Jurisdiction Simpliciter & Forum Non Conveniens. In Club Resorts Ltd. v. Van Breda, the Supreme Court updated the real and substantial

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1 Jurisdiction Simpliciter & Forum Non Conveniens Jerome R. Morse & Hollie Nicol * Introduction In Club Resorts Ltd. v. Van Breda, the Supreme Court updated the real and substantial connection test. 1 The new test provides a more structured framework for courts to apply in relation to assumed jurisdiction. However, work remains to arrive at a clear and comprehensive test for the assumption of jurisdiction by Canadian courts. This paper analyzes the Van Breda decision and its implications to Canadian conflict of laws generally. Jurisdiction Simpliciter There are three ways in which jurisdiction may be asserted against an out-of-province defendant (i.e. jurisdiction simpliciter): (i) presence based jurisdiction (where the defendant is physically present in the jurisdiction at the time of service of the originating process); (ii) consent-based jurisdiction (where the defendant attorns either by agreement or responding to the plaintiff s claim); and (iii) assumed jurisdiction (where the court takes jurisdiction on the basis of a real and substantial connection between the subject matter of the claim and the forum in which the claim is brought). During the past 25 years a number of different approaches for determining real and substantial connection have emerged across Canada. First, the Court Jurisdiction and Proceedings Transfer Act ( CJPTA ) was adopted in a number of provinces and one territory. Second, the Ontario Court of Appeal s multi-factor test in Muscutt v. Courcelles 2 became the preferred approach in a number of the common law jurisdictions. While the Muscutt test was praised for its flexibility, it was also criticized for affording too much discretion in the application 1 [2012] 1 S.C.R. 572 [ Van Breda ] 2 [2002] 60 O.R. (3d) 20 [ Muscutt ]

2 - 2 - of the criteria, thereby creating uncertainty. This academic criticism of Muscutt combined with the implementation of the CJPTA in a number of Canadian jurisdictions likely influenced the Court of Appeal decision to reconsider the Muscutt test in Van Breda v. Village Resorts Limited. 3 In Van Breda, the Ontario Court of Appeal revised the Muscutt test into a two-stage analysis. At the first stage, the factors set out in Rule of the Rules of Civil Procedure governing service ex juris would give rise to a rebuttable presumption of a real and substantial connection (with the exception of 17.02(h) and (o) that is damages sustained in Ontario and the necessary or proper party ). 4 If the case did not fall into one of the categories then the onus was on the plaintiff to show that an analogous category existed. At the second stage, the court is to examine the connections between the forum and the plaintiff s claim and between the forum and the defendant. 5 Leave to appeal to the Supreme Court of Canada was granted and the case was argued in March of On April 18, 2012 the Supreme Court released its reasons. The Facts The Supreme Court of Canada heard Van Breda with another case arising from Cuba: Club Resorts Ltd. v. Charron. In both cases, Canadian resident tourists alleged actionable wrongs causing catastrophic injury to Morgan Van Breda and the death of Dr. Charron. Actions were brought in Ontario against a number of parties, including Club Resorts Ltd., a company incorporated in the Cayman Islands that managed the two hotels where the accidents occurred. Club Resorts opposed these proceedings, arguing that the Ontario courts 3 [2010] O.J. No. 402 (sub nom: Charron Estate v. Bel Air Travel Group Ltd.) [ Sharpe ] 4 Ibid., at 72 5 Ibid., at 84

3 - 3 - lacked jurisdiction and, in the alternative, that a Cuban court would be a more appropriate forum on the basis of the doctrine of forum non conveniens. In both cases, the motion judges found that the Ontario courts had jurisdiction and the Ontario court was clearly a more appropriate forum. The two cases were also heard together in the Court of Appeal, which dismissed both appeals. The Supreme Court of Canada s Decision In Van Breda, LeBel J. writing for the unanimous Supreme Court clarified and elaborated upon the real and substantial connection test as an appropriate common law conflicts rule for the assumption of jurisdiction. While the decision is applicable to all commonlaw provinces, the Court noted that conflicts rules can vary from province to province, so long as each province s rules respect the real and substantial connection requirement, which is a constitutional imperative. 6 The New Framework for the Real and Substantial Connection Test The Court formulated a two-step analytical framework based on the identification of a presumptive connecting factor objectively linking the forum and the subject matter of the litigation. If a presumptive connecting factor is identified, the party challenging the court s jurisdiction may attempt to rebut the presumption. Failing such a rebuttal, the defendant may then argue that the proceedings should be stayed based on the doctrine of forum non conveniens. Step 1: Analysis of the Presumptive Connecting Factors The Court identified a list of presumptive connecting factors forming the basis of when a court will prima facie have jurisdiction over a tort claim: 6 Van Breda, supra note 1 at 22-23

4 - 4-1) 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. 7 The Court noted that the list of factors is not exhaustive and that courts have discretion to recognize additional factors. In identifying a new presumptive factor, courts should consider: the similarity of the proposed factor with currently recognized factors; the treatment of the factor in the statute or case law; and the treatment taken by other legal systems with shared values. 8 The values of order, fairness and comity can also serve as useful analytical tools for assessing the strength of the relationship between the proposed factor and the forum. 9 LeBel J. also made several other key points. The presence of the plaintiff in the jurisdiction, on its own, is not a connecting factor. 10 Additionally, for the tort committed in the province factor, there is not a sufficient connection where a plaintiff is injured outside of Ontario and returns and suffers damages here. 11 The Supreme Court also cautioned that a court may not assume jurisdiction on the basis of the combined effect of a number of nonpresumptive connecting factors. 12 However, if the court determines that a presumptive connecting factor exists in respect of at least one element of the case, then the court has jurisdiction over the entire matter Ibid., at 90 8 Ibid., at 91 9 Ibid., at Ibid., at Ibid., at Ibid., at Ibid., at 99

5 - 5 - Step 2: Rebutting the Presumption of Jurisdiction Where a connecting factor is established, a presumption of jurisdiction will arise, but that presumption may be rebutted by the party challenging jurisdiction. 14 The Court gave examples from the list of presumptive factors in tort cases to show how the presumption of jurisdiction could be rebutted; where the presumptive connecting factor was a contract made in the province, the contract has little or nothing to do with the subject matter of the litigation. 15 By way of further examples, the presumption could be rebutted in a case involving a multijurisdictional tort, where only a relatively minor element of the tort occurred in that province, or where the presumptive factor was carrying on business in the province but the subject matter of the litigation is unrelated to the defendant s business activities in that province. 16 The Court also noted that active advertising in the jurisdiction, such as a website that can be accessed in the jurisdiction, does not constitute carrying on business in the jurisdiction. 17 More is needed to establish carrying on business in the jurisdiction. It may require some actual presence in the jurisdiction, such as maintaining an office or regularly visiting the jurisdiction. Forum Non Conveniens Where jurisdiction has been established, the doctrine of forum non conveniens affords a court the residual power to decline jurisdiction if a forum exists that is in a better position to dispose fairly and efficiently of the litigation. 18 In Van Breda, the Supreme Court re-enforced 14 Ibid., at Ibid., at Ibid. 17 Ibid., at Ibid., at 109

6 - 6 - the Court of Appeal s view that forum non conveniens is a discretionary test that is only applied once jurisdiction is assumed and must remain separate from the jurisdiction analysis. 19 The court s analysis in this regard is contextual, and relevant factors can include the location of the parties and witnesses; the cost of transferring the case to another jurisdiction or declining the stay; the impact of a transfer on the conduct of the litigation or on related or parallel proceedings; the possibility of conflicting judgments; problems relating to the recognition and enforcement of judgments; and the relative strengths of the connections of the two parties. 20 The Court specifically commented on loss of juridicial advantage, stating that the court may be too quick to assume that the proper law naturally flows from the assumption of jurisdiction. 21 The governing law of the tort is not necessarily the domestic law of the forum. The Court also cautioned against placing too much weight on juridicial advantage within the Canadian federation because doing so would be inconsistent with the spirit of comity between courts, and differences between jurisdictions are not necessarily signs of inferiority. 22 Outcome of the Appeals The Supreme Court of Canada dismissed the appeals on the basis that, applying the recognized presumptive connecting factors, the Ontario court had jurisdiction, and Club Resorts has failed to rebut those presumptions. In Van Breda, the plaintiffs had travelled to Cuba as a result of a contract between Morgan Van Breda s spouse, Victor Berg, and René Denis, a third party who facilitated travel to the Cuban resort by Canadian squash and tennis professionals who would teach sports at 19 Ibid., at Ibid., at Ibid., at Ibid., at 112

7 - 7 - the resort in return for free accommodation. The Court found that Mr. Denis had the authority to represent Club Resorts and that a contract was entered into in Ontario and a relationship was thus created in Ontario between Mr. Berg, Club Resorts and Ms. Van Breda, who was brought within the scope of this relationship by the terms of the contract. 23 In Charron, jurisdiction was established on the basis that Club Resorts engaged in significant commercial activities in Ontario, especially through the office of the SuperClubs group and thus the carrying on business factor applied. 24 The Supreme Court declined to exercise its discretion under the doctrine of forum non conveniens in both cases, on the basis that it would be extremely difficult and expensive for the plaintiffs to litigate in Cuba and they may suffer a loss of juridical advantage. 25 The Supreme Court applied its reasoning in Van Breda in the dismissal of two other jurisdiction appeals released the same day and involving the torts of libel and defamation. 26 Application of the Framework To date, provincial courts have not yet identified any new presumptive factors and have declined proposed presumptive factors such as the presence of a necessary party in the jurisdiction; 27 a third party claim within an existing action in the jurisdiction; 28 an Ontario insurer responding to a claim on behalf of a foreign defendant; 29 a secondary and contingent claim 23 Ibid., at Ibid., at Ibid., at Breeden v. Black, [2012] S.C.J. No. 19; Éditions Écosociété Inc. v Banro Corp., [2012] S.C.J. No Misyura v. Walton, [2012] O.J. No Export Packers Company Limited v. SPI International Transportation, [2012] O.J. No Cugalj et al v. Wick, [2012] O.J. No. 1719

8 - 8 - against the party s own insurer which is present in the jurisdiction; 30 and in a case of conversion, the transfer of information and presence of personal property in Ontario. 31 Where the basis for assuming jurisdiction was argued to be premised on the defendant carrying on business in Ontario, the Superior Court of Justice has refused to accept jurisdiction where the claim was against a foreign hotel and the plaintiff had booked using the couples TD Visa Travel Rewards points. 32 The following observations were relevant to the Court s determination: the hotel had only one location: London, England; there was no evidence that the hotel engaged in marketing targeted to Ontario residents; the hotel was only one of many hotels that came up on the TD Visa Travel Rewards website; and the booking website was nothing more than a search engine for those wanting to use their Travel Rewards points. 33 Goldstein J. found that the hotel was not carrying on business in the province of Ontario: [s]ince the Web is everywhere, on the plaintiff s theory, every hotel in the world that can be booked through the Web does business everywhere it would amount to a form of universal jurisdiction it is true that the Court left the door open to e-trade, but it strikes me that this is the type of case that the Supreme Court had in mind when it stated that mere access to a website is not sufficient to establish that a defendant carries on business. 34 The Court also rejected the plaintiffs argument that there was a contract connected with the dispute made in Ontario. The offer, acceptance, and intention indicated privity of contract between TD Visa Travel Rewards and the plaintiffs. Goldstein J. held that there was no connection or negotiation between the hotel and the plaintiffs until the plaintiffs checked into the hotel and thus the contract was formed in London. 35 Unanswered Questions 30 Paraie v. Cangemi, [2012] O.J. No Galaxy Dragon Limited v. Top Water Executive Fund IV LLC, [2012] No Colavecchia v. Berkeley Hotel, [2012] O.J. No [ Colavecchia ] 33 Ibid., at Ibid., at Ibid., at 22

9 - 9 - Although the framework in Van Breda was developed in an effort to avoid an unstable, ad hoc system made up on the fly on a case-by-case basis the very nature of the framework requires a contextual analysis, which may lead to uncertainty. 36 While the presumptive factors were limited to claims in tort, the extent of their application in other areas of law is unclear. However, the presumptive factors in Van Breda have also been applied to cases involving a dispute over termination of a services agreement, 37 claims for restitution, 38 and claims for corollary relief under the Family Law Act. 39 The scope of the existing categories laid out by LeBel J. will need to be defined. The presumptive connecting factor that a defendant carries on business in the province is likely to remain a contentious ground for litigation. A tort committed in the jurisdiction will also require further judicial interpretation. The location of a tort itself can be uncertain creating the corresponding uncertainty as to whether the court will assume jurisdiction. It is unclear how multi-jurisdictional torts, such as product liability claims, will be analyzed for the purposes of determining whether the torts were committed in the province and qualify as a presumptive factor. One of the criteria for assessing the validity of a new presumptive factor - the treatment of the connecting factor in the case law has the potential to produce inconsistent results if the facts of the case do not fall within one of the presumptive connecting factors and the court chooses to exercise its discretion not to adopt the approach taken by other courts. There would arguably be greater weight to the plaintiff s argument where a court has previously 36 Van Breda, supra note 1 at Avanti Management and Consulting Ltd. v. Argex Mining Inc., [2012] O.J. No United States of America v. Yemec, [2012] O.J. No Wang v. Lin, [2012] O.J. No. 2599

10 recognized a new presumptive factor than if the plaintiff was the first to propose the presumptive factor. In addition, the judgment also raises questions about the place of traditional international law tests for jurisdiction in the new real and substantial connection framework. LeBel J. expressly stated that [t]he real and substantial connection test does not oust the traditional private international law bases for court jurisdiction. 40 However, presumptive connecting factors one and two relate to the individual and corporate defendant s presence within the jurisdiction. It is not clear, for example, whether the defendant s mere presence, including passing through the jurisdiction, is a real connection as opposed to a weak connection such that jurisdiction should be assumed. Lastly, LeBel J. stated numerous times that the court was declining to address the existence and availability of the doctrine of forum of necessity. 41 At the Court of Appeal, Sharpe J.A. found that the forum of necessity operated as an exception to the real and substantial connection test where there was no other forum in which the plaintiff can reasonably seek relief. 42 It remains to be seen whether Sharpe J.A. s reasoning will be adopted when that issue is decided by the Supreme Court of Canada. Conclusion In Van Breda, the Supreme Court of Canada has attempted to provide greater clarity and certainty to disputes about assumed jurisdiction. However, the Van Breda test has left considerable room for parties to argue jurisdiction for a wide range of cases. At the very least, however, the new test provides a more structured framework for courts to apply in relation to 40 Van Breda, supra note 1 at Ibid., at 82, 86 & Sharpe, supra note 3 at 100

11 assumed jurisdiction. In terms of certainty, it is an improvement over the previous multi-factor Muscutt test which explains why the Court of Appeal revisited and recast the test. In addition, some of the Canadian provincial courts have now had an opportunity to consider and apply the new framework. Based on the decisions released to date, the lower courts appear to be very reluctant to identify new presumptive factors. The Supreme Court did not alter the traditional forum non conveniens test. The Supreme Court re-enforced the Court of Appeal s view that forum non conveniens is a discretionary test that is only applied once jurisdiction is assumed and must remain separate and distinct from the jurisdiction analysis. * Jerome R. Morse (Partner) Hollie Nicol (student-at-law)