For twenty-two years, since the leading decision in Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077, the ‘real and substantial connection’ test has been the judicial guide to the proper assumption of jurisdiction in conflict of laws cases. Unfortunately, in Morguard the Supreme Court did not attempt to define the content of a ‘real and substantial connection’ sufficient to ground assumption of jurisdiction; nor did it elaborate on the strength of such a ‘connection.’  Rather, the Court held that the connections between the matters or the parties, on the one hand, and the court, on the other, must be of some significance in order to promote order and fairness.  

In the years since, courts at various levels have struggled to complete the task begun in Morguard by articulating just what would amount to a ‘real and substantial connection.’  While the Supreme Court has continually re-emphasized the significance of the test, recognizing it as a constitutional imperative in the application of conflicts rules in Hunt v. T&N plc, [1993] 4 S.C.R. 289, and extending its application to the recognition and enforcement of foreign judgments in Beals v. Saldanha, [2003] 3 S.C.R. 416, it has never attempted to elaborate upon the rules the test requires (see Beals, at paras. 23 and 28). The Supreme Court largely kept out of the fray until now.

After having reserved the decisions for more than a year, on April 18, 2012 the Supreme Court of Canada released its judgments in three separate appeals: Club Resorts Ltd. v. Van Breda, 2012 SCC 17; Les Éditions Écosociété Inc. v. Banro Corp., 2012 SCC 18, and Breeden v. Black, 2012 SCC 19. In the three cases, the court provided what should prove to be a comprehensive code for applying the real and substantial connection test and establishing whether a Canadian court should assume jurisdiction over a claim or defendant.

Context: Previous Attempts to Establish Clear Guidance

In the absence of binding Supreme Court authority, various attempts have been made across Canada to establish the parameters of the personal jurisdiction. These include various provincial statutes that have adopted variants of the Uniform Law Conference of Canada’s Uniform Court Jurisdiction and Proceedings Transfer Act, which make specific reference to the real and substantial connection test.

Ontario has never adopted a statute clearly establishing its ‘long arm’ jurisdiction. The limits on personal jurisdiction remain in broadly stated service ex juris rules. In the absence of a statute, the Court of Appeal attempted to craft a common law framework for application of the real and substantial connection test in Muscutt v. Courcelles (2002), 60 O.R. (3d) 20. The court’s approach in Muscutt was to enumerate a list of eight factors, none of which were determinative, and all of which had to be ‘…considered and weighed together’ in determining whether the test should be met. Considering that the factors included general notions like ‘unfairness to the parties either in assuming or not assuming jurisdiction, and ‘comity,’ the eight factors appeared discretionary, tended to favour the plaintiff’s choice of jurisdiction, and became difficult to distinguish from the test for forum non conveniens.  

The Supreme Court Steps In and Establishes the Test

In Club Resorts Ltd. v. Van Breda, the Supreme Court articulated a new set of criteria for determining real and substantial connections that will likely replace the Muscutt test.

Writing for the unanimous court in Club Resorts Ltd. v. Van Breda, Mr. Justice Lebel (who wrote all three judgments) noted at para. 73 that ‘given the nature of the relationships governed by private international law, the framework for the assumption of jurisdiction cannot be an unstable, ad hoc system made up ‘on the fly’ on a case-by-case basis—however laudable the objective of individual fairness may be.’  Such a framework must also take into account that court decisions dealing with jurisdiction tend to be made in the preliminary stages of litigation on the basis of pleadings and affidavits before the factual record has been fully developed.

The Court created a ‘list of presumptive connecting factors.’  The list is not ‘exhaustive’ and the presumptions can be rebutted, but creating new factors, or rebutting a case where one of the presumptive factors applies, will likely be difficult.

The four ‘presumptive connecting factors’ that will give rise to jurisdiction are:  

  1. a defendant is domiciled or resident in the province;
  2. a defendant carries on business in the province;
  3. a tort was committed in the province; and
  4. a contract connected with the dispute was made in the province.

The Court provided a formula for developing ‘over time’ new categories of presumptive factors.  Relevant considerations include:  

  1. Similarity of the connecting factor with the recognized presumptive  connecting factors;
  2. Treatment of the connecting factor in the case law:
  3. Treatment of the connecting factor in statute law; and
  4. Treatment of the connecting factor in the private international law of other legal systems with a shared commitment to order, fairness and comity.

The test for assumption of jurisdiction, at least in tort cases, now appears to be more straightforward than the process of weighing 8 factors including fairness to the plaintiff. If the party arguing for assumption of jurisdiction can show a ‘presumptive connecting factor,’ the court should take jurisdiction unless the presumption can be rebutted. If a ‘presumptive connecting factor’ does not exist, the court cannot take jurisdiction unless a plaintiff can demonstrate a basis for a new presumptive connecting factor.

Rebutting a presumption will be possible but difficult. A defendant will have the burden of  showing that the connecting factor is trivial, or weak, in the context and thus does not really demonstrate a ‘real and substantial’ connection.  Examples given by the court include a showing that although a contract was made in a province, it has little to do with the subject matter of the litigation.  

The court retains ultimate discretion not to exercise jurisdiction based on the convenient forum doctrine. The Supreme Court was careful to state, however, that that convenient forum can only be invoked where a party objects to the litigation proceeding; a court cannot decline jurisdiction on its own initiative.  

A defendant raising a convenient forum issue has the burden to show why the court should decline jurisdiction. The burden is a heavy one because the court will only decline jurisdiction where another forum is ‘clearly’ more appropriate.

Club Resorts Ltd. v. Van Breda  

Club Resorts was a combined appeal concerning personal injuries that occurred at Cuban resorts.

In Van Breda, a couple, Mr. Berg and Ms. Van Breda, who then lived in Ontario were vacationing at a Cuban resort when Ms. Van Breda suffered a disabling injury. The Court, held that the existence of a contract signed in Ontario by Mr. Berg (who was to give tennis lessons for bed and board) was a ‘presumptive connecting factor’ entitling the Ontario court to take jurisdiction. The Court further held that the resort did not establish that Cuba was a more convenient forum.  

In Charron, the issue was a fatal accident by an Ontario resident at a Cuban resort. The spouse of the Ontario resident returned to Ontario and sued the resort. The Court held that the ‘presumptive connecting factor’ was satisfied because the resort had carried on business in Ontario, even though its corporate head office was not in Ontario. Its business activities in the province ‘went beyond promoting a brand and advertising.’  Again, the Court declined to find Cuba was the more appropriate forum.

What the court found would not establish jurisdiction may turn out to be as important as what the court found to be presumptive connecting factors in the two cases. For example, it would appear that advertising in Ontario would not itself be a sufficient basis for establishing jurisdiction. Nor would returning to a province and continuing to suffer injury relating to a tort committed elsewhere.

Les Éditions Écosociété Inc. v. Banro Corp.

The defendants published a book entitled Noir Canada: Pillage, corruption et criminalité en Afrique. which plaintiffs allege was defamatory because it contained accusations that they had committed human rights violations and fraud. The book was published in Quebec, where the publisher was located; but 93 copies were distributed in Ontario. The Court, applying the new framework developed in Club Resorts Ltd. v. Van Breda, had no difficulty finding that the Ontario courts had jurisdiction: the sale of the book in Ontario established that the alleged tort of defamation had occurred in Ontario. The Court also found that the lower court had correctly exercised its discretion in determining that Quebec was not the more convenient forum. 

Breeden v. Black

Mr. Black commenced six libel actions against 10 defendants, all officers of a company that published a report widely reported in the Ontario media containing allegations that unauthorized payments had been made to him. The Court had no difficulty applying the new framework developed in Club Resorts Ltd. v. Van Breda. The presumptive connecting factor was created by publication of the defamatory statements in Ontario newspapers, or commission of a tort in Ontario. As in all the other cases, the court found that the defendants had not met the burden of showing that another forum for the litigation was clearly more convenient.

Conclusions and Further Questions

The Supreme Court’s decision adds welcome clarity, simplicity, and direction to what had been confusion in applying the real and substantial connection test. Only time will tell if the apparent simplicity of the test is difficult to apply and how it will be used in different contexts other than inter-jurisdictional tort claims.

One particular area of interest to the class action bar is how the test in Club Resorts Ltd. v. Van Breda will apply to creation of national classes. In particular, an interesting question is whether a representative plaintiff will be required to show that each class member can meet the test for showing a presumptive connecting factor. A related question is whether the ‘necessary and proper parties’ basis for establishing jurisdiction can be elevated to a new presumptive connecting factor in national class action litigation.