Evaluating the Van Breda Test for Jurisdiction: OCA Overturns Motion Judge in Dundee v. Marsland
In a previous post, I discussed whether Ontario courts have jurisdiction over a claim for misappropriation of a foreign corporate opportunity, an issue raised in Dundee Precious Metals Inc. v. Marsland. The Ontario Court of Appeal has now answered that question in the affirmative, at least in terms of the specific facts at issue in that case.
Marsland was an Australian national and a former officer and director of a mining company, Dundee. Dundee sued Marsland in Ontario for breach of contract and breach of fiduciary duty for appropriating a mining opportunity in Serbia, which had been developed in Bulgaria. The action was stayed by Justice Corrick, both on the basis that Ontario courts lacked jurisdiction simpliciter and pursuant to the doctrine of forum non conveniens.
The Ontario Court of Appeal disagreed with the motion judge on both counts. In its view,
... the motion judge's assessment and application of [the] real and substantial connection test in this case would lead to the surprising proposition that a Canadian corporation headquartered in Ontario cannot use Ontario courts to enforce legal obligations owed to it under Ontario law by current and former senior officers who routinely traveled to Ontario on company business and who were in daily contact with the company in Ontario.
Though acknowledging that "forum non conveniens is a discretionary decision attracting appellate deference", the Court of Appeal held that the motion judge erred in failing to determine whether there was a clearly more appropriate jurisdiction.
The significance of the Marsland decision is difficult to assess. On the one hand, Marsland suggests that Ontario courts have jurisdiction over claims by Ontario companies for misappropriation of foreign corporate opportunities. On the other hand, the case turned largely on its facts.
What is clear from Marsland is that the new test for jurisdiction set out in Van Breda v. Village Resorts is not living up to one of its main promises. In Van Breda, the Court noted that provincial appellate courts (notably the New Brunswick Court of Appeal in Coutu) and a long list of eminent scholars had criticized the previous 8-factor test for jurisdiction in Muscutt v. Courcelles as being "too subjective" and conferring "too much discretion" on motion judges. Further, the Court in Van Breda took notice of criticisms that the Muscutt framework "too complicated and too flexible and therefore leads to inconsistent application" resulting in a "lack of predictability and certainty" which "increases litigation costs and jurisdictional motions".
These criticisms have significant implications in the context of appeals from jurisdictional motions. Although the Ontario Court of Appeal maintained that jurisdiction is a "question of law", since the Muscutt test was subjective, flexible and discretionary, appellate courts would necessarily engage in a re-weighing of the Muscutt factors on appeal. As Marsland illustrates, it is unclear whether Van Breda has adequately addressed these concerns.
In Marsland, the motion judge held that the connection between Dundee's claim and Ontario was "weak". The Ontario Court of Appeal disagreed with that assessment. The Court discounted the factors cited by the motion judge that led her to conclude that the connection was weak. The Court was apparently impressed with the fact that Dundee was a Canadian company headquartered in Ontario and that Marsland had signed a management contract and a release governed by Ontario law.
The Court also disagreed with the motion judge's conclusion that there was "virtually no connection between Marsland and Ontario." According to the Court, Marsland had brought himself within the jurisdiction of the Ontario courts by virtue of his conduct. The Court observed that Marsland was a senior director of Dundee, attended meetings and participated in conference calls based out of Toronto and had regular contact with Dundee's president, who was based in Toronto. The Court paid little attention to the fact that Marsland was an Australian national and had never lived in Canada.
Both the decision of the motion judge and the decision of the Court of Appeal are defensible. While the Ontario Court of Appeal has reaffirmed in Van Breda that jurisdiction simpliciter is a "question of law", in reality, the test for jurisdiction remains largely subjective and discretionary. As Marsland illustrates, it is likely that there will continue to be a lack of predictability and certainty in the law of jurisdiction in Ontario, both at first instance and on appeal.
Court of Appeal for Ontario Docket Number: C53071
Date of Judgment: September 15, 2011
mining misappropriation claim of foreign corporate opportunity Ontario Court of Appeal Serbia