The Supreme Court of Canada has released a series of decisions considering the circumstances under which Canadian courts can assume jurisdiction over foreign and out-of-province defendants. These decisions establish a framework for the analysis of jurisdiction issues in civil cases that will apply across Canada and affect Canadian businesses that have ties to other provinces and foreign businesses that have ties to Canada.
Club Resorts Ltd. v. Van Breda and Club Resorts Ltd. v. Anna Charron involve claims by Ontario residents who suffered catastrophic injuries while on vacation in Cuba. In both cases the courts below decided that Ontario had the jurisdiction to hear the cases against some or all of the foreign defendants. In Van Breda, the Ontario Court of Appeal reformulated the test applied by Ontario courts in deciding whether to assume jurisdiction over foreign defendants.
The Supreme Court of Canada recognized the need for certainty and predictability in the law on the one hand, and the need to ensure that cases are fairly decided on their merits on the other hand. The Court rejected a case-bycase approach in favour of a more predictable framework based on "objective factors that might link a legal situation or the subject matter of litigation to the court that is seized of it". The Court's intent is to give parties to a case with an interprovincial or international element a greater ability to predict with reasonable confidence if a Canadian court will assume jurisdiction over foreign defendants.
Although the Court retained the "real and substantial connection" test as the basis upon which a court will assume jurisdiction, the Court did not provide substantial guidance on the proper interpretation of "real and substantial". It stated that the connection cannot be "weak or hypothetical" because such an insubstantial connection would cast doubt upon the legitimacy of the exercise of state power over foreign parties.
The Supreme Court of Canada generally retained the framework devised by the Court of Appeal in which a court will first consider whether the case falls within one of the categories for which a "presumption" of connection can be made and, if a presumptive connection applies, the connection can be rebutted by the defendant through evidence that the connection was in fact weak. Significantly, the Supreme Court of Canada reduced the categories in which a connection will be presumed to exist.
The Court of Appeal held that a real and substantial connection would be presumed to exist in all the situations listed in Rule 17.02 of the Ontario Rules of Civil Procedure except for subrules 17.02(h) ("damages sustained in Ontario") and 17.02(o) ("a necessary and proper party"). The situations covered by the Rule included cases concerning real or personal property in Ontario, the administration of estates in Ontario, or where the claim against a person outside Ontario was authorized by statute. The Supreme Court of Canada held that a court will presumptively have jurisdiction only where: (a) the defendant is domiciled or resident in the province; (b) the defendant carries on business in the province; (c) the tort was committed in the province; and (d) a contract connected with the dispute was made in the province.
While the Court retained the presumptive category of the defendant "carrying on business" in the jurisdiction, it noted that this category raises "difficult issues" and requires "some caution in order to avoid creating what would amount to forms of universal jurisdiction in respect of tort claims arising out of certain categories of business or commercial activity." The Court stated, for example, that active advertising in the jurisdiction or the fact that a web site can be accessed from the jurisdiction would not suffice to establish that the defendant is carrying on business there. The Court held that "carrying on business" requires some form of actual, not only virtual, presence in the jurisdiction, such as maintaining an office there or regularly visiting the territory of the particular jurisdiction.
The list of presumptive categories is not closed and the Court appears to invite arguments in the future that other factors should be given presumptive effect. In identifying new presumptive factors, a court will look to connections that give rise to a relationship with the forum that is similar in nature to the ones which result from the listed factors, and will be guided by the values of order, fairness and comity in assessing the strength of the relationship with the forum.
The companion cases of Black v. Breeden and Les éditions Écosociété Inc., et al. v. Banro Corporation concern the ability of Canadian courts to assume jurisdiction in multi-jurisdictional defamation cases. Black v. Breeden, already the authoritative Canadian case on defamation over the internet, concerns allegedly defamatory remarks made in press releases by U.S. representatives of a U.S. company about prominent Canadian businessman Conrad Black. The Supreme Court held that the tort of defamation occurs upon publication of a defamatory statement to a third party, which, in this case, occurred when the impugned statements were read, downloaded and republished in Ontario by three newspapers. Every repetition or republication of a defamatory statement constitutes a new publication; the original author of the statement may be held liable for the republication where it was authorized by the author or where the republication is the natural and probable result of the original publication. The republication in the three newspapers of statements contained in press releases issued by the appellants fell within the scope of this rule.
The decisions of the Supreme Court of Canada will assist in providing guidance to judges, lawyers, and parties in this complex area of the law. Ultimately the question of whether a "real and substantial connection" exists will continue to require a careful review of the factual connections that exist in each case and how these connections fit within the presumptive categories.
Borden Ladner Gervais LLP's litigation lawyers across Canada have the expertise necessary to effectively analyze our clients' positions and provide strategic advice in light of the decisions and current state of the law.
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