



COURT OF APPEAL FOR ONTARIO

CITATION: Excalibur Special Opportunities LP v. Schwartz
    Levitsky Feldman LLP, 2016 ONCA 916

DATE: 20161206

DOCKET: C61321

Cronk, Blair and MacFarland JJ.A.

BETWEEN

Excalibur Special Opportunities LP

Plaintiff

(Appellant)

and

Schwartz Levitsky Feldman LLP

Proceeding Under
t
he Class Proceedings Act, 1992

Defendant

(Respondent)

Linda R. Rothstein, Margaret L. Waddell and Odette
    Soriano, for the appellant

Tim Farrell and Jordan Page, for the respondent

Heard: June 15, 2016

On appeal from the order of the Divisional Court
    (Justices Sidney N. Lederman and Thomas R. Lederer, Justice Harriet E. Sachs
    dissenting), dated June 15, 2015, with reasons reported at 2015 ONSC 1634, 45
    B.L.R. (5th) 46, affirming the order of Justice Paul M. Perell of the Superior
    Court of Justice, dated July 8, 2014, with reasons reported at 2014 ONSC 4118,
    31 B.L.R. (5th) 46.

MacFarland J.A.:

[1]

The appellant, Excalibur Special Opportunities LP, was one of 57
    investors that lost money in an expressly high-risk investment. It sought to
    certify a class action against the respondent, Schwartz Levitsky Feldman LLP
    (SLF), an accounting firm, for negligence and negligent misrepresentation
    over an audit report that Excalibur and the other investors claimed to have relied
    on in deciding to invest. The motion judge denied Excaliburs motion for
    certification. A majority of the Divisional Court upheld the motion judges
    order. Excalibur now appeals with leave to this court.

BACKGROUND

Southern China Livestock and the Private Placement Memorandum

[2]

Southern China Livestock International Inc., incorporated in
    Nevada, USA, owned or operated hog farms in China through various subsidiary
    corporations. Seeking to raise capital to expand its operations, Southern China
    Livestock retained a New York-based investment bank, Rodman & Renshaw LLP,
    to solicit investors.

[3]

In 2010, Rodman & Renshaw put out a 230-page Private
    Placement Memorandum (the Memorandum) to accredited investors  individuals
    with a net worth of at least US$1 million or two years of income over
    US$200,000.

[4]

One of the exhibits to the Memorandum was a one-page audit report
    prepared by SLF for the fiscal years 2008 and 2009. SLF is a Montreal and
    Toronto-based accounting firm with stated expertise in auditing Chinese
    companies. The audit report stated that the financial statements fairly
    represented Southern China Livestocks financial position for those years, in
    accordance with generally accepted accounting principles.

[5]

SLFs audit report is the basis for the proposed class action. It
    reads in full:

Schwartz Levitsky Feldman LLP

CHARTERED ACCOUNTANTS

LICENSED PUBLIC ACCOUNTANTS

TORONTO - MONTREAL

REPORT OF INDEPENDENT REGISTERED
    PUBLIC ACCOUNTING FIRM

To the Shareholders of Southern China Livestock International
    Inc.

We have audited the consolidated balance sheets of Southern
    China Livestock International Inc. as at September 30, 2009 and 2008 and the
    consolidated statements of income and comprehensive income, stockholders'
    equity and cash flows for the years then ended. These consolidated financial
    statements are the responsibility of the management of Southern China Livestock
    International Inc. Our responsibility is to express an opinion on these
    consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those standards
    require that we plan and perform the audit to obtain reasonable assurance about
    whether the consolidated financial statements are free of material
    misstatement. An audit includes examining, on a test basis, evidence supporting
    the amounts and disclosures in the consolidated financial statements. An audit
    also includes assessing the accounting principles used and significant
    estimates made by management, as well as evaluating the overall financial
    statement presentation. We believe that our audits provide a reasonable basis
    for our opinion.

The company is not required to have nor were we engaged to
    perform, an audit of its internal control over financial reporting. Our audit
    included consideration of internal control over financial reporting as a basis
    for designing audit procedures that are appropriate in the circumstances, but
    not for the purpose of expressing an opinion on the effectiveness of the
    company's internal controls over financing reporting. Accordingly, we express
    no such opinion.

In our opinion, these consolidated financial statements
    referred to above present fairly, in all material respects, the financial
    position of Southern China Livestock International Inc. as of September 30,
    2009 and 2008 and the results of its operations and its cash flows for the years
    then ended in accordance with generally accepted accounting principles in the
    United States of America.

Toronto, Ontario, Canada

January 28, 2010

1167 Caledonia Road

Toronto, Ontario, M6A 2X1

Tel: 416 785 5353

Fax: 416 785 5663

[6]

SLF was paid $45,000 for preparing the audit report.

Excalibur Special Opportunities LP

[7]

Excalibur is a limited partnership organized in Manitoba and
    operating as an investment fund based in Toronto. It invests in small-cap
    private and public companies. After reviewing the Memorandum page for page,
    word for word, Excalibur invested a total of US$950,000 in Southern China
    Livestock between March and November 2010.

The Other Investors

[8]

Southern China Livestock raised a total of US$7.6 million through
    the private placement from a total of 57 investors. Excalibur was one of only
    two Canadian investors and the only from Ontario (the other was from British
    Columbia). 50 of the 57 investors were American. All told, 98% of the proposed
    class members were non-residents of Ontario:



Number of
          investors (57)

Residence



50

U.S.



2

Canada



1

Cayman Islands



1

Samoa



1

Malaysia



1

United Kingdom



1

Unknown



[9]

The majority of investors invested under US$100,000. With its
    US$950,000 investment, Excalibur was by far one of the most heavily-invested:



Number of
          investors (57)

Amount invested



19

$1 to $49,000



12

$50,000 to $99,000



8

$100,000 to
          $199,000



7

$200,000 to
          $399,000



3

$400,000 and over



8

(unclear)



The Downfall of Southern
    China Livestock

[10]

In December 2010, Southern China Livestock filed a report
    mandated under U.S. securities law that Excalibur later described as
    shocking. The report revealed that:

·

Hogs were sold primarily for cash by farm employees;

·

The employees maintained corporate funds in bank accounts under
    their own names;

·

Southern China Livestock had little or no control over the
    employees activities;

·

Disclosure controls were ineffective; and

·

Internal controls over financial reporting were not effective.

[11]

In June and July 2011, Southern China Livestocks North American
    directors resigned. A month later, Southern China Livestock withdrew its
    preliminary prospectus from the Securities and Exchange Commission. As the
    motion judge described it, at para. 52: Southern China Livestock went
    dark, and its shares and warrants are now worthless.

The Proposed Class Action

[12]

In October 2012, Excalibur commenced a proposed class action
    against SLF on behalf of the 57 investors, seeking damages equal to the value
    of their investments. The essence of the claim is that in light of the true
    state of Southern China Livestocks financial affairs in 2008 and 2009  i.e.
    that it had little control over the revenue and expenses of its all-cash
    business  SLF could not have provided a clean audit report in accordance with
    generally accepted accounting principles, as it had professed to do.

The Motion Judges Certification Decision

[13]

The motion judge dismissed Excaliburs certification motion on
    two bases.

[14]

First, he held that the class definition criterion under s.
    5(1)(b) of the
Class Proceedings Act, 1992
,
    S.O. 1992, c. 6,

was not met because the
    proposed claim lacked a real and substantial connection to Ontario. While
    Excalibur and SLF are both based in Toronto, the remaining proposed plaintiffs
    are all non-residents of Ontario, the company in which they invested was based
    in the United States, and the transactions were governed by American law.

[15]

Second, the motion judge held that the preferable procedure
    criterion under s. 5(1)(d) was not met because joinder was a more appropriate
    mechanism for resolving the plaintiffs claims. The motion judge contrasted
    this case with what he called the quintessential economic loss case, where a
    class proceeding is the only way for plaintiffs to achieve the goals of access
    to justice, behaviour modification and judicial economy. By contrast, in this
    case, Excalibur itself has a nearly US$1 million claim, and if it joined with
    just the other top 10 investors, their combined claims would be worth about
    US$3 million. This, he held, would amply justify the litigation risk and would
    have the same corrective effect as a class action, without the additional
    procedural hurdles.

[16]

In all other respects, the motion judge was of the view that, with
    modifications to some of the proposed common issues, the remaining requirements
    of s. 5(1) of the
Class Proceedings Act, 1992
,
    were met.

The Appeal to Divisional Court

[17]

Excalibur appealed to the Divisional Court, where the majority
    deferred to and affirmed the motion judges decision.

[18]

Justice Sachs in dissent was of the view that the motion judge
    erred in failing to find a real and substantial connection between Ontario and
    the proposed action. That error informed his preferable procedure analysis, in
    which he fell into further error by failing to conduct the comparative access
    to justice analysis mandated by the Supreme Court of Canada in
AIC Limited v. Fischer
, 2013 SCC 69, [2013] 3
    S.C.R. 949.

ISSUES ON APPEAL

[19]

There are two issues before this court. The first is whether the
    Divisional Court majority erred in deferring to the motion judges
    determination that there was no real and substantial connection between Ontario
    and the subject matter of the dispute. The second is whether the majority
    further erred in deferring to the motion judges determination that joinder was
    the preferable procedure to advance the issues raised in the pleadings. Indeed,
    the Divisional Court went so far as to describe joinder as the default
    procedure and cautioned that: [w]e should be careful to use class proceedings
    when they are needed, not just because they can be made to apply and appear
    convenient: at para. 26.

[20]

Although SLF challenges some of Excaliburs proposed common
    issues, it does not contest that the common issues criterion is satisfied
    generally. I proceed on the basis that all other requirements of s. 5(1) of the
    Act are satisfied, with the exception of those which are the subject of this
    appeal.

[21]

For the following reasons I would allow the appeal essentially
    for the reasons articulated by Sachs J. in the Divisional Court.

ANALYSIS

(1)

The motion judge erred in
    failing to find a real and substantial connection between Ontario and the
    subject matter of the dispute

[22]

As I have explained, of the 57 known investors who formed the
    putative class, only one was resident in Ontario. The vast majority of
    investors who lost money in Southern China Livestock were U.S. residents. The
    motion judge concluded that, in these circumstances, it would not be
    appropriate to certify a global class proceeding because there was no real and
    substantial connection between Ontario and the dispute.

[23]

The motion judge explained that in defining class membership,
    there must be a rational relationship between the class, the causes of action,
    and the common issues, and the class must not be unnecessarily broad or
    over-inclusive: at para. 102.

[24]

He also accepted, at para. 107, that there is jurisdiction under
    the
Class Proceedings Act, 1992
to certify
    a national or global class action where the class members will include persons
    and corporations from across Canada and around the world. The issue for the
    motion judge was not whether there could be a global class action, but whether
    it was appropriate to certify one in this case: at para. 109.

[25]

The motion judge set out the factors that in his view governed
    whether or not to certify a national or global class, at para. 111:

a)

whether the
    Ontario court has jurisdiction
simpliciter
over the defendant;

b)

whether the
    Ontario court can assume jurisdiction over a non-resident class member, which largely
    depends on whether Ontario has a real and substantial connection with the
    subject matter of the action and on principles of order, fairness and comity
    between courts;

c)

whether it would
    be reasonable for the non-resident class members to expect that their rights
    would be determined by what to them would be a foreign court; and

d)

whether the
    non-resident plaintiffs can be accorded procedural fairness, including adequate
    notice and a meaningful opportunity to opt out.

[26]

The motion judge held that the third factor was fatal to
    Excaliburs motion. Relying on this courts decision in
Currie v. McDonalds Restaurants of Canada Ltd.
(2005), 74 O.R. (3d) 321, the motion judge held, at paras. 124 and 129, that he
    had to approach the question whether there was a real and substantial
    connection between the cause of action and the Ontario court with restraint,
    having regard to the reasonable expectations of the foreign plaintiffs.

[27]

With this in mind, the motion judge held that from the class
    members perspective, it is hard to imagine a case where it would be less
    reasonable to expect that his or her legal claims had a real and substantial
    connection to Ontario: at para. 128.

[28]

The motion judge explained, at para. 130:

The investors in the case at bar 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.
    Although the transaction included an Audit Report from an Ontario auditor, the
    standard of care associated with that audit would largely be determined by the
    American accounting standards under which the Audit Report was provided. It
    would be to exercise no restraint at all to conclude that Ontario had a
    substantial connection with this American financing and corporate
    reorganization.

[29]

The Divisional Court majority deferred to this conclusion.

[30]

On appeal, Excalibur takes no issue with factors (a), (b) and (d),
    but submits that the motion judge erred by including factor (c) as an
    independent consideration for the court in determining whether to take
    jurisdiction in a global class proceeding. It submits that the motion judge
    further erred in relying on this courts decision in
Currie
for the proposition that he had to
    exercise restraint in applying the real and substantial connection test.

[31]

I agree with these submissions.

[32]

Currie
was concerned with
    the enforcement of an American settlement agreement that purported to bind
    Canadian class members. The jurisdictional issue in that case involved the
    order and fairness implications of enforcing that judgment against the absent
    Canadian class members. As Excalibur notes in its factum, at para. 50:

When Sharpe J.A. stated, embedded in the principles of order
    and fairness is also the notice of jurisdictional restraint, he was observing
    that fairness includes the foreign court having had a real and substantial
    connection to the cause of action or the parties, as well as having afforded
    adequate procedural rights to the non-resident class members. His concern was
    re-iterated as Before enforcing a foreign class action judgment against
    Ontario residents, we should ensure that the foreign court had a proper basis
    for the assertion of jurisdiction and that the interests of Ontario residents
    were adequately protected.

[33]

I agree with Excalibur that
Currie
does not stand for the proposition that an Ontario court should approach the
    issue of taking jurisdiction in a restrained manner. To the extent that the
    motion judge found that it did, he erred, as did the Divisional Court majority in
    upholding that determination.

[34]

The test to determine whether to take jurisdiction over foreign
    class members begins with an inquiry into jurisdiction
simpliciter
, on the principles set out in
Club Resorts Ltd. v. Van Breda
, 2012 SCC 17,
    [2012] 1 S.C.R. 572.

[35]

There cannot be much question that the court has jurisdiction
simpliciter
in this case. This is an action for
    negligence and negligent misrepresentation against a defendant who resides in
    Ontario, carries on business in Ontario and did the audit report, the subject
    of the dispute, in Toronto. Thus, three of the four presumptive connecting
    factors outlined in
Van Breda
are present
    on the facts of the case as pleaded.

[36]

When the motion judge concluded, at para. 147, that Ontario did
    not have a real and substantial connection with the claims of 56 of the 57
    investors and had only a modest if not trivial connection with Excalibur, he
    focused incorrectly on the private placement transaction in the U.S., instead
    of SLFs preparation of the audit report in Ontario.

[37]

At para. 60 of her dissenting reasons in the Divisional Court,
    Sachs J. stated:

If the action was against the people who were in charge of
    arranging or promoting the financing for the American corporation that made the
    investment in question, I would agree with the motion judges assessment of the
    connection between Ontario and the proposed action.  However, this is not the
    action that the representative plaintiff is proposing to pursue. Its action is
    a claim against a firm of accountants that resides in Ontario and actively
    conducts business here in relation to an audit that the firm performed in Ontario. 
    Conceived of in this way, it cannot be said that the action does not have a
    real and substantial connection with Ontario.

[38]

I agree with these comments. The motion judge misconceived the
    nature and substance of the proposed claim and in so doing, fell into error in
    his jurisdictional analysis. It is for the plaintiffs to plead their case as
    they see fit and to succeed or fail on that basis. It is not the courts role
    to re-write the claim advanced. The following excerpts from Excaliburs
    statement of claim make it clear that the motion judge mischaracterized the
    claim it sought to certify:

22.     Through the Private Placement Memorandum, SLF and
    International represented to potential investors that Internationals audited
    financial statements were prepared under US generally accepted accounting
    principles and that the initial audit of Internationals financial statements
    performed by SLF was in accordance with PCAOB [
Public Company Accounting Oversight Board]
standards.

...

27. In 2010, SLF held itself out as experienced and capable of
    providing audit services for Chinese companies looking to enter the North
    American public markets. It represented that it concluded its audits of Chinese
    companies in accordance with the standards of the PCAOB and in accordance with
    GAAS [generally accepted accounting standards].

...

33.     SLF knew that the Private Placement Memorandum was an
    offering that was made and distributed to an exclusive group of selected and
    qualified investors such as the Plaintiff and the other Class Members. SLF knew
    that the Private Placement Memorandum, inclusive of the Auditors Report, would
    be relied upon by all prospective investors when making their decision to
    purchase the Units.

34.     The Auditors Report was prepared by SLF for the
    specific purpose of improving the investment decisions of prospective investors
    in the Company, and with the intent that investors would rely upon the
    information in the audit.

35.     SLF consented to the inclusion of its Auditors Report
    in Private Placement Memorandum and the dissemination of its Auditors Report
    to prospective investors, including the Class Members, as part of the Private
    Placement Memorandum in connection with Financing.

36.     SLF knew that all investors, including the Plaintiff
    and the Class Members, would reasonably rely on SLFs knowledge and skill and
    on SLFs opinion in the Auditors Report for purposes of making a decision
    about whether to purchase the securities of International through the
    Financing.

[39]

At paras. 57-62 of the statement of claim, the particulars of the
    alleged negligence on the part of SLF are set out. They include:

57. In light of the true state of affairs regarding
    International's operations in 2008 and 2009, and as described in detail below,
    SLF could not have obtained the degree of comfort and verification required
    under GAAS and the PCAOB standards to complete an audit of International
    without significant reservations and qualifications, if SLF could complete any
    audit at all.

58. International's financial statements were, in no way, a
    fair presentation of International's financial position for the periods stated.
    The Representation was materially false, inaccurate and misleading. Excalibur
    and the Class Members relied on the clean Auditors' Report to their detriment,
    and have suffered the loss of their investments as a result, Excalibur and the
    Class would never have invested in the Units absent the assurance of a clean
    audit report by SLF.

59. SLF was negligent in failing to exercise the requisite care,
    skill and diligence of a reasonably competent auditor of a public company in
    carrying out its audit to ensure that the Auditors' Report accurately presented
    International's financial condition and performance, all as described below.

60. SLF was also negligent in permitting the Auditors' Report
    to be included as an exhibit to the Private Placement Memorandum when it knew
    or ought to have known that it did not exercise the requisite care, skill and
    diligence of a reasonably competent auditor of a public company in carrying out
    the audit of International.

61. SLF was negligent in the preparation of the Auditors'
    Report in that, among other things:

(a) it failed to conduct its audits
    in accordance with GAAS;

(b) it failed to properly supervise
    its audit staff;

(c) it failed to ensure that the
    financial statements were prepared in accordance with GAAP;

(d) it failed to obtain an adequate
    understanding of International's business operations and control systems prior
    to conducting its audit procedures;

(e) it failed to detect significant
    weaknesses in International's governance and internal controls;

(f) it failed to detect significant
    weaknesses in International's risk management system;

(g) it failed to report that the
    financial statements did not fairly present International's financial position
    in accordance with applicable accounting principles;

(h) it failed in its duty to warn of
    facts discovered, or that ought to have been discovered by the application of
    ordinary diligence, care, skill and GAAS, and other facts indicative of
    dishonesty, negligence or unreliability of certain senior management of
    International;

(i) it failed to comply with the
    rules and standards of the PCAOB to which its audit was subject:

(i) in failing to adequately assess
    the risk of material misstatement and to compensate by formulating sufficient,
    appropriate and alternative audit procedures;

(ii) by failing to adequately
    supervise the audit, particularly in circumstances where all of the field work
    was carried out in China;

(iii) in failing to obtain
    appropriate audit evidence;

(iv) by failing to identify
    weaknesses in internal controls and carrying out necessary audit testing;

(v) by failing to sufficiently
    pursue and evaluate related party transactions;

(j) it failed to seek or require
    sufficient and appropriate audit evidence about payables and receivables
    including the proper supervision and follow-up of the confirmation process; and

(k) it failed to obtain an adequate
    or sufficient and appropriate audit evidence in accordance with GAAS.

62. SLF received total audit and audit-related fees of
    approximately $365,000 for its services to International.

[40]

On the claims as pleaded, there is little question that the
    substance of this dispute, focused as it is on the Auditors Report prepared by
    SLF, does have a real and substantial connection to Ontario. This is an
    auditors negligence case, involving Ontario auditors in the context of a
    private placement in the United States. At its core, it does not concern the
    regulation of such placements in the United States.

[41]

Considerations of order and fairness are not seriously challenged
    here. The identity of all class members but one is known and they can be notified
    directly about the claim and their opt-out options. This is not a situation
    where there are unknown and indeterminate class members.

[42]

In my view, had the motion judge properly characterized the
    nature of the proposed action he could not have concluded that Ontarios
    connection to the claim was either modest or trivial.

[43]

Indeed, the majority in the Divisional Court acknowledged as much
    at para. 33 of their reasons:

[The motion judge] and counsel for the plaintiff see the
    circumstances of this case quite differently. For the judge, the case is founded
    on the financing of an American Corporation. It concerns investors, not
    resident in Ontario, making substantial investments in American dollars in that
    corporation. For counsel, the case is about an audit done in Ontario by an
    auditor whose business is located in Toronto and Montreal.  The proposition is
    that, if the perspective of the judge is correct, there is no real and
    substantial connection to Ontario but, if counsel is right, there is. [Citation
    omitted.]

[44]

The majority concluded that it did not have to resolve the issue
    in light of its decision to uphold the motion judges preferable procedure
    analysis, but noted that [d]eference would suggest the motion judges
    analysis of the real and substantial connection issue should be left to stand:
    at para. 36.

[45]

I respectfully disagree. There was in my view a clear error here
    on the part of the motion judge, which displaces the deference normally
    accorded to judges on motions for certification. He disregarded the pleadings
    in describing the nature of the claim.

[46]

I also agree with the conclusion of Sachs J. on this issue, at
    paras. 51-54 and 60 of her dissent:

The motion judge found that Ontario had only a modest if not
    trivial connection to the representative plaintiffs claim, and an even weaker
    connection to the other 56 non-resident investors claims. As such, according
    to the motion judge, it would not have been contemplated by the class that
    their rights arising out of the investment they made would be adjudicated in
    Ontario. Therefore, order and fairness dictated that the foreign class members
    not be included in an Ontario class proceeding. As put by the motion judge, at
    paras. 129 and 130 of his reasons:

[129] The residence of [the defendant] in Ontario is
    essentially the only connection with Ontario and while that connection
    certainly gives the Ontario court jurisdiction over [the defendant] and while Ontario
    courts would welcome foreigners to sue in Ontario that is a different thing
    from Ontario courts exercising the restraint required of them under the
    principles of order and fairness in assuming jurisdiction when the foreign
    plaintiff would have expected to pursue his or her rights in a court that did
    have a substantial connection with the subject matter of the litigation.

[130] The investors in the case at bar 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. Although the transaction included an Audit Report from an
    Ontario auditor, the standard of care associated with that audit would largely
    be determined by the American accounting standards under which the Audit Report
    was provided. It would be to exercise no restraint at all to conclude that
    Ontario had a substantial connection with this American financing and corporate
    reorganization.

In assessing the motion judges reasoning on this issue, it is
    important to recognize several key points. The proposed class action is an
    action against a firm of accountants that is resident in Ontario and actively
    carries on business here. Its only other office is in Montreal. It has no
    assets in the United States.

The subject of the action is the audit work done in Ontario by
    this accounting firm. The partner who did the work is a partner in the firms
    Toronto office.

The proposed representative plaintiff is a Toronto-based investment
    fund that is registered in Manitoba. The investment in question was made out of
    their Toronto office.



If the action was against the people who were in charge of
    arranging or promoting the financing for the American corporation that made the
    investment in question, I would agree with the motion judges assessment of the
    connection between Ontario and the proposed action. However, this is not the
    action that the representative plaintiff is proposing to pursue. Its action is
    a claim against a firm of accountants that resides in Ontario and actively
    conducts business here in relation to an audit that the firm performed in
    Ontario. Conceived of in this way, it cannot be said that the action does not
    have a real and substantial connection with Ontario.

(2)

The motion judge erred in
    holding that a class proceeding was not the preferable procedure

[47]

In addition to finding that a global class was inappropriate, the
    motion judge concluded that a joinder of claims was preferable to a class
    action, which, although manageable would be and has shown itself to be more
    procedurally cumbersome and protracted than a regular action: at para. 216.
    While the motion judge adverted to the Supreme Courts decision in
AIC Limited v. Fischer
and the five questions to
    be considered in the preferability analysis, he did not conduct the comparative
    analysis that case prescribes. He simply concluded that this case was far
    removed from what he described as the quintessential economic loss case, in
    which an individual action is out of the question because of the high cost of
    litigation relative to the low value of the claim: at para. 203.

[48]

By contrast, in this case, the motion judge noted that Excalibur
    itself has an almost $1 million claim. He proposed that if Excalibur was joined
    by just the other top 10 investors in an action against SLF (which would not
    need to be certified and for which there would be no doubt about the courts
    jurisdiction
simpliciter
), the action
    would have the heft of being a claim for around USD $3 million: at para. 206.

[49]

In short, the motion judge concluded, at paras. 206 and 208:

Excalibur itself does not genuinely
    need a class action to obtain access to justice.



Perhaps, with a few exceptions, the Class Members also do not need
    a class action in order to obtain access to justice. The Class Members, even
    the smaller ones, are accredited investors which means they are, by
    definition, not without resources to litigate.

[50]

The majority in the Divisional Court deferred to the motion judges
    conclusion on this point, and went further, stating, at para. 13: [j]oinder is
    not simply an alternative, it is the default position in considering whether a
    class proceeding is or is not the preferable procedure.

[51]

If the motion judge meant to suggest that a plaintiff must
    establish that a class proceeding is necessary to obtain access to justice,
    rather than preferable to other methods, he erred in doing so. Further, the
    Divisional Court majority erred in describing joinder as the default
    procedure against which the merits of a class proceeding should be assessed. The
    majority cite no authority for this assertion, which appears to contradict the
    Supreme Courts jurisprudence on the preferable procedure criterion.

[52]

For example, at para. 35 of
AIC
    Limited v. Fischer
, under the heading What Are the Alternatives to Class
    Proceedings?, the Supreme Court instructs:

The motions court must identify alternatives to the proposed
    class proceedings. As McLachlin C.J. held in
Hollick
,
    the preferability analysis requires the court to look to
all
reasonably available means of resolving the class members claims, and not just
    at the possibility of individual actions: para. 31 (emphasis added).  Here,
    the court considers both other potential court procedures (such as joinder, test
    cases, consolidation and so on:
Hollick
,
    at para. 28) and non-court proceedings.

[53]

The court is to look at all reasonably available means of
    resolving the class members claims. To me this contradicts any suggestion
    that joinder is the default position.

[54]

Beyond this, I agree with Sachs J. that the motion judges error
    in his real and substantial connection analysis tainted his analysis of the
    preferable procedure, as demonstrated by his conclusion, at para. 217 of his
    reasons:

Like all of the [criteria] for certification, the preferable
    procedure criterion sets a very low and easy to satisfy standard, but it is not
    so low that it is satisfied automatically because a representative plaintiff
    can form a group of claimants with manageable common issues, which is more or
    less all that Excalibur has done in the case at bar. And in the case at bar,
the
    formation of the class is without showing that Ontario has a real and
    substantial connection to the investors' claims
and is without showing
    that a class action is necessary to overcome any barriers to access to justice.
    In the case at bar, a class action is not necessary to achieve behaviour
    modification and a class action would not be particularly helpful in providing judicial
    economy. [Emphasis added by Sachs J.]

[55]

Justice Sachs held that if the motion judge had conducted the
    access to justice analysis mandated by
AIC
    Limited v. Fischer
through a lens that accepted that Ontario had a real
    and substantial connection to the investors claims, he could not have
    concluded that joinder was a preferable mechanism. She offered several reasons
    why.

[56]

First, Sachs J. noted, at para. 79, that there was no evidence
    before the motion judge that joinder was available as an alternative procedure.
    In particular, there was no evidence that the other class members would be
    prepared to assume the burdens, risks and responsibilities of commencing their
    own claims, that they would want or be able to retain the same counsel, or that
    the defendant would retain the same counsel to defend the hypothetical actions.

[57]

Second, contrary to the instruction in
AIC Limited v. Fischer
, the motion judge did not
    properly consider the barriers to access to justice for all the proposed class
    members, choosing to focus instead on those with the highest value claims.
    Justice Sachs explained that 19 of the proposed class members claims are for
    under $50,000, and another 12 claims are for between $50,000 and $99,000. As
    she put it, at para. 82: [t]he cost of pursuing these claims individually
    would dwarf the potential recovery for these investors. The foreign plaintiffs
    also face the spectre of motions for security for costs.

[58]

Third, there was no evidence before the motion judge that the
    proposed class members are a cohesive group who would or could agree on a form
    of joint retainer and an allocation of the costs of the litigation. And, since
    SLF had not acknowledged its willingness to attorn to any jurisdiction, even a
    successful foreign judgment would pose further jurisdictional challenges.

[59]

On the other hand, a class action will allow the members with
    smaller claims to have the most contentious and costly part of their claims
    determined in the common issues trial. If successful, these plaintiffs will
    have an Ontario judgment that they will be able to enforce in Ontario against a
    defendant who resides in Ontario. While a class action requires the additional
    procedural burden of certification, joinder brings with it its own procedural
    challenges.

[60]

Finally, Sachs J. noted that class actions have been recognized
    as having a greater effect than individual actions in supplementing and
    enhancing the regulatory oversight of companies seeking to raise capital:
Green v. Canadian Imperial Bank of Commence
,
    2014 ONCA 90, 118 O.R. (3d) 641, varied 2015 SCC 60, [2015] 3 S.C.R. 801, at
    paras. 35-36.

[61]

Justice Sachs concluded, at para. 95:

Again, while I recognize that a motion judges finding with
    respect to the preferable procedure criterion is one to which deference is
    owed, I find that, in this instance, the motion judges analysis cannot stand
    as his analysis was driven by his error in finding that Ontario was not the
    proper forum for the adjudication of the foreign class members claims.

[62]

I would adopt this reasoning. In my view, on the basis of the
    foregoing analysis the preferability requirement is met and the Divisional
    Court majority erred in deferring to the motion judges holding to the contrary.
    Even the motion judge here recognized that a resolution of the common issues on
    the facts of this case would make a substantial contribution to resolving the
    class members claims: at para. 210.

(3) This court should certify the common issues as reframed by
    Sachs J.

[63]

Although the motion judge refused to certify Excaliburs class
    proceeding, he went on to consider its proposed common issues in the event of
    an appeal. He held that several of the proposed common issues were redundant
    and that others were defective because they required adjudication on a
    case-by-case basis, specifically on those issues that claimed reliance on SLFs
    allegedly negligent misrepresentations. Nevertheless, the motion judge held
    that several of the proposed common issues were properly certifiable.

[64]

The Divisional Court majority declined to deal with SLFs
    objections to the motion judges treatment of the common issues (which the
    majority held was mischaracterized as a cross-appeal) given its ultimate
    decision to uphold the motion judges determinations on the global class and
    preferable procedure criteria.

[65]

Justice Sachs considered the common issues in light of her
    conclusion that the motion judge had misconceived the nature of Excaliburs
    action, leading him to err in his global class and preferable procedure
    analyses. At paras. 103-138, she carefully considered each of the proposed
    common issues. She agreed with the motion judges reformulation of some of the
    common issues and restored or modified others.

[66]

On appeal, Excalibur asks that this court certify the common
    issues as Sachs J. did in her dissenting reasons. I would grant this request. I
    agree with Sachs J.s conclusions on the common issues and would adopt her
    reasoning.

CONCLUSION

[67]

For the foregoing reasons I would allow the appeal, set aside the
    order of the Divisional Court, and substitute in its place an order certifying
    the action as a class proceeding in relation to the common issues as set out in
    Schedule A to Excaliburs notice of appeal.

[68]

As per the parties agreement, I would award Excalibur $60,000 in
    costs, inclusive of the costs of the appeal and the motion for leave to appeal.
    The parties did not address the disposition of costs in the courts below. If
    the parties cannot agree on that issue, they may make brief written submissions
    (no more than 3 pages) to the court within 15 days of the release of these
    reasons.

J. MacFarland J.A.

I agree. E.A. Cronk
    J.A.


R. A. Blair J.A. (dissenting):

[69]

I have had the opportunity to review the draft reasons of my
    colleague, Justice MacFarland. Respectfully, I disagree with her determination
    of the appeal.

[70]

In my view, Perell J. did not err in law, nor did he commit any
    palpable and overriding error of fact or of mixed fact and law in refusing to
    certify a global class or in determining that a class proceeding was not the
    preferable procedure. His determinations are entitled to deference, which the
    majority of the Divisional Court properly accorded him. I would dismiss the
    appeal.

[71]

More particularly, my colleague, and the dissenting justice in
    the Divisional Court, conclude that the motion judge erred in law by:

(i)

mischaracterizing the
    plaintiffs claim by focusing on the private placement issue in the United
    States instead of treating the claim as a simple action in auditors negligence
    against an Ontario auditor who performed the work out of its Ontario office;

(ii)

taking into account, in
    determining whether the Ontario court should assume jurisdiction, whether it
    would be reasonable for the non-resident class members to expect that their
    rights would be determined by what to them would be a foreign court; and by

(iii)

failing to conduct a proper
    preferable procedure analysis, concluding that a joinder of actions was an
    acceptable alternative, and therefore failing to hold that a class proceeding
    was the preferable procedure in the circumstances.

[72]

I come to a different conclusion for the following reasons.

Discussion and Analysis

[73]

My colleague has succinctly summarized the background facts. I
    need not expand on them further except as may be necessary in the context of
    the analysis.

[74]

I agree that the issue on this appeal is whether the majority in
    the Divisional Court erred in deferring to the motion judges decisions with
    respect to the certification of a global class and the preferable procedure
    issue. However, if the motion judge committed no reversible legal error and
    made no palpable and overriding error of fact or of mixed fact and law  which,
    on my analysis of his reasons, is the case  his decisions in that regard are
    entitled to deference and may not be overturned simply because judges at a
    different level might have arrived at different conclusions. Hence the focus of
    the analysis here is rightly on the decision of the motion judge.

The
    Identifiable Class Analysis

[75]

Much of my disagreement with my colleagues reasoning, and that
    of the dissenting justice in the Divisional Court, stems from what I see as a
    misplaced emphasis, here and below, on the expression real and substantial
    connection.  It is important in this case, I think, to focus on what the
    motion judge was doing, rather than concentrating too closely on the language
    he used in explaining what it was that he was doing.

[76]

In the post-
Club Resorts Ltd. v.
    Van Breda
, 2012 SCC 17, [2012] 1 S.C.R. 572 era, real and substantial
    connection has a particular connotation. Where one or more of the four
    presumptive factors outlined by the Supreme Court of Canada in that case are
    established, a real and substantial connection between the jurisdiction and the
    subject matter of the proceeding  the hallmark of a courts competence to
    assume jurisdiction over a case with a foreign element  is presumed to exist
    and the court acquires jurisdiction
simpliciter
.
    That is not the end of the matter, however. The presumptive factors may be
    rebutted, and, even if they are not, the court may still go on to consider
    whether, in spite of the fact that it
has jurisdiction
, it should take
    the next step and
assume jurisdiction
over the foreign element in the
    proceeding.

[77]

Here, there has never been any dispute that the Ontario court has
    jurisdiction
simpliciter
over the proposed
    class action, and therefore that there is a real and substantial connection in
    the
Van Breda
sense; the action is brought
    against an auditor defendant that is domiciled, resident and carrying on business
    in Ontario and that at least performed the impugned audit out of its Toronto
    office.  The motion judge recognized this. The parties accept it.

[78]

The motion judge undeniably articulated his reasons in terms of a
    real and substantial connection. But as I read those reasons as a whole, it is
    clear that he was not using the term in the
Van
    Breda
sense, nor was he seeking to analyse whether a
Van Breda
type of connection existed or denying
    that it did. The purpose of his analysis was to determine whether the Ontario
    court
should
, not whether it
could
assume jurisdiction over a
    global class, and what he was searching for was whether there was a sufficient
    connection between Ontario and the subject matter of the dispute for that
    purpose.

[79]

The motion judges review of the evidence and his conclusion that
    Ontario had a connection but not a real and substantial connection to the
    action must be read with that in mind.

[80]

That this was the thrust of the motion judges approach to the
    global class decision is evident from a number of passages in his reasons,
    including the following:

[109] In the immediate case, the question to be decided is not
    whether there can be a global class action, the question is
when is it
    appropriate
to certify a global class.



[117] Upon reflection, it now strikes me that this discussion
[1]
misses the point
    because the issue about whether there should be a global class is not so much
    whether a class proceeding procedure would be unfair to the defendant
but
    more about whether including the foreigners in the Ontario proceeding would be
    fair to the foreigners
. In that regard, the question of whether a foreign
    court would enforce the unfavourable foreign judgment begs the question because
    as noted by Justice Strathy in
Ramdath v. George Brown College of Applied
    Arts and Technology, supra
,
[2]
it generally can be assumed that the foreign court will enforce the Ontario
    judgment if it was fair for the Ontario court

to extend its
    jurisdiction

to the foreign Class Members.

[118] Thus, determining the likelihood of the enforceability of
    the Ontario judgment in a foreign court begs the question of whether the
    Ontario court should extend its jurisdiction to a foreigner represented by the
    Representative Plaintiff. I think, however, the discussion of the likely enforceability
    of the Ontario judgment is useful because it focusses attention on the issue of
    when would it be fair for an Ontario court
to assume jurisdiction
and
    bind a foreigner to its judgment.



[123] Justice Sharpe
[3]
discussed the topic of national and international class actions and how the
    principles of conflicts of law should apply in circumstances where there were
    non-resident plaintiffs in a global class action. Justice Sharpe appreciated
    that the underlying issue was when should a domestic court assume jurisdiction
    over foreign plaintiffs and purport to bind them. [Emphasis and footnotes
    added.]

[81]

It was from this perspective that the motion judge viewed his
    task of determining whether to certify the proposed global class here  a class
    more than 98% of which would be comprised of non-resident members. And it was
    from this perspective that the motion judge concluded it was appropriate to
    consider, in the course of performing that task, whether it would be reasonable
    for the non-resident class member to expect that his or her rights would be
    determined in and by a foreign court. His concern was to ensure that it was
    fair and appropriate in the circumstances for the Ontario court
to assume
    jurisdiction
over the non-resident members of the proposed class.

[82]

While it may be that the motion judge erred, or at least strayed,
    in casting his analysis in the language of real and substantial connection,
    it is not an error that affects the validity of the outcome of his analysis.
    Viewed in the foregoing manner, and as I shall explain below, I see no error in
    his consideration of the reasonable expectation of the non-resident members of
    the proposed class or in his characterization of the proposed class action in
    broader terms than that of a straightforward auditors negligence case brought
    against an Ontario auditor in Ontario.

[83]

On the other hand, I respectfully suggest that my colleague and
    the dissenting justice in the Divisional Court concentrate too narrowly on the
    notion that the motion judge erred in failing to find a real and substantial
    connection between Ontario and the subject matter of the dispute in the
Van Breda
sense.  They conclude that the motion
    judge erred in taking this approach and that he compounded this error by
    adapting the cautionary note of Sharpe J.A. in
Currie
,
    to the effect that courts should approach the issue of taking jurisdiction with
    restraint, to the circumstances of this case. I am unable to accept this
    critique, however.

[84]

As I have explained above, the motion judge did not fail to find a
    real and substantial connection between Ontario and the subject matter of the
    dispute in the
Van Breda
sense. He
    accepted that Ontario had jurisdiction
simpliciter
.

[85]

Likewise, the idea that a court should exercise restraint in
    assuming jurisdiction over a case with a foreign element is not new. Indeed, I
    would argue that it is deeply-rooted in our entire approach to that issue.
    Sharpe J.A. merely reflected this state of affairs when he said, in
Currie
at para. 10, that embedded in the
    principles of order and fairness is also the notion of jurisdictional
    restraint.  In doing so, he referenced the following comment of La Forest J.
    in
Morguard Investments Ltd. v. De Savoye
,
    [1990] 3 S.C.R. 1077, at p. 1103:

[I]t hardly accords with principles of order and fairness to
    permit a person to sue another in any jurisdiction, without regard to the
    contacts that jurisdiction may have to the defendant or the subject-matter of
    the suit  Thus, fairness to the [party against whom enforcement is sought]
    requires that the judgment be issued by a court
acting through fair process
    and with properly restrained jurisdiction
. [Emphasis added.]

[86]

The notion of restraint is reinforced by the provisions in the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194
    dealing with service of defendants outside of Ontario. Rule 17 permits such
    service without leave of the court in a defined list of circumstances but
    requires leave of the court in other circumstances. In either event, it permits
    the foreign party served the originating process to move for an order setting
    aside the service or staying the proceeding before delivering a defence. This
    is consistent with the approach whereby courts do not willy-nilly assume
    jurisdiction over a case with a foreign element. There is a built-in restraint
    to that approach.

[87]

One of the mechanisms through which that restraint is exercised
    is through the need to find a real and substantial connection between the
    jurisdiction and the subject matter of the dispute.
Van Breda
has clarified, and taken some of the
    uncertainty out of, the process of determining whether such a connection exists
    by establishing a set of presumptive factors. I accept that the notion of
    restraint may not apply to a determination of whether one or more of the
    presumptive factors exist, but I observe that even the presumptive factors are
    subject to rebuttal which is consistent with the underlying concept of
    jurisdictional restraint.

[88]

The notion of restraint is further evident in common law courts
    long-standing power to decline to assume jurisdiction over a foreign party,
    even though they have the jurisdiction to do so, on the basis of the
forum non conveniens
doctrine. This is a second
    step if jurisdiction continues to be challenged after one or more of the
    presumptive factors establishing a real and substantial connection have been
    found to exist. As LeBel J. put it in
Van Breda
,
    at para. 104:

When it is invoked, the doctrine of
forum non conveniens

requires a court to go beyond a strict application of the test
governing
    the recognition and assumption of jurisdiction. It is based on a recognition
    that a common law court retains a residual power to decline to exercise its
    jurisdiction in appropriate, but limited, circumstances in order
to assure
    fairness to the parties and the efficient resolution of the dispute
.
    [Emphasis added.]

[89]

It was in this context that the motion judge invoked the notion
    of restraint and undertook his consideration of whether the proposed
    non-resident class members would reasonably expect that their rights would be
    dealt with in the Ontario courts. I do not read his reasons as suggesting that
    a court must exercise restraint in finding that it
has
jurisdiction,
    once the existence of a presumptive factor has been found to exist, but rather
    as focusing on the need for a restrained approach (perhaps better described as
    a balanced approach) when deciding whether the court
should assume
jurisdiction over a global class.  I see no error in this approach.

[90]

The dissenting justice in the Divisional Court observed,
    correctly, that several of the
Van Breda
presumptive factors were present in this case. She concluded that the motion
    judge erred in not finding that there was a real and substantial connection
    between Ontario and the proposed action because he mischaracterized the
    plaintiffs action. There are two responses to this.

[91]

First, as noted above, although he used the real and substantial
    connection language, the motion judge was not addressing the concept in the
Van Breda
sense of jurisdiction
simpliciter
. He was addressing whether the court
should assume
jurisdiction over the non-resident class members and
    whether there was a sufficient connection between Ontario and the subject
    matter of the dispute for that purpose.

[92]

The appellant asserts that the respondent did not argue
forum non conveniens
before the motion judge and
    points to
Van Breda
for the proposition
    that once a presumptive factor has been established and the court has
    jurisdiction, it cannot decline to exercise that jurisdiction unless the
    defendant invokes
forum non conveniens
.

[93]

I would not give effect to that submission here. As the
    respondent submits, while there are overlapping concepts and analytical
    considerations between jurisdiction and whether the court should certify a
    global class, the two are not identical. The argument below focussed on the
    underlying issue of order and fairness which is important to the question of
    when a domestic court will assume jurisdiction over foreign plaintiffs and
    purport to bind them. It was not essential to invoke the magic phrase 
forum non conveniens
 in order to conduct the
    analysis in these circumstances.

[94]

Secondly, he did not err, in my view, by mischaracterizing the
    subject matter of the proposed class proceeding. The dissenting justice in the
    Divisional Court chose to characterize that subject matter narrowly: as a
    simple claim in auditors negligence against an Ontario auditor. The motion
    judge  properly in my view  approached it more broadly because he was
    attempting to resolve not the narrower issue of whether the court
had
jurisdiction but the wider issue of whether it
should assume
jurisdiction over a global class. To adopt the language of respondents counsel
    in its factum, [a] Court will not certify a class over which it has no
    jurisdiction, but it will not necessarily certify a global class just because
    it can assert jurisdiction.

[95]

It was in that regard that the motion judge asked himself about
    the reasonable expectations of the proposed non-resident class members, and
    stated the following at paras. 129-130:

The residence of SLF in Ontario is essentially the only
    connection with Ontario
and while that connection certainly gives the
    Ontario court jurisdiction over SLF
and while Ontario courts would welcome
    foreigners to sue in Ontario
that is a different thing from Ontario courts
    exercising the restraint required of them under the principles of order and
    fairness in assuming jurisdiction
when the foreign plaintiff would have
    expected to pursue his or her rights in a court that did have a substantial
    connection with the subject matter of the litigation.

The investors in the case at bar 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.
    Although the transaction included an Audit Report from an Ontario auditor, the
    standard of care associated with that audit would largely be determined by the
    American accounting standards under which the Audit Report was provided. It
    would be to exercise no restraint at all to conclude that Ontario had a
    substantial connection with this American financing and corporate
    reorganization. [Emphasis added.]

[96]

Respectfully, I see no error in the motion judges approach to
    the broader whether to assume jurisdiction over a global class action
    question or in his broader characterization of the subject matter of the
    proposed class proceeding for the purpose of addressing the reasonable expectations
    of the proposed non-resident class members. It may be that at one level the
    proposed action is simply a claim in negligence against an Ontario auditor.
    That claim cannot be determined, however, outside of the almost entirely
    foreign-related factual matrix alluded to by the motion judge and cited above.
    Keep in mind, as well, that Excalibur is the only member of the proposed class
    that is resident in Ontario.

[97]

The motion judge was not establishing new law when he considered,
    as one of the circumstances when it would be fair to join foreign plaintiffs to
    an Ontario action, the question of whether it would be reasonable for the
    non-resident class member to expect that his or her rights would be determined
    by what to him or her would be a foreign court. Other courts, including this
    Court in
Currie
, have done so. See also,
    for example,
Ramdath
. In addressing this
    issue, he was entitled to take a broader view of the subject matter of the
    proposed class proceeding.

[98]

The dissenting justice in the Divisional Court did a comparative
    analysis between the present case and
Currie
.
    She distinguished
Currie
on the basis that
    certain procedural protections that were lacking in the foreign proceeding for
    the Ontario plaintiffs that were to be bound by the settlement could be
    satisfied here, essentially because the unnamed non-residents were known and
    could be notified of these proceedings. I do not think this assists, however.
    The motion judge did not resort to or rely on
Currie
for its procedural protection component.  He relied on it for the restraint
    proposition on which  for the reasons I have outlined above  he was entitled
    to proceed for purposes of determining whether the Ontario court
should
assume jurisdiction.

[99]

Absent error in law or palpable and overriding error of fact or
    of mixed fact and law, his decision is entitled to deference. I see no such
    error here. There is, therefore, no basis to interfere with his determination
    that it was not appropriate to certify a global class in this proceeding, as
    the majority in the Divisional Court concluded.

The
    Preferable Procedure Analysis

[100]

What
    I have already said affects my view of the motion judges treatment of the
    preferable procedure criterion too. Because I am not persuaded that he erred in
    arriving at his decision not to certify a global class, his analysis of the
    preferable procedure issue cannot be tainted by viewing the preferable
    procedure analysis through the wrong lens.

[101]

Nor
    do I accept, as my colleague concludes, that the motion judge did not conduct
    the comparative analysis mandated by the Supreme Court of Canada in
AIC Limited v. Fischer
, 2013 SCC 69, [2013] 3
    S.C.R. 949. Absent any such error, it is not for an appellate court to conduct
    its own
Fischer
analysis and substitute
    its own view of the preferable procedure criterion for that of the motion
    judge.

[102]

Respectfully,
    the motion judge did not simply conclude that this case was far removed from
    the quintessential economic loss case in which an individual action was out
    of the question because of the high cost of litigation to the low value of the
    claim, as my colleague asserts. His
Fischer
analysis occupies over 20 paragraphs of his reasons. It acknowledges that the
    preferability analysis must be conducted through the lens of judicial economy,
    behaviour modification and access to justice (para. 196)  the touchstones
    underpinning the rationale for class proceedings. It specifically addresses the
    five
Fischer
questions that are to be
    answered when considering whether processes will achieve access to justice
    (para. 197) and directly or indirectly explores the application of each of
    those questions to the access to justice issue on the facts before him (paras.
    198-218).  This includes a canvassing of:

·

any economic, psychological, social, or procedural barriers to
    access to justice (he found none);

·

the need to ensure the ultimate remedy provides substantive
    justice;

·

whether behaviour modification was needed beyond the behaviour
    modification that would come from a normal tort action or another alternative (again,
    he found no such need); and

·

the need to consider the alternatives to a class proceeding and
    whether the alternative has the potential to provide effective redress for the
    substance of the plaintiffs claims in a manner that accords suitable procedural
    rights.

[103]

The
    motion judge concluded that a joinder of claims was an alternative that
    satisfied the foregoing requirements in the circumstances of this case. He
    summarized his conclusions in this regard in the following fashion (paras. 215
    and 216):

In the case at bar, the alternative of a joinder of claims
    would provide effective redress for Excalibur and [any] other investors who
    could join the action as co-plaintiffs.  A joinder of claims would provide
    suitable procedural rights. A joinder of claims would have avoided a
    certification motion, although perhaps not a motion to challenge the
    jurisdiction of the Ontario court as
forum non conveniens
given that the
    United States would be the expected venue for all of the investors. In
    comparison to a class action, a joinder of claims would provide access to
    justice for those class members with meritorious claims, promote adequate
    behaviour modification of the defendant and provide a similar amount of
    judicial economy to that which would be achieved by a class action.

In my opinion, in the circumstances of the case at bar, a
    joinder of claims is preferable to a class action, which, although manageable
    would be and has shown itself to be more procedurally cumbersome and protracted
    than a regular action. With the benefit of hindsight, this almost two-year old
    action might be past discoveries and be ready to set down for trial if it had
    not been delayed by the pursuit of certification under the
Class Proceedings
    Act, 1992
.

[104]

Then,
    in an observation with which I substantially agree, he concluded:

Like [each] of the criterion for certification, the preferable
    procedure criterion sets a very low and easy to satisfy standard, but it is not
    so low that it is satisfied automatically because a representative plaintiff
    can form a group of claimants with manageable common issues, which is more or
    less all that Excalibur has done in the case at bar. And in the case at bar,
    the formation of a class is without showing that Ontario has a real and
    substantial connection
[4]
to the investors claims and is without showing that a class action is
    necessary to overcome any barriers to access to justice. In the case at bar, a
    class action is not necessary to achieve behaviour modification and a class
    action would not be particularly helpful in providing judicial economy.
    [Footnote added.]

[105]

Certification
    is not the automatic or default outcome of an application for certification of
    a class action. As the majority in the Divisional Court pointed out, [t]here
    is no inherent right to proceed on a class basis. Section 5(1) of the
Class Proceedings Act, 1992
, sets out the
    requirements for certification and the onus is on the moving party to show that
    those requirements, including that a class proceeding would be the preferable
    proceedings, have been met.

[106]

We
    charge trial judges to exercise the responsibility of gatekeepers in this
    process, and substantial deference is owed to their certification decisions. 
    Appellate intervention should be restricted to matters of general principle.
    See
Anderson v. Wilson
(1999), 175 D.L.R.
    (4th) 409 (Ont. C.A.), at para. 12, leave to appeal to S.C.C. refused, [1999]
    S.C.C.A. No. 476;
Markson v. MBNA Canada Bank
,
    2007 ONCA 334, 282 D.L.R. (4th) 385, at para. 33, leave to appeal to S.C.C.
    refused, [2007] S.C.C.A. No. 346.

[107]

Here,
    there was a basis in the record for the motion judges determination that a
    class proceeding was not the preferable procedure in the circumstances of this
    case. The appellant complains that he failed to conduct a comparative analysis
    and argues, for example, that he failed to look at the potential negative
    aspects of the joinder alternative. However, his reasons show that the motion
    judge did consider comparative factors and the fact that he did not
    specifically mention potential difficulties with a joinder proceeding does not
    mean that he failed to consider them (he recognized, for example, that a
    joinder of claims might not have avoided a jurisdictional challenge).

[108]

Although
    the motion judge did refer, during his comparative analysis, to what he viewed
    as the quintessential case of a class proceeding for economic loss, he made it
    clear that the preferable procedure analysis must be conducted in relation to
    the case at bar, even though it was far from the quintessential case, and he
    recognized that class proceedings have been certified in other  even similar 
    cases involving economic loss. At paras. 211- 214 of his reasons he said:

That the case at bar is far from the quintessential economic
    loss class action, however, does not mean that it does not satisfy the
    preferable procedure criterion. Similar pure economic cases with
    self-sufficient representative plaintiffs have been certified.

So the preferable procedure analysis must go forward to
    determine whether the case at bar although far from the quintessential economic
    loss case, nevertheless, is the preferable procedure for the Class Members
    claims.

In making a preferable procedure analysis, it is necessary to
    consider the alternatives to a class action.  The preferable procedure analysis
    recognizes that a class action is not the only way for a group to litigate.

As noted above in
AIC Limited v. Fischer, supra
, the
    Supreme Court stated that when considering alternatives to a class action, the
    question is whether the alternative has potential to provide effective redress
    for the substance of the plaintiffs claims and to do so in a manner that
    accords suitable procedural rights.  [Citations omitted.]

[109]

It
    was just this analysis that the motion judge conducted.

[110]

Before
    leaving this aspect of the appeal, I should say that I agree with the appellant
    and with my colleague that the majority of the Divisional Court erred in
    stating that [j]oinder is not simply an alternative, it is the default
    position in considering whether a class proceeding is or is not the preferable
    procedure (para. 13). Nothing in the
Class
    Proceedings Act
or in the jurisprudence justifies such an observation,
    in my view. However, the motion judge did not proceed on that basis. He
    conducted the
Fischer
exercise, including
    a comparative analysis of a class proceeding and joinder. For the reasons cited
    above, he was not persuaded that the appellant had met the onus of showing the
    preferable procedure criterion was satisfied.

[111]

Again,
    in the absence of reversible error in law or principle or a palpable and
    overriding error of fact or of mixed fact and law  none of which exist here 
    it is not for an appellate court to re-do the preferable procedure analysis and
    substitute its own views for that of the motion judge, whose decision is
    entitled to deference. Whether there may be credible arguments favouring a
    different result on the preferable procedure analysis is not the question.

[112]

I
    would not give effect to this ground of appeal.

Disposition

[113]

For
    the foregoing reasons, I would dismiss the appeal. Given that disposition, it
    is not necessary for me to deal with the way in which the motion judge framed
    the common issues.

[114]

The
    Divisional Court refused to grant the appellant leave to appeal a portion of
    the costs award in favour of the respondent. That issue is therefore not
    properly before this court.

Released: December 6, 2016 (RAB)

R.A. Blair J.A.





[1]

This passage followed a review of certain authorities dealing
    with principles of comity and the circumstances in which foreign courts may or
    may not recognize Ontario judgments.



[2]

2010 ONSC 2019, 93 C.P.C. (6th) 106.



[3]

In
Currie v.
    McDonalds Restaurants of Canada Ltd.
(2005), 74
    O.R. (3d) 321 (C.A.).



[4]

I have already explained that, in my view, the motion judge
    was not referring to real and substantial connection in the sense of
    jurisdiction
simpliciter
as set out in
Van Breda
when using that
    language.


