A Real and Substantial "Tune-Up": The Ontario Court of Appeal Reformulates the Test for Asserting Jurisdiction Against Out-of-Province Defendants
On February 2, 2010, a five-member panel of the Ontario Court of Appeal released its long-awaited reasons in Van Breda v. Village Resorts Limited (2010), 98 O.R. (3d) 721 (CA) (sub nom. Charron Estate v. Bel Air Travel Group Ltd.), leave to appeal to SCC granted,  SCCA. Nos. 114 and 174. The decision in Van Breda significantly reformulates the test for "jurisdiction simpliciter," i.e., the court’s ability to assert jurisdiction against an out-of-province defendant who has not submitted or attorned to an action against it in Ontario. While Van Breda represents a much needed reassessment, both the judgment itself, and its recent application in two further decisions of the Ontario Court of Appeal, suggest that uncertainty will remain so long as jurisdiction simpliciter continues to be based upon the "deliberately general" concept of a "real and substantial connection."
In a series of cases beginning with Morguard Investments Ltd. v. De Savoye,  3 S.C.R. 1077, the Supreme Court of Canada held that principles of "order and fairness" require there to be a "real and substantial connection" in order for a domestic court to assert jurisdiction against an out-of-province defendant. In Muscutt v. Courcelles (2002), 60 O.R. (3d) 20 (CA), the Ontario Court of Appeal attempted to add some clarity to this "deliberately general" concept laid down by the Supreme Court. The Muscutt Court listed eight factors for Ontario courts to consider when determining whether there is a real and substantial connection for the purposes of jurisdiction simpliciter: (1) the connection between the forum and the plaintiff’s claim; (2) the connection between the forum and the defendant; (3) unfairness to the defendant in assuming jurisdiction; (4) unfairness to the plaintiff in not assuming jurisdiction; (5) the involvement of other parties to the suit; (6) the court’s willingness to recognize and enforce an extra-provincial judgment rendered on the same jurisdictional basis; (7) whether the case is interprovincial or international in nature; and (8) comity and the standards of jurisdiction, recognition and enforcement prevailing elsewhere. If the court had jurisdiction simpliciter, it would then go on to determine whether jurisdiction should be declined, as a matter of judicial discretion, pursuant to the doctrine of forum non conveniens. Factors relevant to this determination were said to include:the location of the majority of the parties; the location of key witnesses and evidence; contractual provisions that specify applicable law or accord jurisdiction; the avoidance of a multiplicity of proceedings; the applicable law and its weight in comparison to the factual questions to be decided; geographical factors suggesting the natural forum; and whether declining jurisdiction would deprive the plaintiff of a legitimate juridical advantage available in the domestic court.
In Van Breda, the Court of Appeal agreed that after seven years, the Muscutt framework was due for a "tune-up." The Court reviewed an extensive body of judicial and academic commentary containing criticisms that the Muscutt factors —especially "fairness"— led to uncertainty, unnecessary complication and conflation of jurisdiction simpliciter with forum non conveniens. Furthermore, the court observed that there had been considerable development in other provinces through the enactment of the Uniform Law Conference of Canada’s Court Jurisdiction and Proceedings Transfer Act (CJPTA), which attempts to codify and clarify the rules for jurisdiction following Morguard and its progeny. The Van Breda Court adopted an approach modelled in part on the CJPTA. The essence of the Van Breda test may be summarized as follows:
- First, the court must decide whether the claim falls within Rule 17.02 of the Ontario Rules of Civil Procedure (which permit service ex juris without leave) to determine whether a real and substantial connection with Ontario is presumed. If one of the connections identified in Rule 17.02 is made out, the defendant bears the burden of showing that a real and substantial connection does not exist. If none of the Rule 17.02 connections are made out, the burden falls to the plaintiff to demonstrate that the real and substantial connection test is met. Rules 17.02(h) (damages sustained in Ontario) and 17.02(o) (necessary or proper party) do not have presumptive effect.
- At the second stage, the "core" of the real and substantial connection analysis rests upon the connections between: (a) Ontario and the plaintiff’s claim (e.g., whether the plaintiff suffered damages in Ontario, or entered into a contract with the defendant in Ontario); and (b) Ontario and the defendant (e.g., whether the defendant could reasonably foresee that its conduct would harm a person within Ontario, with the primary focus being upon the actions of the defendant or its agents in Ontario). The remaining considerations for jurisdiction simpliciter set out in Muscutt "should not be treated as independent factors having more or less equal weight … but as general legal principles that bear upon the analysis," in the form of
The Van Breda test has been applied by the Ontario Court of Appeal in two recent cases. In Black v. Breeden, 2010 ONCA 547, the plaintiff brought several libel actions in Ontario against a U.S. company’s directors, officers and advisors. The plaintiff alleged that the company’s website posted defamatory statements about him that were downloaded, read and published by newspapers in Ontario, damaging his reputation in that province. The court found that a presumption of a real and substantial connection arose, since the tort of defamation was committed in Ontario pursuant to Rule 17.02(g). The court clarified that the core sub-test for a connection between Ontario and the plaintiff’s claim should focus only upon ties that are relevant to the claim, or to the subject matter of the suit (and not upon ties between Ontario and the plaintiff in the abstract, such as whether the plaintiff is an Ontario resident). Since the plaintiff’s claim in Black alleged publication in Ontario, and damage to his reputation in Ontario, there was a significant connection between Ontario and the claim, even though the plaintiff was not resident in Ontario. This, coupled with the connection between Ontario and the defendants (arising from the fact that the statements were directed towards the Ontario media), supported the presumption of a real and substantial connection. The court also placed great emphasis upon considerations of fairness, treating this as the most important of the "analytical tools" from Muscutt. In the court’s view, it would be unfair to deprive the plaintiff of a trial in the community where his reputation was damaged, and fair to require that the defendants defend in the place where both the tort and the damages occurred.
Subsequently, in Dilkas v. Red Seal Tours Inc. (Sunwing Vacations), 2010 ONCA 634, the Ontario Court of Appeal applied the Van Breda test to a claim arising out of a bus accident occurring in Mexico. The claim was brought by Ontario tourists against a Mexican defendant (Best Day), who had subcontracted the bus service to a non-party, pursuant to a contract between the defendant and another defendant that had served as the plaintiffs’ Ontario tourist agency (Sunwing). The court relied upon contracts between Best Day and these parties in finding that there was a real and substantial connection. The contracts included: (1) a bus transportation contract between Best Day and Sunwing, entered into before the accident, which contained an Ontario choice of law clause; and (2) indemnity agreements among the parties entered into after the accident, which contained Ontario choice of law and forum selection clauses. In rejecting Best Day’s motion to dismiss the claim, the court found that these agreements amounted to an acknowledgment by Best Day that it expected claims arising out of the accident could be brought in Ontario, even though the plaintiffs were not party to any of them. Further, the Court observed that Best Day had agreed to litigate in Ontario against Sunwing, an essential party to the action. Because Sunwing had brought a cross-claim against Best Day seeking indemnity, Best Day would be brought into the action as a third party in any event. The court appeared to regard these factors as determinative with respect to the jurisdiction simpliciter inquiry, even though there was no presumption of a real and substantial connection under Rule 17.02. The court also noted that it would not be "unfair" for Best Day to defend against the plaintiffs in Ontario in light of the agreements.
Please note that, as of the date of this publication, the Supreme Court of Canada has granted leave to appeal in Black v. Breeden.McCarthy Tétrault Notes