Court Of Appeal For Ontario Reformulates The Test For Assuming Jurisdiction Over Foreign Defendants

Van Breda v. Village Resorts Ltd., 2010 ONCA 84, February 2, 2010

A special five-member panel of the Court of Appeal for Ontario recently released its judgment in Van Breda v. Village Resorts Ltd. The ruling reconsiders and reformulates the test for determining when Ontario courts will assume jurisdiction over foreign defendants who are sued in Ontario.

Jurisdiction and forum non conveniens before Van Breda

In Morguard Investments Ltd. v. De Savoye¹, the Supreme Court of Canada moved away from traditional conflict- of-laws rules in favour of a more pragmatic approach to determining questions of jurisdiction centring on the principles of order and fairness, the need for judicial restraint and the existence of a "real and substantial connection" between the subject matter of the proceeding or the defendant and the forum. In a series of subsequent cases², the Court of Appeal for Ontario clarified and provided guidance to courts as to how the "real and substantial connection" test should be applied in practice. In one of these, Muscutt v. Courcelles³, the Court of Appeal set out a non-exhaustive list of eight factors to be considered in assessing whether a real and substantial connection exists:

1. The connection between the forum and the plaintiff's claim;
   
2. The connection between the forum and the defendant;
   
3. Unfairness to the defendant in assuming jurisdiction;
   
4. Unfairness to the plaintiff in not assuming jurisdiction;
   
5. The involvement of other parties to the suit;
   
6. The Court's willingness to recognize and enforce an extra-provincial judgment rendered on the same jurisdictional basis;
   
7. Whether the case is interprovincial or international in nature; and
   
8. Comity and the standards of jurisdiction, recognition and enforcement prevailing elsewhere.

The Muscutt decision also set out a list of seven further factors to be considered, once jurisdiction was established, to determine if the Court should exercise its discretion not to assume jurisdiction in the matter in favour of another, more convenient forum. This forum non conveniens analysis included the following:

1. The location of the majority of the parties;
   
2. The location of key witnesses and evidence;
   
3. Any contractual provisions that specify applicable law or accord jurisdiction;
   
4. The avoidance of a multiplicity of proceedings;
   
5. The applicable law and its weight in comparison to the factual questions to be decided;
   
6. Geographical factors suggesting the natural forum; and
   
7. Whether declining jurisdiction would deprive the Plaintiff of a legitimate juridical advantage available in the Ontario Court.

Reformulation of the Muscutt standard

The Van Breda appeal arose out of two separate actions in which foreign defendants with little or no presence in Ontario had been sued in the Ontario courts. Each action involved plaintiffs who had been injured while staying at vacation resorts in Cuba and who commenced proceedings in Ontario after returning home to Canada. In both instances, the lower courts found that Ontario had jurisdiction over most of the defendants in the action.

In upholding the rulings of the lower courts, the Court of Appeal took the opportunity to reformulate the Muscutt jurisdictional framework in light of eight years of subsequent jurisprudence on "real and substantial connection," as well as the development of the model Court Jurisdiction and Proceedings Transfer Act (CJPTA) by the Uniform Law Conference. Justice Sharpe, writing for a unanimous Court, set out how the Muscutt analysis should now be applied by the courts.

The Court noted that the first step in assessing whether a "real and substantial connection" exists is to determine whether the claim falls under Rule 17.02 of the Rules of Civil Procedure, which sets out the circumstances in which a claim can be served on defendants outside of Ontario without leave of the courts. If one of the Rule 17.02 categories is engaged, then a real and substantial connection is presumed and the defendant bears the burden of showing that connection does not exist. If the Rule 17.02 categories are not engaged, then the plaintiff bears the onus of showing that a real and substantial connection exists. There are, however, two exceptions to this rule. The Court noted that the presumption will not operate where service outside the jurisdiction is based on (i) the plaintiff having suffered damages in Ontario (Rule 17.02(h)) or (ii) a foreign defendant being a necessary and proper party to a claim brought against defendants over whom Ontario has jurisdiction (Rule 17.02(o)).

At the second stage of the jurisdiction analysis, the central or core analysis of the reformulated Muscutt test is focused on the connections between (i) Ontario and the plaintiff's claim and (ii) the defendant and Ontario, with a primary focus on the things that the defendant has done within the jurisdiction (though physical presence is not a requirement).

The Court proceeded to explain that the remaining Muscutt considerations are not independent factors of more or less equal weight, but rather are general legal principles that inform the overall jurisdictional analysis. For instance, what under the traditional understanding of Muscutt were separate considerations of fairness to the plaintiff and fairness to the defendant are now subsumed into a single analysis in which the concept of fairness is used to assess the "relevance, quality and strength" of the connections between the forum, the plaintiff's claim and the defendant. As a consequence, fairness is not a free-standing factor capable of "trumping" weak connections. Similarly, considerations such as whether Ontario would recognize a foreign judgment rendered on the same jurisdictional basis, whether the matter is interprovincial or international in nature and general concerns of comity and the standards of recognition and enforcement prevailing elsewhere are no longer to be assessed as independent factors. Instead, they are to be treated as general principles of private international law that bear on whether a real and substantial connection exists.

Finally, the Court also stated that there is a residual discretion to assume jurisdiction even where there is no real and substantial connection to Ontario under the principle of "forum of necessity," meaning that there is no other forum in which the plaintiff could reasonably litigate a claim.

What the decision means

In the final analysis, the Van Breda decision stresses that the considerations and concerns that drive the analysis of the most convenient forum are separate and distinct from the matter of jurisdiction, and should therefore have no part to play in establishing whether Ontario has jurisdiction in a case. While it remains to be seen precisely what impact the Van Breda decision will have on the courts' willingness to take jurisdiction over foreign defendants, it is clear that the Court of Appeal for Ontario has adopted a more streamlined approach to analyzing jurisdiction.

Footnotes

1 Muscutt v. Courcelles (2002), 60 O.R. (3d) 20 (C.A).
2 Lemmex v. Bernard (2002), 60 O.R. (3d) 54 (C.A.); Sinclair v. Cracker Barrel Old Country Store Inc. (2002), 60 O.R. (3d) 76 (C.A.); Leufkens v. Alba Tours International Inc. (2002), 60 O.R. (3d) 84 (C.A.); Gajraj v. DeBernardo (2002), 60 O.R. (3d) 68 (C.A.); Muscutt v. Courcelles, supra n. 1.
3 Morguard Investments Ltd. v. De Savoye (1990), 76 D.L.R. (4th) 256 (S.C.C.).

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