Advocacy Group
Litigation e-LERT: Suing a Foreign Defendant: When Will Canadian Courts Assume Jurisdiction?
Published: 12/07/2010
By Stefanie Baldassarra The enforcement of private international law has changed significantly in Canada in the past decade. This has greatly impacted the way Canadian parties respond to legal proceedings commenced against them in foreign jurisdictions, as well as how they assess whether to initiate claims against foreign parties in Canadian courts. This was recently illustrated in the case of Dilkas v. Red Seal Tours Inc. (Sunwing Vacations), an appeal to the Ontario Court of Appeal from the decision by Justice Denise Bellamy of the Ontario Superior Court of Justice dismissing a motion challenging both the jurisdiction of the Ontario Court and the convenience of Ontario as the forum.
The plaintiffs brought an action in Ontario, seeking damages from Sunwing and Best Day for injuries suffered from an accident that occurred in Mexico on a bus tour. Best Day argued that there was no real and substantial connection between the action and Ontario, and that even if there was, Mexico was the more convenient forum.
The motion judge disagreed, ruling that there was a strong connection between Ontario and the plaintiffs’ claims. Applying the eight-part test laid down by the Ontario Court of Appeal in the 2002 Muscutt v. Courcelles case, the judge concluded that the balance of relevant factors favoured Ontario assuming jurisdiction of the plaintiffs’ action. She noted that the fact that the plaintiffs lived in Ontario and had received medical attention in Ontario tipped the scale in favour of the Ontario courts assuming jurisdiction of the case. She also considered the facts that the vacation packages included air transportation from Ontario to Mexico and that the majority of Sunwing's witnesses were located in Ontario. In response to the defendant’s argument that the Ontario court was nonetheless an inconvenient forum, the judge ruled that while the laws of Mexico applied and there would be some difficulty enforcing the ruling of an Ontario court in Mexico, the ability of the witnesses to testify by closed circuit TV in addition to the other factors considered with respect to the jurisdiction argument weighed in favour of the court assuming jurisdiction and dismissing the forum non conveniens argument. The Defendants appealed.
At the Ontario Court of Appeal, the Court noted that since the Superior Court’s ruling was issued, the Court of Appeal had reconsidered and revised the jurisdiction test articulated in Muscutt, in the case of Van Breda v. Village Resorts Ltd.
The first step in the jurisdictional analysis is a consideration of whether the claim falls within the rules for service outside Ontario set out in Rule 17.02 of the Rules of Civil Procedure. Under that rule, there is a presumption that the Ontario court is the appropriate forum if the claim falls under one of the listed categories. There are two critical exceptions: first, where the plaintiff has sustained damages in Ontario and, second , if the foreign defendant is a necessary and proper party to proceedings brought against persons served in Ontario. If it is found that one of the presumptive factors is present, a defendant challenging jurisdiction must prove that despite the presumption, there is no real and substantial connection to the province. On the other hand, where there is no presumptive factor present, the plaintiff has the onus of demonstrating that a real and substantial connection exists. Once the burden of proof is met, the court will then consider whether there is a real and substantial connection between the claim and Ontario.
In Van Breda, the Court of Appeal ruled that the considerations in the jurisdiction analysis are no longer to be treated as independent factors, but rather “as principles that bear upon the analysis, including the fairness to each party of assuming or refusing to assume jurisdiction, the involvement of other parties in the action, the willingness to recognize and enforce an extra-provincial judgment with similar jurisdictional connections to the forum, comity, and the standards of enforcement in the other jurisdiction.” The Court affirmed that the core of the real and substantial connection test is a balance between the connection of the plaintiff’s claim and of the defendant to the forum. Framed in this way, the decision highlights that the remaining considerations are to serve as general legal principles to assist the court in assessing the significance of the connections between the forum, the claim and the defendant, rather than as independent factors to be weighed against the connections.
The Court of Appeal ultimately dismissed Best Day’s appeal, concluding that there was the necessary real and substantial connection between the plaintiffs’ claims, Best Day and the Ontario forum. Most germane to the decision was the fact that Best Day voluntarily entered into an indemnity agreement with Sunwing in respect of any Ontario litigation, indicating an expectation that claims arising from the accident would be litigated in Ontario. Any resulting unfairness to Best Day was mitigated by the terms of the indemnity agreement and the exclusive jurisdiction possessed by the Ontario court over the interpretation of the indemnity agreement.
The modified test articulated in Van Breda gives due consideration to the overarching principles of “order and fairness” that have guided the concept of a “real and substantial connection” for twenty years. So where do these recent developments lead us? Counsel should be mindful of the practical implications of the revised test when approaching legal disputes with parties in foreign jurisdictions. Going forward, the independent fairness considerations will not be determinative. Instead, the analysis will turn on whether there exists a real and substantial connection in an objective sense and what, if anything, connects the dispute to the forum.
Out-of-province parties who contract with counterparties in Ontario or who have other significant ties to the province that give rise to claims by Ontario residents will continue to face the threat of litigation in Ontario courts, but they may now expect more rigour and consistency in the application of jurisdictional principles. But, we have not heard the last of this issue - in July, the Supreme Court of Canada granted leave to appeal in the Van Breda case.
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