Canada’s Supreme Court Clarifies Test for Assumption of Jurisdiction in Tort Cases

| Justin G. Necpal

In its recently released decision in the companion cases of Club Resorts Ltd. v. Van Breda and Club Resorts Ltd. v. Charron,1 the Supreme Court of Canada has clarified the approach that Canadian courts must take in determining whether they have jurisdiction over foreign defendants in tort cases. In particular, the decision specifies the factors that Canadian courts must consider, and the analytical framework they must use, in applying the "real and substantial connection" test for the assumption of jurisdiction in tort cases. The decision is intended to bring greater predictability to Canadian courts’ assumption of jurisdiction over foreign defendants, and is a welcome development for companies not resident in Canada, which must assess their legal risk for activities carried on in Canada.


Background

At issue in both Club Resorts cases was the Ontario courts' jurisdiction over two actions brought by Canadian residents for injuries sustained at resorts in Cuba operated by the defendant Club Resorts Ltd. Club Resorts, a company incorporated in the Cayman Islands, sought to dismiss the actions on the basis that the Ontario courts lacked jurisdiction or, in the alternative, that Ontario was not an appropriate forum for the disputes. In both cases, the lower courts found that they did have jurisdiction over the defendant and that Ontario was an appropriate forum. These rulings were upheld on appeal to the Ontario Court of Appeal, which also took the opportunity to reformulate the real and substantial connection test for the assumption of jurisdiction. As we discussed in a previous bulletin, the Court of Appeal’s reformulation of the test was directed toward improving the predictability and consistency of the jurisdictional assessment by Ontario courts.


The Decision

The Supreme Court in Club Resorts has gone even farther than the Ontario Court of Appeal in its efforts to increase the predictability of the real and substantial connection test. Under the Supreme Court’s new approach for the assumption of jurisdiction in tort cases, Canadian courts must look for the following objective factors, any of which will presumptively entitle a Canadian court to assume jurisdiction over a dispute:

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


Importantly, the Court acknowledged that this list of "presumptive connecting factors" is not exhaustive and that courts may, over time, identify new presumptive factors.

Under the new approach, if no recognized presumptive connecting factors – whether listed or new – are present, the court should not assume jurisdiction. If, on the other hand, a recognized presumptive connecting factor – either listed or new – does apply, the court must assume jurisdiction unless the defendant can rebut the presumption. To rebut the presumption, the defendant must establish "facts which demonstrate that the presumptive connecting factor does not point to any real relationship between the subject matter of the litigation and the forum or points only to a weak relationship between them." For example, if the presumptive connecting factor is a contract made in the province, the Court suggested that the presumption could be rebutted by showing that the contract has little or nothing to do with the subject matter of the litigation.

If the defendant fails to rebut the presumption that results from a connecting factor, jurisdiction is established and the litigation must proceed, subject to a court's discretion to stay the proceeding on the basis of the doctrine of forum non conveniens. The Court stressed the important distinction between the analysis for assuming jurisdiction, which determines the existence of jurisdiction through the real and substantial connection test, and the analysis under the doctrine of forum non conveniens, which determines whether a court should exercise its jurisdiction. The Court also confirmed (i) that a stay of proceedings on the basis of forum non conveniens is exceptional relief to be granted in limited circumstances; (ii) that the decision to raise this doctrine rests with the defendant not the court; and (iii) that the defendant seeking such exceptional relief must show that an alternative forum is "clearly more appropriate," meaning that it would be fairer and more efficient to proceed in the alternative forum. The Court indicated that it is under the forum non conveniens analysis that a court may employ a more individualized approach to jurisdiction and take into account a range of considerations and concerns, including (i) the locations of parties and witnesses; (ii) the cost of transferring the case to another jurisdiction or of declining the stay; (iii) the impact of a transfer on the conduct of the litigation or on related or parallel proceedings; (iv) the possibility of conflicting judgments; (v) problems related to the recognition and enforcement of judgments; (vii) and the relative strengths of the connections of the two parties.

In Club Resorts, the Court concluded that jurisdiction had been properly assumed and exercised in each of the two cases before it. Presumptive connecting factors were present in both cases and in neither case was the defendant able to rebut the presumption of jurisdiction that arose from these presumptive factors. Nor was the defendant able to show that a Cuban court would clearly be a more appropriate forum.


Related Decisions

Concurrently with the release of its judgment in Club Resorts, the Supreme Court released two judgments concerning the manner in which the revised test for assuming jurisdiction is to be applied to multistate defamation claims (Breeden v. Black and Éditions Écosocieté Inc. v. Banro Corp). The result in both cases was the same as in Club Resorts: the Court concluded that the Ontario courts had properly assumed jurisdiction over the non-resident defendants, on the basis of the presence of the presumptive connecting factor of the commission of the tort of defamation in Ontario and the defendants’ failure, in each case, to rebut the presumption of jurisdiction arising therefrom. The Court also found that the Ontario courts had made no error in deciding not to decline to exercise their jurisdiction.


Implications

The Supreme Court’s judgment in Club Resorts and the related judgments in Black and Banro have clarified the analytical framework that Canadian courts will apply in determining whether they should assume and exercise jurisdiction over multijurisdictional tort claims. As a result, foreign defendants that carry on business in Canada should now have an improved measure of predictability regarding the likelihood that their activities will bring them before Canadian courts. At the same time, the full implications of the Court’s new approach remain to be seen, particularly with respect to the application of the presumptive connecting factors (including the thorny issue of the meaning of “carrying on business”), the principled basis on which the list of factors is expanded and the manner in which defendants will be able to rebut a presumption of jurisdiction arising from the presence of a connecting factor. Moreover, as the Court itself acknowledged, each Canadian province remains free to develop its own solution and approach to the assumption of jurisdiction (as certain provinces have done in the past), provided that they abide by the constitutional limits on the authority of their legislatures and courts.


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1 Torys LLP represented the Tourism Industry Association of Ontario, an intervener, in both cases.

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