WHEN MAY A CANADIAN COURT ASSUME JURISDICTION OVER A FOREIGN DEFENDANT?

May 09, 2012

Defending a lawsuit is often a costly undertaking, but it may be especially so for a foreign party which is required to defend itself in a lawsuit commenced in Ontario.

A foreign defendant facing a lawsuit in Ontario should first consider whether it is appropriate to challenge the court’s jurisdiction to even deal with the matter.

A motion to challenge the court’s jurisdiction may also be costly and difficult, but if it is successful, the proceedings against the foreign defendant in Ontario will be stayed. If that occurs, the plaintiff will be required to either, pursue the defendant in another jurisdiction, or abandon any claims against that defendant. Therefore, in practical terms, a successful jurisdictional challenge could put an end to the claim against the foreign party.  

Generally speaking, the Ontario court will assume jurisdiction when there is a “real and substantial connection” between the subject matter of the lawsuit and Ontario. Though the test appears to be a simple one, there has been much litigation about when that test has, in fact, been met in any given circumstance.

The Supreme Court of Canada’s  (the “SCC”) decision in Club Resorts Ltd. v. Van Breda (“Van Breda”), which was released on April 18, 2012, is instructive on the issue.

By way of background, Van Breda involved two separate claims in which one individual was seriously injured and another was killed while on vacation at the same hotel in Cuba. Lawsuits were commenced in Ontario against a number of parties, including the company which operated the hotels, Club Resorts Ltd. (“Club Resorts”). That company was incorporated in the Cayman Islands. Club Resorts challenged the Ontario court’s jurisdiction to try the cases. Alternatively, it argued that even if the Ontario court had jurisdiction, the court should decline to hear the cases because Ontario was not the most convenient forum to do so. Club Resorts was unsuccessful in its initial motion and in its appeal to the Court of Appeal for Ontario. Club Resorts then appealed to the SCC.

In dismissing the appeal, the SCC sought to clarify the circumstances in which a Canadian court could assume jurisdiction over a foreign party.

In summary, a Canadian court will be presumed to have jurisdiction in the following circumstances:

(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.


The SCC was also very clear that the list of presumed situations was not limited and it was open to the courts to expand that list in the future on a case by case basis. In this regard, the Court provided some guidance as to what ought to be considered in establishing a new presumption. In general terms, the question to be asked is whether it would be reasonable to expect that the defendant would be called to answer legal proceedings in that jurisdiction.

If, however, no presumptive connecting factor exists, the court should not assume jurisdiction, nor it should assume jurisdiction on the basis of the combined effect of a number of non-presumptive connecting factors.
Where a presumptive connecting factor exists, then the court should assume jurisdiction.  That assumption, however, is rebuttable.  In such case, the party challenging the court’s jurisdiction has the onus of establishing facts that would persuade the court that, despite the presumption, there really is no connection between the subject matter of the lawsuit and the jurisdiction. It would seem that there would have to be some very unusual facts to rebut the presumption and, therefore, the onus would be a difficult one to meet.

Even if a foreign defendant is unsuccessful in challenging the court’s jurisdiction in the first place, it is still open to that party to raise an issue of forum non conveniens (i.e. that the jurisdiction chosen by the plaintiff it is not the most convenient forum in which to try the case)
.
The relevant considerations in determining the most convenient forum include:

(a)    the comparative convenience and expense for the parties to the proceeding; and for their witnesses;
(b)    the law to be applied to the issues in the proceedings;
(c)    the desirability of avoiding multiplicity of proceedings;
(d)    the desirability of avoiding conflicting decisions in different courts;
(e)    the enforcement of an eventual judgment; and
(f)    the fair and efficient working of the Canadian legal system as a whole.


Ultimately, the determination of the most convenient forum is in the court’s discretion, but in exercising that discretion the court must be satisfied that one jurisdiction is clearly better than another to fairly deal with the litigation.

Once again, a party challenging the court’s jurisdiction on the basis of forum non conveniens would seem to have a high onus to meet.

Jeffrey A.L. Kriwetz

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