Canada: Is This the End for Global Classes? Foreign Class Claimants and the Real and Substantial Connection Test

Last Updated: September 7 2015
Article by Emrys C. Davis, Gannon Beaulne and Benjamin Burford

On August 26, 2015, Justice Leitch held that the Ontario court does not have jurisdiction over foreign class members in Airia Brands Inc v Air Canada. Counsel on both sides of the class action bar should take note. For plaintiffs, it may be harder to certify a global class action than it has been in the past. For defendants, the decision may mitigate concerns that foreign plaintiffs can recover more than once where a relevant foreign jurisdiction does not recognize or enforce Ontario class action judgments.

In Airia Brands, the plaintiffs commenced a putative class action in Ontario alleging that the defendants had conspired in Canada and around the world to fix prices for airfreight cargo shipping services for shipments to or from Canada. The representative plaintiffs sought to certify a global class of purchasers of airfreight cargo shipping services. The class members would include claimants from more than 30 different countries in North America, South America, Asia, Australia, Africa, and Europe.

The defendants sought an order staying the proposed class action, as it relates to absent foreign claimants, on the basis that the court lacked jurisdiction over them. The defendants argued that foreign claimants who were not present in Canada and had neither consented nor submitted to Ontario’s jurisdiction could not be bound by Ontario class action judgments. They suggested that the keystone principles of order and fairness would not be served by applying the common law jurisdiction test in Canada—the “real and substantial connection” test—because, if the court were to assume jurisdiction over foreign claimants using that test, the resulting judgment may not be recognized or enforced abroad. This would expose the defendants to future litigation in those jurisdictions and the risk of double recovery by proposed class members.

Justice Leitch had to decide whether the court should assume jurisdiction where conflict of laws principles in foreign jurisdictions prevent the recognition of an Ontario judgment. She held it should not. The defendants had submitted extensive expert evidence concerning the prevailing law in foreign jurisdictions. Justice Leitch accepted that the real and substantial connection test is a radical departure from traditional rules in other jurisdictions. She concluded that relevant foreign jurisdictions would not recognize an Ontario judgment by a court that had assumed jurisdiction over foreign claimants under the real and substantial connection test.

After extensively reviewing the case law on jurisdiction, Justice Leitch held that the Supreme Court of Canada’s leading decision in Van Breda v Club Resorts Ltd invited courts to develop an approach to jurisdiction that recognizes order, fairness, and the related concept of comity. These principles underlie any approach to determining the constitutional limits of the court’s jurisdiction, and they require the court to avoid re-litigation.

Justice Leitch accepted that it would offend comity if the court were to assert jurisdiction over foreign claimants where it could not reasonably expect that its judgment would be recognized in a relevant foreign jurisdiction. The constitutional limits on the court’s jurisdiction thus prevented the application of the real and substantial connection test in the case’s circumstances such that the court could only properly assume jurisdiction over foreign claimants if they were present in Canada or had consented or submitted to Ontario’s jurisdiction. Justice Leitch therefore stayed the claim in relation to absent foreign claimants who were not present in the jurisdiction and who had not consented or submitted.

In Canada, class counsel often seek to certify global classes. Ontario courts have not hesitated to accede to such requests in the past on the basis of the real and substantial connection test. Justice Taylor’s certification decision in Abdula v Canadian Solar offers a recent example, although the jurisdiction issue was not placed before the court and the defendants conceded that a global class was appropriate (at least for the oppression remedy claim advanced in that case).

The practice of certifying global classes has been particularly prevalent in securities class actions and may thus be most significant for practitioners in that area. But Justice Leitch’s decision could have broader implications: it may signal a shift towards greater scrutiny of the jurisdictional basis for class actions with foreign claimants, at least with respect to certain foreign jurisdictions. It is notable that the absent foreign claimants in Airia Brands were mostly (but not exclusively) located in Europe and Asia.

It remains to be seen how this decision—and the wider legal framework that it describes—will be applied to specific foreign jurisdictions. It also remains to be seen whether the decision will be successfully appealed or, if not, gain acceptance in the case law moving forward. For now, the decision will be welcomed by defendants concerned about multiple class action judgments and the attendant risk of multiple recoveries by plaintiffs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Emrys C. Davis
Gannon Beaulne
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