My place or yours? SCC sets new and improved test for jurisdiction in Canada.

• Author: Pliszka, Peter J.
• Position: Supreme Court of Canada

ON APRIL 18, 2012, the Supreme Court of Canada ("SCC") changed the "real and substantial connection" test for determining when a Canadian court is allowed to take jurisdiction over a foreign (extra-provincial or international) defendant. This decision is good news for Canadian and foreign companies. The new test confirms that the "real and substantial connection" must be an objective factual connection to the court's territory, and the SCC dearly held that subjective notions of "fairness to the plaintiff' are not part of the test.

The SCC's decision arose from the appeal of two cases, which were heard together: Club Resorts Ltd. v. Van Breda and Club Resorts Ltd. v. Charron; (collectively, "Van Breda-Charron"). (1) This paper will explain the new Van Breda-Charron test for jurisdiction in Canada and highlight its potential effect upon litigants--domestic and foreign--in legal proceedings in Canada. For context, this paper will commence with a summary of the facts of the Van Breda and Charron cases. This paper will then describe the law of jurisdiction in most of the provinces of Canada that existed prior to the Van Breda and Charron cases and follow with a discussion of the SCC's derision establishing this new test for assumed jurisdiction. The final section of this paper will examine how the Van Breda-Charron test has been applied by subsequent motions and appeal courts in the nine months following the release of that decision up through the end of 2012.

1. Facts of Van Breda and Charron

   From a jurisdictional perspective, the material facts of Van Breda and Charron were similar.

   1. Van Breda

      The defendant, Club Resorts Limited ("CRL"), is a Cayman Islands-based company which carries on business as a resort operator in Cuba, among other places. The defendant, Rene Denis, an Ottawa-based travel agent, operated a business of arranging for racquet-sport professionals to be hired by CRL to work at resorts in Cuba. Mr. Denis received compensation for this service from both CRL and the racquet sport professional.

      In 2003, Mr. Denis arranged for the plaintiff, Viktor Berg, to work as a tennis professional for CRL at the Superclubs Breezes Jibacoa Resort in Cuba, which was managed by CRL. In return, CRL provided accommodation and other services at the resort for Mr. Berg and a guest. In 2003, Mr. Berg and his common law spouse, the plaintiff Morgan Van Breda, travelled to the resort in Cuba. On the first day of their trip, Ms. Van Breda tried to perform some exercises on a metal structure on the beach. The structure collapsed, and Ms. Van Breda suffered a spinal cord injury that rendered her paraplegic. After spending a few days at a hospital in Cuba, Ms. Van Breda returned to Canada. Rather than going to her pre-accident home in Ontario, Ms. Van Breda went to Calgary, Alberta where her family lived. Subsequently, Ms. Van Breda and Mr. Berg moved together to British Columbia; they never returned to Ontario.

      In May 2006, Ms. Van Breda and Mr. Berg issued a lawsuit in the Ontario Superior Court against several defendants, including Mr. Denis and CRL. The action was framed in breach of contract and the tort of negligence.

   2. Charron

      In January 2002, Dr. Charron and his wife, the plaintiff Mrs. Charron, purchased a vacation package through an Ontario-based travel agent, the defendant Bel Air Travel Group Ltd. ("Bel Air"). The package was assembled and sold by an Ontario-based tour operator, the defendant Hola Sun Holidays, Ltd. ("Hola Sun"). It was an all-inclusive vacation package at the Breezes Costa Verde Resort in Cuba. The package included scuba diving, among other things. The Costa Verde Resort property was owned by a Cuban corporation, the defendant Gaviota S.A. ("Gaviota"), and it was managed by the defendant CRL.

      The scuba diving activity was provided and conducted by another Cuban corporation, the defendant Marina Gaviota ("Marina Gaviota"), and its two employees--the defendants Andres Ricardo (the dive boat captain) and Leonardo Ricardo (the scuba diving instructor). On February 12, 2002, Dr. Charron died while scuba diving.

      Mrs. Charron returned to her home in Ontario; she and her adult children brought a lawsuit in the Ontario Superior Court against six defendants: Bel Air, Hola Sun, CRL, Gaviota, Marina Gaviota, Andres Ricardo, and Leonardo Ricardo.

2. Jurisdiction Motions and Pre-SCC Test for Jurisdiction

   In both the Van Breda and Charron actions, CRL brought a motion to stay the proceedings in Ontario on the basis that the Ontario court did not have jurisdiction over the claims against CRL. At that time, the law for determining when an Ontario court was entitled to assume jurisdiction over a claim against a foreign defendant was governed by a 2002 Ontario Court of Appeal decision, Muscutt v Cottrcelles, (2) Under the Muscutt test, an Ontario court was entitled to assume jurisdiction over a claim against a foreign defendant if there was a real and substantial connection between Ontario and either the defendant or the subject matter of the claim. In Muscutt, the Ontario court prescribed the following eight factors that the court was to consider to determine whether such a real and substantial connection was present:

   (1) The connection between the forum and the plaintiffs claim;

   (2) The connection between the forum and the defendant;

   (3) Unfairness to the defendant if the court assumes jurisdiction;

   (4) Unfairness to the plaintiff if the court does not assume jurisdiction;

   (5) The involvement of other parties in the action;

   (6) The court's willingness to recognize and enforce an extra provincial judgment rendered on the same jurisdictional basis;

   (7) Whether the action is interprovincial or international in nature; and

   (8) Comity and the standards of jurisdiction, recognition, and enforcement prevailing elsewhere. (3)

   1. Van Breda

      Even though the alleged tort occurred in Cuba and even though CRL had no physical presence in Ontario, the motion judge found that there was a real and substantial connection between Ontario and Van Breda's claim against CRL based on the following: Mr. Denis' activity in Ontario of arranging for the hiring of racquet sports professionals to work at the CRL-managed Jibacoa Resort in Cuba; a finding on a prima facie basis that the contract between Mr. Berg and CRL was made in Ontario through Mr. Denis, whom the judge held was an agent of CRL; and a consideration of unfairness to Ms. Van Breda if the Ontario court were to decline to assume jurisdiction over this claim against CRL.

   2. Charron

      A different motion judge also dismissed CRL's stay motion in Charron. This motion judge held that a real and substantial connection existed between the Ontario court and the Charrons' claim against CRL based on the following factors: a purchase contract for the Charrons' holiday package from Hola Sun was made in Ontario; CRL marketed the Casa Verde Resort extensively in Ontario; CRL relied heavily upon international travellers, and particularly tourists from Ontario, for the profitability of the Casa Verde Resort; and another corporation (a non-party to this action) operated an office in Ontario which performed business promotion services that were of benefit to various Superclubs/Breezes-brand resorts, including those operated by CRL.

3. Joint Appeal to Ontario Court of Appeal

   CRL appealed the motion decision in both cases. The two appeals were heard jointly by a special 5-judge panel of the Ontario Court of Appeal. On the appeal, CRL submitted that the Muscutt test was inappropriate because: (a) the extensive number of factors, including in particular subjective notions of fairness, rendered the test highly unpredictable; (b) as a result, the test failed to achieve the necessary objective of order that the SCC had previously held in other contexts is required by conflicts of law rules; and (c) it conflated the concepts of jurisdiction and forum non conveniens by considering as relevant to the issue of jurisdiction various factors that traditionally have been regarded as relevant to the issue of forum non conveniens. CRL submitted that, instead, the test for jurisdiction should be replaced with an objective, category-based test for jurisdiction, with a limited right of rebuttal.

   The Ontario Court of Appeal accepted CRL's position in part. The Court of Appeal reframed, but did not dispose of, the Muscutt test. Rather, the Court of Appeal adopted a new two-stage test. As the first stage, the Court of Appeal adopted a category-based presumption of jurisdiction that incorporated most of the categories prescribed by the Ontario court rules for permitting service ex juris without leave of the court. If a claim fell within one of those categories, there would be a rebuttable presumption of jurisdiction, and vice versa. However, at that stage this determination would only determine which party would then have the onus in the second stage of establishing that the presumption of jurisdiction, or of no jurisdiction, should be rebutted. Moreover, the Ontario Court of...