Cross-Border Tort Cases: A Changing Environment

The Supreme Court of Canada has recently changed how courts are to decide, in tort cases, whether a court has jurisdiction over non-resident defendants. It has made less subjective and more predictable the approach to determining whether there is a real and substantial connection between the province and the defendant or the subject matter of the case. Such a connection is a long-standing constitutional prerequisite for a court to take jurisdiction over a non-resident defendant (absent the defendant’ consent to jurisdiction).

The cases, Van Breda v Village Resorts Ltd., Club Resorts et al. and Charron v. Village Resorts Ltd., Club Resorts et al. reached the Supreme Court not because of unusual facts, but because of widespread sentiment that the existing law was in need of review. In fact, there were several interveners at the Ontario Court of Appeal and at the Supreme Court – and the Ontario Court of Appeal convened a special panel of five judges, instead of the usual three, to hear the case.

Both cases involved Canadian tourists who had accidents at resorts in Cuba during vacations they had arranged in Ontario. Both resorts were managed by Club Resorts, a company based in the Cayman Islands, which had marketed the resorts in Ontario. Ms. Van Breda was catastrophically injured when exercise equipment collapsed; after leaving Cuba she took up residence in British Columbia. Dr. Charron drowned while scuba diving during an all-inclusive scuba diving vacation. The plaintiffs in both cases sued, in Ontario, the parties from whom they had bought their vacations, the management of the resorts, and others, including defendants from Canada, Cuba, and the Cayman Islands.

As often happens in cross border cases, some of the foreign defendants asked the court to stay the proceedings. There are broadly speaking two grounds on which a court may stay the proceedings. One is that the court lacks jurisdiction (i.e. that there is no real and substantial connection). The other is that, although the court has jurisdiction, it has applied the forum non conveniens doctrine, which gives the court a residual power to decline jurisdiction in appropriate but limited circumstances to assure fairness to the parties and the efficient resolution of the dispute. The court will exercise its discretion to decline jurisdiction if it determines that another court elsewhere is clearly a more suitable forum.

Under the pre-Van Breda law, when defendants challenged the court’s jurisdiction over them, the court would first consider several factors to decide whether there was a real and substantial connection, namely: 

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;

8. comity (that is, respect for the courts of other jurisdictions), and the standards of jurisdiction, recognition, and enforcement prevailing elsewhere

If the court found a real and substantial connection based on these eight factors it would then proceed to the forum non conveniens analysis. Here the court considers such things as the location of the parties, witnesses, and evidence, whether another proceeding was underway in that other court, whether differences in the laws of the two jurisdictions might help or hinder one side or the other, and the like.

The problem was that some of the eight factors regarding real and substantial connection, such as fairness (factors 3 and 4) and comity (factor 8) are suitable only for deciding which of two jurisdictions are the best place to hear the case, not for deciding whether a real and substantial connection to the home jurisdiction exists (incidentally, fairness to the defendant(s) included consideration of whether it/they have insurance.) Several commentators had observed that the foregoing approach was too subjective, too complicated and insufficiently predictable.

In a unanimous decision, the Supreme Court of Canada has changed the law in mainly two respects. The first change is that a real and substantial connection is to be presumed (subject to rebuttal) if one or more of certain, objective, factors that connect the subject matter of the litigation with the forum exist. If no recognized presumptive connecting factor applies, the court should not accept jurisdiction. The SCC indicated that in tort cases, these presumptive connecting factors include:

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;

d) a contract connected with the dispute was made in the province.

The Supreme Court found a real and substantial connection in Van Breda – the contractual relationship formed in Canada with the Cuban resort – and also in Charron, the fact the resort carried on business in Ontario, not just by advertising but also with an office and frequent visits by staff to promote its resort. The Court allowed both cases to proceed in Ontario.

The Supreme Court made clear that courts may identify other new presumptive connecting factors, i.e. connections giving rise to a relationship with the forum that is similar to the four factors listed above, but it did not say much about what would qualify as a presumptive connecting factor. It also clarified that neither the mere fact the plaintiff is present in the jurisdiction, nor that the injured plaintiff has incurred income loss or medical costs there, nor considerations such as fairness, comity and efficiency, would constitute presumptive connecting factors.

If the plaintiff shows there is a presumptive connecting factor, then to rebut the presumption of jurisdiction the defendant must show that the presumptive connecting factor does not point to any real relationship between the subject matter of the litigation and the forum, or that the relationship is weak. For example, if the connecting presumptive factor is that the defendant carries on business in the forum, the defendant should show that the subject matter of the litigation is unrelated to the defendant’s business there.

The second change is to more clearly separate and distinguish the real and substantial connection test from the discretionary forum non conveniens analysis as to whether the court should decline jurisdiction in favour of another court elsewhere. The court may consider forum non conveniens only after having first determined it has jurisdiction, and then only if the defendant invokes forum non conveniens.

The defendant has the burden to show another forum is clearly more appropriate. He must show a presumptive connecting factor connecting the subject matter of the litigation to the other forum, then must show that forum is clearly more appropriate, based on the factors mentioned above and others. Probably the defendant’s insurance or lack thereof will be considered here, rather than as part of the real and substantial connection issue.

Differences in the laws between the home jurisdiction and the jurisdiction to which the defendants want the case transferred are often an important factor in the forum non conveniens analysis. For example, the plaintiffs in Van Breda would not be entitled to statutory family law benefits if Cuban law applied. However, the Supreme Court rightly pointed out that letting the case proceed in Ontario does not necessarily mean that Ontario law will apply. As well, differences that are an advantage for one side are a disadvantage for the opposing side. Accordingly, the Court cautioned against giving much weight to such differences in the forum non conveniens analysis.

All in all, the decision helps a little to clarify when courts will assume jurisdiction. But it remains to be seen what new connecting factors will be recognized, and what is needed to rebut the presumption.

Ken MacDonald is a partner with Henry K. Hui & Associates. His practice focuses on commercial and general civil litigation with expertise in cross border cases. The foregoing provides general information only and is not legal advice; readers should contact counsel for advice tailored to their particular situation.