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Advertising Alone Is Not Enough To Establish Court’s Jurisdiction in Canada

By Susan Smith (guest author) (posts)

The Supreme Court of Canada recently confirmed that in determining whether a “real and substantial connection” exists for a court to assume jurisdiction over a case involving a foreign accident or foreign defendant, advertising alone within a Canadian jurisdiction is not sufficient to establish that a business is being carried on there, regardless of whether that advertising is physical or virtual.

The Court found on April 18, 2012 in Club Resorts Ltd. v. Van Breda (and Charron) that a “real and substantial connection” had been established by way of physical circumstances linking Ontario and the foreign torts (or accidents) claimed by both parties. Both plaintiffs resided in Ontario and purchased travel packages to Cuba from an agent in Ontario, and while on vacation in Cuba (at the defendant’s hotel) both plaintiffs suffered catastrophic accidents. The Supreme Court of Canada revised the test to be used for evaluating the existence of jurisdiction of our courts in relation to foreign matters.

The Supreme Court of Canada stated that while the “real and substantial connection” test was a well-established constitutional principle, there was a need to give certainty about its meaning and conditions of application, and “greater direction on how it applies”. The Court reviewed the factors traditionally considered by the courts (the Muscutt factors), together with the factors listed in the Court Rules for service beyond the jurisdiction, and factors in the Court Jurisdiction and Proceedings Transfer Act.

The Court stated, “The development and evolution of the approaches to the assumption of jurisdiction … suggest that stability and predictability in this branch of the law of conflicts should turn primarily on the identification of objective factors that might link a legal situation or the subject matter of litigation to the court that is seized of it. At the same time, the need for fairness and justice to all parties engaged in litigation must be borne in mind in selecting these presumptive connecting factors.”

The Supreme Court then formulated a list of “presumptive connecting factors” to be used in determining whether or not a “real and substantial connection” for jurisdiction in tort cases exists. This list of “presumptive connecting factors” is not exhaustive, and other connecting factors may be raised. When one or more of the presumptive connecting factors applies, a court will assume jurisdiction unless the defendant can show the absence of a real and substantial connection. If none of the presumptive connecting factors apply, the plaintiff must nevertheless prove that a sufficient relationship exists between the litigation and the forum.

The following factors are now the “presumptive connecting factors” that normally entitle a Court to assume jurisdiction over a tort dispute:

(i) the defendant is domiciled or resident in the province;
(ii) the defendant carries on business in the province (with some actual presence in the jurisdiction such as maintaining an office or making regular visits);
(iii) the tort was committed in the province; and
(iv) a contract connected with the dispute (or tort) was made in the province.

The Supreme Court of Canada specifically rejected the plaintiff’s presence in the jurisdiction as a presumptive connecting factor, and also the location of where the damage was sustained which may raise even more complex and difficult issues.

It is clear that the Supreme Court of Canada welcomes the development of additional factors over time, provided they are similar in nature to the factors listed above. Relevant considerations for developing new “presumptive connecting factors” include:

(i) similarity of the connecting factor with the already recognized presumptive connecting factors;
(ii) treatment of the connecting factor in the case law;
(iii) treatment of the connecting factor in the statute law; and
(iv) treatment of the connecting factor in the private international law of other legal systems with a shared commitment to order, fairness and comity.

As explained by the Court, the constitutional values of order, fairness and comity underlie all of the presumptive connecting factors, whether listed or new. All presumptive connecting factors point to a relationship between the subject matter of the litigation and the forum so that it would be reasonable to expect the defendant would be called on to answer legal proceedings in that forum. Where such a relationship exists, Canadian courts would recognize and enforce a foreign judgment on the basis of the presumptive connecting factor in question, and foreign courts could be expected to do the same with a Canadian judgment. The assumption of jurisdiction is thus consistent with the principles of order, fairness and comity.

The Supreme Court provided guidance on how a party can rebut a “presumptive connecting factor”. That party must establish facts, which demonstrate that the presumptive connecting factor does not point to any real relationship between the subject matter of the litigation and the forum. An example is when a defendant is carrying on business in the forum (with actual presence) but the subject matter of the litigation has little or no connection with that business.

In conclusion, under the Van Breda-Charron test, to establish a “real and substantial connection” for jurisdiction, the party seeking jurisdiction has the burden of identifying a “presumptive connecting factor” that links the subject matter of the litigation, or the defendant, to the forum in a real and substantial way. There are now four “presumptive connecting factors” for tort claims but the list is not exhaustive. Courts will undoubtedly identify additional presumptive factors over time.

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