In MM Fund v. Excelsior Mining Corp., 2024 BCCA 163, Justice Gail Dickson upheld a motion judge’s finding that for class action purposes, a corporation or trust is a “resident” of the location where its central management and control takes place.
The appellant, MM Fund, a mutual fund based in Ontario, sought to commence a class action against the respondent mining company, Excelsior Mining Corp., its CEO and its chair over allegations that the company made misrepresentations in a prospectus in relation to a public offering of securities.
The appellant claimed that Excelsior failed to disclose that it was experiencing problems caused by the presence of carbon dioxide at a copper mining project and falsely represented that it anticipated achieving a maximum production rate of 25 million pounds of copper per annum in 2021.
MM sought to bring an action on behalf of all persons and entities who purchased the securities of Excelsior offered in the prospectus.
Excelsior sought an order striking the appellant’s certification application, arguing that the appellant lacked standing to commence a class proceeding under s. 2(1) of the CPA as it was not a resident of British Columbia.
The appellant contended that it was a B.C. resident since it was governed by the B.C. Securities Act and was an “investment fund issuer,” “responsible issuer” and “reporting issuer” within the meaning and for the purposes of the Securities Act.
MM submitted that its securities were available to investors in British Columbia through registered dealers in British Columbia and that it reports to the British Columbia Securities Commission.
The appellant argued that it had a “real and substantial connection” to B.C. as the Securities Act defines a “responsible issuer” as a reporting issuer or any other issuer with a real and substantial connection to B.C.
In MM Fund v. Excelsior Mining Corp, 2022 BCSC 1541, a motion judge rejected the appellant’s argument that the aforementioned circumstances established that it had a “statutory seat” in BC.
The judge held that the concept put forward by the appellant to establish residency was not equivalent “with the meaning of residency in B.C.”
The motion judge cited Fundy Settlement v. Canada, 2012 SCC 14, in which the Supreme Court of Canada held that the residence of a trust, like the residence of a corporation, should be determined by where its central management and control takes place.
The judge concluded that MM was not a resident of B.C. because Ontario was the jurisdiction where it was registered to do business, where its central management and control was located and where its trustee, Spartan Fund Management Inc., and its management was located.
The motion judge struck the certification application and ordered MM to amend its pleadings to remove those related to advancing a class proceeding.
MM appealed the decision, arguing that the motion judge erred in interpreting the term “resident” in s. 2(1) by failing to consider or give effect to the fact that it is a reporting issuer under the Securities Act and that it is registered under the Securities Act to carry on business in British Columbia.
MM submitted that s. 2(1) should be interpreted liberally, generously and flexibly, bearing in mind the context and structure of the legislation and the goals of access to justice, behaviour modification and judicial economy.
The appellant submitted that the residency requirement in s. 2(1) was a remnant from a previous iteration of the CPA and that the legislature favoured modern and flexible provisions for certification of multi-jurisdictional class proceedings through certain amendments made to the CPA in 2018.
Justice Dickson observed that the concept of the residency of a corporation or trust was well-established in case law and, to the extent possible, approximated that of an individual.
The judge noted that in Fundy Settlement the Supreme Court adopted the central management and control test for determining the residency of a trust based on common law principles that apply to the residence of a corporation.
The court observed that there was nothing in the CPA that suggested that the residency requirement in s. 2(1) is “a remnant” from a previous iteration of the CPA or that it was a mere technicality.
The judge highlighted that s. 2(1) was replaced with a revised version when the CPA was amended in 2018 and that the revised version maintained the residency requirement.
“In my view, this strongly suggests that the legislature intended to continue limiting standing to commence a putative class action in the courts of British Columbia to British Columbia residents, as the term ‘resident’ is ordinarily understood,” the judge wrote.
The judge also noted that the purpose of the provision was to limit standing to bring a putative class action to the British Columbia courts to British Columbia residents.
Justice Dickson also found that the motion judge had considered the fact that MM is a reporting issuer in British Columbia but found that this was not enough to establish the appellant as a B.C. resident.
“In my view, that finding was plainly available on an application of the central management and control test,” the judge wrote.
The court dismissed the appeal.
Justices G. Bruce Butler and Ronald Skolrood concurred in the decision.
“We are pleased the British Columbia Court of Appeal has confirmed that class actions in British Columbia must be brought by residents of the province,” said James Sullivan of Blake, Cassels & Graydon LLP, counsel for the respondents.
Counsel for the appellant Paul Bates noted that the decision provided increased certainty and predictability for determining the residence of business organizations.
“But it increases the barriers for Access to Justice for commercial enterprises that carry on business in British Columbia under the governance of management located outside the province,” he added.
Robin Reinertson and Joshua Hutchinson of Blake, Cassels & Graydon LLP also acted as counsel for the respondents.
Sage Nematollahi of KND Complex Litigation also acted as counsel for the appellant.
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