The issue of jurisdiction often arises where parties to a dispute operate in different jurisdictions or where the underlying facts forming the basis of a claim involve another jurisdiction. The recent Supreme Court of Canada decision in Lapointe has important implications for individuals and companies outside of Ontario who do business with entities in Ontario, or who become involved, even indirectly, in a contract made in Ontario.
Legal Context
Before a court assumes jurisdiction in a tort action in Ontario, it follows a two step process. In the first step, the court determines whether it has jurisdiction simpliciter, that is, whether it is able to assume jurisdiction. Previous jurisprudence has established that, before a court can assume jurisdiction over a claim in a tort matter, a real and substantial connection must be shown between the circumstances giving rise to the claim and the jurisdiction where the claim is brought.
In the second step, the court can apply the doctrine of forum non conveniens to exercise its discretion to decline jurisdiction in favour of a more appropriate forum. A consideration of forum non conviniens is engaged only after jurisdiction is established and has no relevance to the analysis of jurisdiction simpliciter.
In Club Resorts Ltd. v. Van Breda,[1] the Supreme Court of Canada clarified and reformulated the “real and substantial connection” test. It held that jurisdiction simpliciter must be established primarily based upon objective factors that connect the subject matter of the litigation to the forum. The court identified four non-exhaustive presumptive connecting factors in tort claims:
The defendant is domiciled or resident in the province;
The defendant carries on business in the province;
The tort was committed in the province; or
A contract connected with the dispute was made in the province.
The onus is on the plaintiff to establish a presumptive connecting factor. Once the plaintiff establishes a presumptive connecting factor, the onus shifts to the defendant to rebut the presumption and the defendant bears the burden of convincing the court that the proposed assumption of jurisdiction would be inappropriate.
Facts in Lapointe
At issue in the recent decision of the Supreme Court of Canada in Lapointe was whether the fourth connecting factor was established in this case and whether the Ontario courts should decline jurisdiction under the doctrine of forum non conveniens.
The dispute in Lapointe arose out the 2009 federal bailout of the Canadian automotive sector. A term of the bailout was that General Motors of Canada Ltd. close dealerships across the country. GM Canada proceeded to close over 200 dealerships across the country and offered compensation to each dealer through a Wind-Down Agreement.
The Wind-Down Agreement contained a provision stating that it was governed by the laws of the Province of Ontario and that the courts of the Province of Ontario have exclusive jurisdiction to hear and determine claims relating to the agreement. The agreement required the dealers to waive their rights under any and all applicable statutes, regulation or other law, including rights under provincial franchise laws. GM further required each dealer to obtain independent legal advice and to provide a certificate signed by the retained lawyer who provided the independent legal advice.
207 GM Canada dealers started a class action against GM Canada alleging that it had breached provincial franchise laws and alleging that Cassels Brock & Blackwell LLP, counsel for the Canadian Automobile Dealers Association, was negligent in the legal advice it gave to the GM dealers who were members of the Association and further alleged that the law firm was in conflict. Cassels Brock in turn added 150 law firms as third party defendants, seeking contribution and indemnity from the third party law firms who gave individual dealers independent legal advice. Of these firms, 67 were based in Ontario, 32 were based in Quebec and 51 were based in the other provinces.
The non-Ontario law firms brought motions claiming that there was insufficient connection between the third party claims and the Ontario courts. The firms argued that they were not domiciled or resident in Ontario and did not carry on business in the province. Alternatively, the non-Ontario firms argued that, even if the Ontario courts had jurisdiction, they ought to decline to exercise it based on forum non conveniens.
Jurisdiction Simpliciter
The motion judge dismissed the motions by the non-Ontario firms, holding that the Ontario courts had jurisdiction under the fourth Van Breda factor because there was a real and substantial connection between the contract, the Wind-Down Agreement, and the dispute between Cassels Brock and the local law firms. The judge pointed out that the Wind-Down Agreement explicitly addressed the issue of providing independent legal advice and contemplated the involvement of lawyers local to the GM dealers who operated outside of Ontario. The motion judge concluded that, although the third party law firms were not parties to the Wind-Down Agreement, they were brought within the scope of the contractual relationship by providing legal advice to the GM dealers.
The Supreme Court of Canada dismissed the appeal, which was brought by the Quebec law firms. The Honourable Madam Justice Abella, writing for the majority of the Supreme Court, held that the fourth Van Breda factor did not necessarily require that a tortfeaser be a party to the contract at issue, only that the dispute be connected to a contract made in the province or territory where jurisdiction was proposed to be assumed:
[32] The fourth factor also promotes flexibility and commercial efficiency. As seen in Van Breda, all that is required is a connection between the claim and a contract that was made in the province where jurisdiction is sought to be assumed. A “connection” does not necessarily require that an alleged tortfeasor be a party to the contract. To so narrow the fourth presumptive factor would unduly narrow the scope of Van Breda, and undermines the flexibility required in private international law.
The Supreme Court of Canada emphasized that Van Breda does not limit the fourth connecting factor to situations where the defendants’ liability flows immediately from his or her contractual obligations, or require that the defendant be a party to the contract. It is sufficient that the dispute before the courts be “connected” to a contract made in the province or territory where jurisdiction is proposed or assumed.
An important finding of fact made by the lower courts in this case, which was upheld by the Supreme Court, was that the last act essential to the formation of the contract occurred at GM Canada’s office in Ontario, where GM Canada’s Vice President of Sales, Service & Marketing, accepted and signed the Wind-Down Agreements that had been signed and returned by the dealers. In Ontario, where the parties of a contract are located in different jurisdictions, the contract will be held to be formed in the jurisdiction where the last essential act of contract formation, such as acceptance, took place. Thus, the lower courts and the Supreme Court found that the relevant contracts were made in Ontario.
Forum Non Conveniens
The lower courts and the Supreme Court also rejected the alternative argument of the appellants under the forum non conveniens doctrine. Madam Justice Abella reiterated that the burden is on the defendant to demonstrate that a court of another jurisdiction has a real and substantial connection to the claim and that this alternative forum was “clearly more appropriate” than the one where jurisdiction may be assumed. The court found that the defendants failed to meet this burden.
The implication of these recent cases is that individuals and companies that do business in Canada, or have a connection to a contract that was formed in Canada, are increasingly more vulnerable to being sued in Canadian courts. Similarly, individuals or companies in one Canadian jurisdiction are also more vulnerable to being sued in another Canadian jurisdiction.
An Aside: Forum of Necessity
Can the plaintiff bring a tort claim in a Canadian jurisdiction where jurisdiction simpliciter is not established?
In extraordinary and exceptional circumstance, the court can apply the forum of necessity doctrine to assume jurisdiction where there is no real or substantial connection but where the plaintiff establishes that there is no forum in which they can reasonably seek relief.
In Ibrahim v. Robinson,[2] the plaintiff brought a claim in Ontario for damages resulting from a motor vehicle accident that occurred in Michigan. The limitation period in Ontario for bringing such a claim is two years, while in Michigan it is three years. The Plaintiff brought the claim in Ontario within the two-year limitation period. However, the defendant did not bring its motion challenging jurisdiction until the expiry of the three-year limitation period under the rules in Michigan. If the court denied jurisdiction, the plaintiff would not be able to bring a claim in Michigan and would not be able to seek redress for his injuries.
The Ontario Court of Appeal upheld the motion judge’s holding that by delaying serving the jurisdiction motion until it was too late for the plaintiff to sue in Michigan, the defendant effectively denied the plaintiff access to the Michigan courts and may have lulled them into a false sense of security. The court concluded that fairness and access to justice for the plaintiff called for the court to assume jurisdiction based on the doctrine of forum of necessity.
Disclaimer
Suliman Law Firm has prepared this document for information only; it is not intended to be legal advice. You should consult us about your unique circumstances before acting on this information. Suliman Law Firm excludes all liability for anything contained in this document and any use you make of it.
Endnotes
[1] 2012 SCC 17
[2] 2015 ONCA 21