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Residents Only: B.C. Court of Appeal Confirms Plaintiff Residency Requirement for Class Actions

May 8, 2024

On April 30, 2024, the British Columbia Court of Appeal confirmed in MM Fund v. Excelsior Mining Corp. that only residents of B.C. may commence class actions under the provincial Class Proceedings Act (CPA), with the effect of preventing non-residents from commencing proposed class actions in the province for perceived procedural advantage. The Court of Appeal also clarified that for the purpose of the CPA, a corporation or trust is “resident” where its central management and control takes place.

The B.C. Supreme Court Decision

The plaintiff, a mutual fund based in Ontario, filed a claim in B.C. alleging that a publicly traded company and two of its directors were liable pursuant to the B.C. Securities Act for alleged misrepresentations in a prospectus. 

After the plaintiff delivered an application to certify the action as a class proceeding, the B.C. Supreme Court granted an order sought by the defendants striking the certification application on the basis that the plaintiff is not resident in B.C. and therefore lacks standing to commence a class proceeding pursuant to section 2(1) of the CPA. The B.C. Supreme Court found that the plaintiff is based in Ontario, and there was no evidence that it maintains a place of business or has operations in B.C.

The B.C. Court of Appeal Decision

On appeal, the plaintiff argued that the chambers judge erred by narrowly interpreting the residency requirement under the CPA to prohibit parties that do not have a physical presence in the province from commencing a class action. Accordingly, the plaintiff submitted that the chambers judge failed to give effect to three “real and substantial connections” it has to the province: its status as a reporting issuer under the Securities Act; its registration under the Securities Act to carry on business in B.C.; and its attornment to the jurisdiction of B.C. courts in relation to the offering.

The defendants argued that the chambers judge correctly articulated the test for residency as being “where the central management and control of the trust actually takes place,” and considered all salient factors to find that the plaintiff is not a B.C. resident. They emphasized the absence of authority for the plaintiff’s argument that its status under the Securities Act equates to “carrying on business” in the province, much less that it amounts to residence. Further, they argued that the statutory residency requirement is not a mere “technicality,” or a “remnant from the previous iteration” of the CPA, as suggested by the plaintiff, but a deliberate requirement imposed by the legislature.

The Court of Appeal agreed with the defendants and dismissed the appeal, concluding that based on the text, context and purpose of section 2(1) of the CPA, “for class action purposes, a corporation or trust is a ‘resident’ of the location where its central management and control takes place.” The Court of Appeal further concluded that the judge correctly identified and applied the test for residency, finding no error in the chambers judge’s determination that the plaintiff is not a resident of B.C.

The authors include counsel for the defendants in the B.C. Supreme Court and the B.C. Court of Appeal.

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