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The SCC Clarifies the “Real and Substantial Connection” Test

Introduction

The Supreme Court of Canada has released its long-awaited decision in Club Resorts Ltd. v. Van Breda, in which it clarifies the "real and substantial connection" test for assuming jurisdiction. This decision is of particular importance for companies engaged in interprovincial and international business. It should be read in conjunction with two companion decisions released simultaneously by the Supreme Court: Breeden v. Black and Éditions Écosociété Inc. v. Banro Corp.

Background

The Van Breda decision arises from two Ontario actions: Van Breda and Charron. Both actions involved claims by Canadian tourists (from Ontario and British Columbia) for personal injury damages suffered at vacation resorts in Cuba. The defendants included a travel agent from Ontario, the Cuban resort and the operator/manager incorporated in the Cayman Islands.

The defendants moved to stay or dismiss the actions on the basis that Ontario was not the proper jurisdiction. The motions were dismissed by the lower courts. The defendants appealed to the Ontario Court of Appeal. A five-judge panel of the Ontario Court of Appeal upheld the lower court decisions assuming jurisdiction. In the process, the Court of Appeal "clarified" and "reformulated" the "real and substantial connection" test for jurisdiction.

The SCC Decision

In Van Breda and the companion decisions, the Supreme Court has attempted to create a more predictable and stable analysis for determining the jurisdiction of an action.

The Court has simplified the test for determining jurisdiction to a three-step inquiry: (1) Does the court have presumptive jurisdiction? (2) Can the court’s presumptive jurisdiction be rebutted? (3) If the court has jurisdiction (meaning that the answer to question (1) is "yes" and the answer to question (2) is "no"), should it decline to exercise its jurisdiction in favour of a clearly more appropriate forum?

The onus is on the party seeking to have the action determined in the domestic court to establish the first part of the test — presumptive jurisdiction. This requires an analysis of the "real and substantial connection" between the forum and the claim, which is guided by a non-exhaustive list of presumptive factors, the presence of which establish the existence of presumptive jurisdiction.

To this end, the Court recognizes two categories of presumptive factors. The first category includes "existing factors" that prima facie entitle a court to assume jurisdiction. In a tort case, the following give rise to presumptive jurisdiction:

  1. the defendant is domiciled or resident in the province;
  2. the defendant carries on business in the province;
  3. the tort was committed in the province; and
  4. a contract connected with the dispute was made in the province.

The second category includes a framework for analyzing "new factors" the court may consider in determining whether it is presumptively entitled to assume jurisdiction. The analysis for establishing new presumptive factors focuses on the relationship between the action and the forum, and involves the following relevant considerations:

  1. similarity of the connecting factor with the recognized presumptive connecting factors;
  2. treatment of the connecting factor in the case law;
  3. treatment of the connecting factor in statute law; and
  4. treatment of the connecting factor in the private international law of other legal systems with a shared commitment to order, fairness and comity.

New factors must be analyzed according to the values of order, fairness and comity for assessing the strength of the relationship with a forum to which the factor in question points.

The onus then shifts to the party challenging the jurisdiction to rebut the presumptive factors. The presumptive connections can be rebutted by, for instance, pointing to the weakness of the connections or by showing their irrelevance to the dispute. During this second part of the test, if the party fails to rebut the presumptive factors, the court must assume jurisdiction subject only to the forum non conveniens doctrine discussed below. If the party is successful in rebutting the presumptive factors, the court must dismiss or stay the action, subject to the application of the forum of necessity doctrine.

If the court assumes jurisdiction, the question shifts from one of existence of jurisdiction to one of exercise of jurisdiction. At this point, the party challenging the jurisdiction of the court may rely on the doctrine of forum non conveniens and must demonstrate why a proposed alternative forum should be considered clearly more appropriate.

In the companion decision, Breeden v. Black, the Supreme Court held that the factors to be considered in determining whether an alternative forum is clearly more appropriate vary depending on the context of each case. Nevertheless, using in part the same analytical approach the court followed to establish the existence of a real and substantial connection with the local forum, one forum must emerge as "clearly" more appropriate for disposing of the litigation and ensuring fairness to the parties and a more efficient process for resolving their dispute.

The decision determining forum non conveniens is discretionary and will be afforded great deference from higher courts.

Potential Significance

The Court’s clarification in Van Breda and Charron attempts to create a more predictable analysis for determining whether there is a "real and substantial connection" between an action and the forum.

While the test in Van Breda and Charron may be a little simpler, it limits the discretion of the judge to assume jurisdiction. This may result in a higher burden being placed on the party seeking jurisdiction to establish a "real and substantial connection."

Readers will find additionnal information relating to the Van Breda and Charron cases on our Canadian Appeal Monitor blog.

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