Oakley & Oakley Professional Corp. v. Aitken et al., [2011] O.T.C. Uned. 5613; 2011 ONSC 5613, refd to. [para. 15, footnote 27].

Jaikaran v. Austin, 2011 ONSC 6336, refd to. [para. 15, footnote 27].

Hudson v. Austin et al., [2010] O.T.C. Uned. 2789; 2010 ONSC 2789, refd to. [para. 15, footnote 27].

Bendall v. McGhan Medical Corp. (1993), 14 O.R.(3d) 734; 1993 CanLII 5550 (Gen. Div.), refd to. [para. 30, footnote 44].

Robertson v. Thomson Corp. et al. (1999), 86 O.T.C. 226; 43 O.R.(3d) 161; 1999 CanLII 14768 (Gen. Div.), refd to. [para. 30, footnote 44].

Carom et al. v. Bre-X Mineral Ltd. et al. (1999), 98 O.T.C. 1; 44 O.R.(3d) 173; 1999 CanLII 14794 (Sup. Ct.), affd. (1999), 46 O.R.(3d) 315 (Div. Ct.), revd. (2000), 138 O.A.C. 55; 51 O.R.(3d) 236; 2000 CanLII 16886 (C.A.), refd to. [para. 30, footnote 44].

Wilson v. Servier Canada Inc. et al., [2000] O.T.C. 884; 50 O.R.(3d) 219; 2000 CanLII 22407 (Sup. Ct.), refd to. [para. 30, footnote 44].

Mondor et al. v. Fisherman et al., [2001] O.T.C. Uned. B99 (Sup. Ct.), refd to. [para. 30, footnote 44].

Brimner et al. v. Via Rail Canada Inc. et al., [2000] O.T.C. 577; 50 O.R.(3d) 114; 2000 CanLII 22404 (Sup. Ct.), refd to. [para. 30, footnote 44].

Cheung et al. v. Kings Land Developments Inc. et al., [2001] O.T.C. 680; 2001 CanLII 28002 (Sup. Ct.), leave to appeal refused (2002), 156 O.A.C. 73 (Div. Ct.), refd to. [para. 30, footnote 44].

McNaughton Automotive Ltd. v. Co-operators General Insurance Co., [2003] O.T.C. 757; 66 O.R.(3d) 466; 2003 CanLII 34059 (Sup. Ct.), refd to. [para. 30, footnote 44].

Baxter v. Canada (Attorney General) et al., [2005] O.T.C. 391 (Sup. Ct.), refd to. [para. 30, footnote 44].

McCutcheon v. Cash Store Inc. et al., [2006] O.T.C. 424; 80 O.R.(3d) 644; 2006 CanLII 15754 (Sup. Ct.), refd to. [para. 30, footnote 44; para. 70].

Silver et al. v. IMAX Corp. et al., [2009] O.J. No. 5585; 2009 CanLII 72334 (Sup. Ct.), leave to appeal refused, [2011] O.T.C. Uned. 1035; 2011 ONSC 1035, refd to. [para. 30, footnote 44].

Pysznyj v. Orsu Metals Corp., 2010 ONSC 1151, refd to. [para. 30, footnote 44].

Ramdath et al. v. Brown (George) College of Applied Arts and Technology, [2010] O.T.C. Uned. 2019; 2010 ONSC 2019, refd to. [para. 30, footnote 44].

Green et al. v. Canadian Imperial Bank of Commerce et al., [2012] O.T.C. Uned. 3637; 2012 ONSC 3637, varied (2014), 314 O.A.C. 315; 2014 ONCA 90,refd to. [para. 30, footnote 44; para. 94].

Gray v. SNC-Lavalin Group Inc. et al., [2012] O.T.C. Uned. 5288; 2012 ONSC 5288, refd to. [para. 30, footnote 44].

Bell ExpressVu Limited Partnership v. Pieckenhagen et al., [2013] O.T.C. Uned. 195 (Sup. Ct.), refd to. [para. 38, footnote 50].

Hamilton v. Open Window Bakery Ltd. et al., [2004] 1 S.C.R. 303; 316 N.R. 265; 184 O.A.C. 209; 2004 SCC 9, refd to. [para. 38, footnote 50].

Andriano v. Napa Valley Plaza Inc. (2011), 280 O.A.C. 339; 2011 ONSC 2168 (Div. Ct.), refd to. [para. 38, footnote 50].

Van Damme v. Gelber et al. (2013), 307 O.A.C. 81; 115 O.R.(3d) 470; 2013 ONCA 388, refd to. [para. 38, footnote 50].

Van Breda et al. v. Village Resorts Ltd. et al. (2012), 429 N.R. 217; 291 O.A.C. 201; 2012 SCC 17, refd to. [para. 56].

Currie v. McDonald's Restaurants of Canada Ltd. et al. (2005), 195 O.A.C. 244; 74 O.R.(3d) 321 (C.A.), refd to. [para. 66].

Tolofson v. Jensen and Tolofson, [1994] 3 S.C.R. 1022; 175 N.R. 161; 77 O.A.C. 81; 51 B.C.A.C. 241; 84 W.A.C. 241, refd to. [para. 71].

Hercules Management Ltd. et al. v. Ernst & Young et al., [1997] 2 S.C.R. 165; 211 N.R. 352; 115 Man.R.(2d) 241; 139 W.A.C. 241, refd to. [para. 98].

Robinson v. Rochester Financial Ltd. et al., [2010] O.T.C. Uned. 463; 2010 ONSC 463, leave to appeal refused (2010), 262 O.A.C. 148; 2010 ONSC 1899 (Div. Ct.), refd to. [para. 101].

Lipson v. Cassels Brock & Blackwell LLP et al., [2011] O.T.C. Uned. 6724; 2011 ONSC 6724, revd. (2013), 303 O.A.C. 124; 2013 ONCA 165, refd to. [para. 101].

Cannon v. Funds for Canada Foundation et al., [2012] O.T.C. Uned. 399; 2012 ONSC 399, leave to appeal refused [2012] O.A.C. Uned. 778; 2012 ONSC 6101 (Div. Ct.), refd to. [para. 101].

Dugal et al. v. Manulife Financial Corp. et al., [2013] O.T.C. Uned. 4083; 2013 ONSC 4083, leave to appeal refused (2014), 317 O.A.C. 384; 2014 ONSC 1347, refd to. [para. 101].

Murphy v. BDO Dunwoody LLP et al., [2006] O.T.C. 630; 2006 CanLII 22809 (Sup. Ct.), refd to. [para. 101].

Quinte et al. v. Eastwood Mall Inc. et al., [2014] O.T.C. Uned. 249; 2014 ONSC 249, refd to. [para. 108].

Authors and Works Noticed:

Ontario, Law Reform Commission, Report on Class Actions (1982), vol. 1, pp. 5 [para. 13, footnote 24]; 82 to 86 [paras. 13, 89, footnote 24].

Counsel:

Linda Rothstein, Margaret Waddell and Odette Soriano, for the plaintiff/appellant;

Tim Farrell and Jordan Page, for the defendant/respondent.

This appeal was heard at Toronto, Ontario, on February 11, 2015, before Lederman, Sachs and Lederer, JJ., of the Ontario Divisional Court. The judgment of the court was delivered on June 15, 2015, and included the following opinions:

Lederer, J. (Lederman, J., concurring) - see paragraphs 1 to 43;

Sachs, J., dissenting - see paragraphs 44 to 140.