Canada: An Entrepreneurial Expectation Of Risk: Yip v. HSBC Holdings

In Yip v. HSBC Holdings plc, the Ontario Superior Court of Justice granted the class action defendants $1 million in costs, based in part on Justice Perell's conclusion that the "entrepreneurial" plaintiff ought to have reasonably expected that the defendants would spend that amount in response to an $8 billion lawsuit.  The costs decision followed a ruling delivered earlier this year where Justice Perelll held the Ontario courts lacked jurisdiction over HSBC as a foreign issuer that does not do business in Ontario and whose shares do not trade in the province.1


In the proposed class action, the plaintiff had asserted a misrepresentation claim under the Ontario Securities Act against HSBC Holdings ("the Bank") and a former employee, as well as a common law negligent misrepresentation claim. As described below, the Bank ultimately brought a successful motion to dismiss and stay the action on jurisdictional grounds. 

On the defendants' motion, Justice Perell held that to determine whether HSBC was a "responsible issuer" under the Ontario Securities Act, the essential question was whether it had a connection to Ontario. The Court confirmed that, in certain circumstances, an Ontario court will possess jurisdiction simpliciter over a foreign corporation where a real and substantial connection to Ontario exists, even where the company's shares do not trade in Ontario's secondary market. However, in this case, HSBC did not have a substantial connection to Ontario because it was based in the UK and did not carry on a business in the province. 

Notably, while HSBC managed a Canadian subsidiary, the Court held that a parent company does not carry on a business in Ontario simply by virtue of the fact it owns shares of a subsidiary that does operate in the jurisdiction. Moreover, the fact that the alleged misrepresentation would constitute a tort committed in Ontario does not constitute a real and substantial connection. To hold otherwise would effectively amount to universal jurisdiction for claims arising out of commercial activities.

Therefore, lacking the necessary connection to Ontario, HSBC was not a "responsible issuer", and the Court held that it lacked jurisdiction simpliciter. In the alternative, Justice Perell noted that he would have declined to exercise jurisdiction on the grounds that the UK was a more appropriate forum.  The preponderance of trading in HSBC securities takes place on the London exchange, the corporation is domiciled in the UK, and most witnesses and evidence were similarly located in that country. In addition, while Ontario possessed a juridical advantage over the UK, due to the acceptance of contingency fees in the former, this was characterized as a weak factor in deciding the appropriate forum.  Justice Perell contrasted this with the much stronger factor of comity, which suggested that courts should not intervene in another country's securities regulation without a strong connection to Ontario.

A Reasonable Expectation of Costs Exposure

On the subsequent motion to address the costs to be awarded to the successful defendants, the Bank sought roughly $1 million in costs.  Justice Perell applied the factors under Rule 57 of the Rules of Civil Procedure, as well as the caselaw that has developed pertaining to the judicial discretion to award costs in the class proceedings context.

The Court awarded the costs sought by HSBC. Among other things, Perell J. rejected the plaintiff's argument that the Bank had committed more resources than necessary to challenge a jurisdiction motion on a largely uncontested factual record, rendering HSBC's claim for costs excessive.  Importantly, the costs sought had to be placed in the context of the Bank's potential exposure, and the corresponding need to mount a vigorous defence. Similarly, plaintiff counsel pursued entrepreneurial litigation with full knowledge of its risks:

There is a make-believe quality to Mr. Yip's lawyers' characterization of Mr. Yip's lawsuit and of HSBC Holdings' defence to it. It is a fantasy to suggest that when Mr. Yip and his entrepreneurial class counsel sued a foreign defendant for $20 billion, later reduced to the not trifling $8.0 billion, that they did not reasonably anticipate that HSBC Holdings would spend $0.0001 billion to defend itself.

The proposed class action was not altruistic litigation; it was entrepreneurial litigation. Mr. Yip and others willingly traded in foreign stock exchanges with no reasonable expectation that Ontario law might follow them overseas but with the knowledge that the foreign stock markets were regulated by foreign regulators. The putative class members have or had remedies available to them in the jurisdictions in which they traded. Putative class counsel's pursuit of access to justice for Canadians was a self-appointed engagement as a regulator in another jurisdiction's regulated stock market. The lawyers knew that their class action would be jurisdictionally challenged.  

Plaintiff counsel could not "take cover from their exposure to the risks they knowingly took on" through recourse to the argument that the issues raised on the jurisdiction motion were novel. The "loser pays" principle held sway; "Mr. Yip's lawyers' prime motivation was entrepreneurial and they had no reasonable basis for anticipating that the court would relieve Mr. Yip from any of the myriad purposes of a costs regime in which loser pays."  Lastly, the proceeding had involved extensive expert evidence, a number of affidavits and cross-examinations in various cities. No issue was taken by Justice Perell with the extent of evidence proffered, or duration of the cross-examinations.

The decisions in Yip v. HSBC Holdings provide a cautionary example of the limits to the entrepreneurial pursuit of class proceedings. The costs decision rests on an understanding of the economic interests of class counsel as a driver for class actions, as well as the fact that it is typically plaintiff counsel themselves that indemnify the representative plaintiff for an adverse costs award. Where successful class counsel are recognized for their risk-taking in having their contingency fees approved by the Court, it is only symmetrical that they bear the cost when their "bet" on high-stakes litigation goes wrong.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions