BTR Global Opportunity Trading Limited v. RBC Dexia Investor Services Trust

BTR Global Opportunity Trading Limited v. RBC Dexia Investor Services Trust Collection Decisions of the Court of Appeal Date 2011-09-30 Neutral citation 2011 ONCA 620 Docket numbers C53335, M40432 Judges Laskin, John Ivan Subject Civil Decision Content CITATION: BTR Global Opportunity Trading Limited v. RBC Dexia Investor Services Trust, 2011 ONCA 620 DATE: 20110929 DOCKET: M40432 (C53335) COURT OF APPEAL FOR ONTARIO Laskin J.A. (In Chambers) BETWEEN BTR Global Opportunity Trading Limited, BTR Global Growth Trading Limited, BTR Global Arbitrage Trading Limited, and BTR Global Prospector Trading Limited Plaintiffs (Respondents/Responding Parties) and RBC Dexia Investor Services Trust and Lehman Brothers International (Europe) Defendants (Appellant/Moving Party) Christopher D. Bredt, for the moving party Jeffrey Leon, for the responding parties Heard: September 12, 2011 On a motion to stay the order of Campbell J. of the Superior Court of Justice dated January 25, 2011 pending leave to appeal to the Supreme Court of Canada. Laskin J.A.: A. INTRODUCTION [1] The moving party, Lehman Brothers International (Europe) (“LBIE”), asks to stay the order of Campbell J. pending a decision on its motion for leave to appeal to the Supreme Court of Canada. The responding parties, the BTR Funds, oppose the stay. [2] BTR placed publicly and privately traded securities with LBIE under various brokerage contracts. In September 2008, LBIE became insolvent. BTR then brought two separate proceedings in Ontario to recover their securities – one in respect of the Canadian privately traded securities, and the other in respect of the Canadian publicly traded securities. The motion before me concerns the action for recovery of the publicly traded securities. [3] LBIE sought a permanent stay of this action on the ground that the parties had agreed that a New York court would have exclusive jurisdiction over any proceeding relating to their contracts. Campbell J. refused to grant the stay. In his view, even if the exclusive jurisdiction clause governed the parties’ dispute, BTR had shown “strong cause” why it should not be enforced. [4] On July 8, 2011 this court dismissed LBIE’s appeal from Campbell J.’s order. For somewhat different reasons, this court also concluded that BTR had shown strong cause not to give effect to the exclusive jurisdiction clause. It is from this court’s decision that LBIE seeks leave to appeal to the Supreme Court of Canada. Earlier this month, LBIE perfected its leave motion. B. BACKGROUND (1) The parties and their contracts [5] LBIE was a trading and brokerage company registered in England. Three years ago it went into administration, in other words, it became insolvent. [6] BTR had invested in a variety of privately traded and publicly listed securities. Between 2002 and 2008, BTR entered into brokerage contracts with LBIE to settle trades in these securities. (2) The litigation [7] BTR started three proceedings, two in Ontario and one in New York. In each proceeding it claimed beneficial ownership of the securities held by or for LBIE. [8] The first proceeding, for the recovery of Canadian private securities located in Toronto, was started in Ontario in October 2008. Although not a party to that proceeding, LBIE was aware of it and chose not to participate. In that proceeding, BTR obtained an order that it beneficially owns the Canadian private securities. LBIE was given a copy of the order. It took no steps to have it varied or set aside. [9] The second proceeding is an action in Ontario started in April 2010 for recovery of the Canadian publicly listed securities. Because LBIE has claimed an ownership interest in these securities, it is a named defendant in the action. This action is the subject of the stay motion before me. [10] The third proceeding, also started in April 2010, is an action in the Supreme Court of New York for the recovery of United States privately traded securities physically located in the State of New York. In this action, LBIE has counter-claimed for a declaration that it owns all the securities – publicly and privately traded, Canadian and American – that BTR has placed with it. [11] Because of LBIE’s counter-claim, both the New York action and the Ontario action raise the identical question: who is the beneficial owner of the Canadian publicly listed securities? LBIE’s counter-claim also seeks to re-litigate the question of the ownership of the Canadian privately traded securities, which was determined in Ontario nearly three years ago. [12] In the New York action, pleadings have been completed and documentary production has begun. LBIE’s attorneys are pressing to move forward with examinations for discovery. They will not agree to delay examinations in New York unless BTR agrees to a stay of its action in Ontario for recovery of the Canadian public securities. [13] Meanwhile, in Ontario, BTR’s action has been stalled by the various stay motions brought by LBIE. BTR has delivered a statement of claim; LBIE has not delivered a statement of defence, and does not wish to do so. It relies on the exclusive jurisdiction clause, and does not want to attorn to the jurisdiction of the Ontario court. (3) BTR’s undertakings [14] BTR wants to proceed with the Ontario action. It is content to have LBIE deliver a statement of defence without filing it with the court. It undertakes not to argue that delivery of the statement of defence or participation in examinations for discovery constitute acts of attornment. BTR also undertakes not to invoke the jurisdiction of the Ontario court, by, for example, a motion for summary judgment, while LBIE’s leave motion is outstanding. [15] Against this background, I turn to the issues on the stay motion. C. ANALYSIS [16] The test for a stay pending appeal, including a motion for leave to appeal to the Supreme Court of Canada, is well established. The moving party, here LBIE, must show that it has raised a serious issue to be adjudicated, that it will suffer irreparable harm if a stay is not granted, and that the balance of convenience favours a stay. These three components of the test are interrelated in the sense that the overriding question is whether the moving party has shown that it is in the interests of justice to grant a stay. [17] In my view, LBIE has not shown that it is in the interests of justice to stay the Ontario action pending the determination of its leave motion. Three considerations underlie my conclusion: the dubious merit of the leave motion; BTR’s undertaking; and the ongoing New York litigation. (i) Serious issue - the merit of the leave motion [18] Ordinarily, the threshold for showing a serious issue to be adjudicated is low. However, the criteria for granting leave to appeal to the Supreme Court of Canada add another layer to this component of the test. Under s. 40(1) of the Supreme Court Act, R.S.C. 1985, c. S-26, the Supreme Court of Canada typically grants leave to appeal only in cases of public or national importance. Thus, a provincial appellate court judge hearing a motion for stay pending leave to appeal to the Supreme Court of Canada must take account of the stringent leave requirements in the Supreme Court Act: see Merck & Co. v. Nu-Pharm Inc. (2000), 5 C.P.R. (4th) 417 (F.C.A.) and Ontario Public Service Employees Union v. Ontario (A.G.) (2002), 158 O.A.C. 113. [19] The Supreme Court of Canada itself decides when leave should be granted and does not give reasons for doing so. As Rothstein J.A. noted in Merck, this puts provincial appellate court judges in a “somewhat awkward position.” Nonetheless, the stay test requires that I make some preliminary assessment of the merit of the leave motion. And having made that assessment, I think that LBIE’s leave motion has very little merit for the following three reasons. [20] First, LBIE’s leave motion does not raise any real issues of national importance. The general issue on which LBIE seeks leave, the contours of the strong cause test, has already been addressed by the Supreme Court of Canada quite recently in Z.I. Pompey Industrie v. ECU-Line N.V., [2003] 1 S.C.R. 450. Since Pompey was decided, several appellate court decisions have elaborated on the strong cause test. One example is this court’s decision in Expedition Helicopters Inc. v. Honeywell Inc., 2010 ONCA 351. [21] If the appellate decisions post-Pompey conflicted with each other or with Pompey itself, that would improve LBIE’s prospects for obtaining leave. In those circumstances the Supreme Court of Canada might wish to revisit Pompey and clarify the law. But there is no conflict among the later decisions, and moreover, they are consistent with Pompey. [22] In Pompey, Bastarache J. emphasized that the assessment of strong cause is a fact driven inquiry, in which the court should take account of all the circumstances of a given case. When this court dismissed LBIE’s appeal, it did precisely that. After noting that BTR disputed whether the exclusive jurisdiction clause applied to the contracts it relied on, the panel concluded that even if the clause did apply, BTR had shown strong cause not to enforce it. In so concluding, this court, like Campbell J., was particularly critical of LBIE’s conduct, especially its failure to raise the question of Ontario’s jurisdiction in the 2008 proceedings that dealt with the Canadian privately traded securities. This court did not even call on BTR to respond LBIE’s appeal. [23] Second, this is not a criminal, constitutional or administrative law case. Those types of cases form the bulk of the Supreme Court of Canada’s case load, and constitute most of the approximately 11 per cent of cases in which leave is granted. Therefore, it follows that those types of cases most often raise issues that the Supreme Court considers to be of public importance. This consideration further diminishes LBIE’s prospect for obtaining leave. [24] Of course, the Supreme Court does grant leave in private law cases. One recent example is this court’s decision in Momentous.ca Corporation v. Canadian American Association of Professional Baseball Ltd., 2010 ONCA 722. That case, however, raises entirely different questions, including one of major national importance, which is not present here: the effect of attornment on the application of an exclusive jurisdiction clause. LBIE’s motion raises no similar important issue. [25] Third, the order sought to be appealed is discretionary, thus warranting appellate deference. Campbell J.’s order is consistent with both the jurisprudence of this court and the Supreme Court of Canada. The discretionary nature of the order further militates against additional appellate review. [26] For these three reasons, in my opinion, LBIE’s leave motion has little merit. (ii) Irreparable harm – the effect of BTR’s undertaking [27] LBIE argues that it will be irreparably harmed if a stay is not granted because it will be forced to attorn to the jurisdiction of the Ontario court, thus rendering its leave motion moot. BTR’s undertaking, however, addresses LBIE’s claim of irreparable harm. [28] If LBIE decides to deliver a statement of defence, BTR will not require it to be filed with the court, will not argue that it amounts to an act of attornment, and will not invoke the jurisdiction of the Ontario court until LBIE’s leave motion is decided. [29] LBIE contends that the undertaking is unsatisfactory and in support of this contention points to the decision of Lang J.A. in M.J. Jones Inc. v. Kingsway General Insurance Co. (2004), 242 D.L.R. (4th) 139. Without commenting on the correctness of that decision, I simply observe that the present case is distinguishable. In M.J. Jones, Lang J.A. dealt with whether a court order requiring a defendant to deliver a statement of defence would amount to attornment. She held that a court order requiring a defendant to participate in an action, even though involuntarily, might amount to attornment. Therefore, she held that despite the plaintiff’s undertaking not to treat the defendant’s participation as attornment, refusing a stay could cause irreparable harm. [30] Here, no court order or involuntary participation is required because BTR asks LBIE only for a statement of defence to permit it to move ahead with discoveries. Furthermore, Lang J.A. appears to have contemplated and approved of this very scenario. She wrote at para. 52: This disposition does not necessarily preclude all parties to this action cooperating by exchanging documents and answering questions about the merits of the disputes between them. Such exchange, if done outside the formal bounds of these court proceedings, would, in my view, not be considered an attornment to Ontario’s jurisdiction. It would simply be an efficient exchange of information that, with the agreement of the parties, could later be used either in the Ontario proceeding, or in any subsequent Michigan proceeding. [31] As BTR asks LBIE for documents outside of the “formal bounds” of the court proceedings, I do not consider that the delivery of a statement of defence or participation in discoveries, would amount to attornment. If there is no attornment, the risk of LBIE’s appeal becoming moot is eliminated. LBIE, therefore, has not made out irreparable harm. (iii) Balance of convenience - the effect of the ongoing New York litigation [32] LBIE submits that the balance of convenience favours a stay because without one it will be prejudiced. It argues that proceeding with the Ontario action while the issue of the Ontario court’s jurisdiction has not been finally decided will result in duplication, waste the courts’ and the parties’ time and resources, and create a risk of inconsistent judgments. [33] Respectfully, this argument overstates any prejudice to LBIE from refusing a stay. I accept that there may be some modest increase in costs if the litigation proceeds concurrently in New York and Ontario. However, costs can be reduced by consolidating discoveries, a process that counsel for BTR advised would indeed be used. The risk of inconsistent judgments from the refusal of a stay is practically non-existent because the Supreme Court of Canada will likely decide LBIE’s leave motion within the next three to four months, or at least long before the Ontario action comes to trial. [34] If the Supreme Court of Canada refuses leave then the parties will eventually have to deal with the risk of different results in the two jurisdictions. However, that risk arises from the existence of the two proceedings themselves, not from any decision on the stay motion. If, on the other hand, the Supreme Court of Canada grants LBIE’s motion for leave to appeal, then LBIE would be at liberty to renew its stay motion and would have a compelling argument that it be granted. [35] However, while the leave motion is pending, the balance of convenience is very much against granting a stay. Tactics play a role here. LBIE wants the issue of beneficial ownership decided in New York and thus, wants to move the New York action along while delaying the Ontario action. BTR wants the issue of beneficial ownership of the publicly traded securities decided in Ontario, especially as it already has a decision in its favour on the issue of ownership in respect of the Canadian privately traded securities. [36] Whether this turns out to be a race to the swift is not for me to decide; however, BTR is at least entitled to be on an even footing. If LBIE is proceeding on its counter-claim in New York, BTR should be allowed to proceed on its claim in Ontario. [37] The motion for a stay is dismissed. If the parties cannot agree on costs, they may make brief submissions in writing. RELEASED: Sep. 29, 2011 “JL” “John Laskin J.A.”