In its recently released decision in Van Breda v. Village Resorts Limited (Van Breda), the Ontario Court of Appeal has provided a welcome clarification to the “real and substantial connection” test to be applied in determining whether Ontario courts should assume jurisdiction over out-of-province defendants.

While the Court of Appeal reaffirmed that “the core of the real and substantial connection test is the connection that the plaintiff’s claim has to the forum and the connection of the defendant to the forum, respectively,” it has simplified the cumbersome eight-factor test which has previously been used to decide jurisdiction motions.

Greater consistency and predictability in the approach of our courts to questions of jurisdiction and forum non conveniens may be expected as a result.

The case involves the appeal of two separate proceedings for personal injuries suffered by Canadian tourists at resorts in Cuba. In both instances the motion judges found that Ontario should assume jurisdiction. The Ontario Court of Appeal convened a special five-judge panel to consider whether the existing test for the assumption of jurisdiction should be refined.

The Muscutt Test

The existing multi-factor test was established by the Ontario Court of Appeal in a group of cases known as the “Muscutt quintet” in 2002. The Muscutt test requires the Court to weigh eight factors to determine whether there is a real and substantial connection to Ontario, including:

  1. The connection between the forum and plaintiff’s claim;
  2. The connection between the forum and 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; and
  8. Comity and the standards of jurisdiction, recognition and enforcement prevailing elsewhere.

The Court of Appeal Decision

A range of criticisms of the Muscutt test are cited in the Van Breda decision, including concerns that it is too subjective and unnecessarily complicated, that the factors overlap unacceptably with aspects of the test for forum non conveniens, and that aspects of the test, including “ill-defined fairness considerations” lead to forum shopping and encourage an influx of litigation into the province. As observed in one academic commentary cited by the Court, “It is not surprising that after seven years in the trenches Muscutt would be due for a tune up.”

In Van Breda, the Court of Appeal observed that the substantial body of jurisprudence which has developed subsequent to Muscutt suggests that the existing test was too discretionary and inconsistently applied. Muscutt provided little guidance on the relationship between the eight factors or the relative weight or significance each factor should bear.

In Van Breda, the Court of Appeal modified the Muscutt test by instituting a preliminary step to determine whether a real and substantial connection is presumed to exist. Second, the Court clarified the role and weight to be ascribed to each factor and reaffirmed that two factors remain at the core of the analysis:

  1. connection between the forum and plaintiff’s claim; and
  2. the connection between the forum and the defendant.

Step One: Presumption of Connection

In determining whether it has jurisdiction, a court must now first consider whether the factors used to determine whether a defendant may be served outside the province without leave under rule 17.02 of the Ontario Rules of Civil Procedure are present. This determination will frame the second stage of the test and establish which party bears the burden of proving the existence of a “real and substantial connection.”

Some of the most commonly relied-upon connecting factors for the purposes of Rule 17.02 include: a contract that was made in Ontario; the existence of governing law provisions designating the law of Ontario; a tort committed in the Province; damages sustained in the Province; and the fact that the defendant is a necessary or proper party to a claim properly brought against other parties in the Province.

The Court of Appeal held that when one of the enumerated factors under Rule 17.02 is made out, with the exception of damage sustained in the province, or the defendant being a “necessary or proper” party to proceedings brought properly against other parties in the Province, jurisdiction is presumed and the defendant bears the burden of showing that a real and substantial connection does not exist. If one of these connections is not made out, the burden falls on the plaintiff to demonstrate that the real and substantial connection test is met.

This is significant for two reasons. First, the burden of proof has, to date, been largely undefined in case law and this method provides substantial clarification. Second, the Court of Appeal has recognized that the mere fact that the plaintiff sustained damages in Ontario will not generally serve as a reliable indicator of a real and substantial connection. Nor will the fact that litigation is legitimately pursued against other parties in the Province. It is now clear that, although these two factors may form the basis for assumed jurisdiction in some instances, they are to be accorded less weight than the other factors enumerated under Rule 17.02 and are not, in themselves, sufficient to shift the burden of proof to the defendant.

Step Two: The Real and Substantial Connection Test

At the second stage, the question before the court is whether there is a real and substantial connection between Ontario and the plaintiff’s claim and the defendant, respectively. Following the Supreme Court of Canada’s reasoning in Morguard, the Court of Appeal rejected the notion that there is a precise or mechanical test to define the nature or degree of connection required. It confirmed that both the factors connecting the plaintiffs’ claim to Ontario and the extent and nature of the defendants’ conduct in the jurisdiction are relevant considerations.

Although the Court of Appeal confirmed that, where the defendant has confined its activities to its home jurisdiction, it will not ordinarily be subject to the jurisdiction of the Ontario courts, the Court did note that physical presence or activity is not always required to establish a real and substantial connection to Ontario--for instance, when a defendant may reasonably foresee that its conduct would cause harm within the forum by putting a product into the normal channels of trade jurisdiction may be assumed.

However, the Court of Appeal was careful to constrain the potential for foreseeability of harm within the province to establish jurisdiction over defendants who otherwise have no meaningful connection to the Province. It rejected, as overly broad, the respondents’ argument that jurisdiction should be assumed over a defendant who ought to reasonably have contemplated being called into account within the forum. As observed by Justice Sharpe, writing for the unanimous panel: “It is difficult to see how a proposition stated that broadly could avoid subjecting anyone who has regular dealings with extra-provincial parties from rendering themselves subject to the home jurisdiction of the extra-provincial customer.”

The Remaining Six Muscutt Factors

In the Court of Appeal’s rearticulation of the test, the remaining six factors from the Muscutt quintet are not to be treated as independent factors but as analytical tools to assist the court in assessing the significance of the connections between the forum, the plaintiff’s claim and the defendant. For example, with respect to considerations of fairness, the Court of Appeal observed that the assumption of jurisdiction “must be guided by the requirements of order and fairness, not a mechanical counting of connections.” Thus, fairness is not an independent factor to be evaluated in the abstract, but a lens through which the court should assess the quality, strength and significance of the connections between the claim and the defendant with the jurisdiction. Unfairness to the plaintiff in declining jurisdiction may not, therefore, trump a want of a real and substantial connection.

Forum of Necessity Doctrine

The Court of Appeal noted that there will be exceptional cases where the need to ensure access to justice will justify the assumption of jurisdiction, even in the absence of a real and substantial connection. The forum of necessity doctrine operates as an exception to the real and substantial connection test and provides a residual discretion to assume jurisdiction where there is no other form in which the plaintiff can reasonably seek relief.

Distinction Between the Tests for Jurisdiction and Forum non Conveniens

The Court of Appeal expressed disapproval of a recent tendency of Ontario judges to incorporate considerations from the forum non conveniens test into the real and substantial connection test. It blamed this tendency, in part, on an unduly wide interpretation given to fairness in some cases, and emphasized the importance of maintaining a rigorous distinction between the two tests.

In particular, the Court of Appeal distinguished the tests on the basis that the test for jurisdiction (often referred to as jurisdiction simpliciter) is a non-discretionary determination as to whether a jurisdiction exists. The test for forum non conveniens, is a discretionary determination that compares the relative strength of the connection with another potentially available jurisdiction. The Court confirmed that considerations that weigh the relative advantages or disadvantages of litigation in another forum have no place in the jurisdiction simpliciter analysis.

Significance

While the Van Breda decision represents a welcome rearticulation of the Muscutt test, it does not alter the fundamental basis for assumption of jurisdiction by Ontario Courts. Amongst the many things that have not changed, the application of the “real and substantial connection” test continues to require flexibility and fairness and remains highly dependent on the specific facts of individual cases. In other words, the outcomes of jurisdictional determinations will continue to be contextual and relatively difficult to predict.

Non-resident parties who contract with counterparties in Ontario or who have other meaningful ties to the Province that give rise to claims by Ontario residents will continue to face the threat of litigation in Ontario courts but they may now expect more rigour and consistency in the application of jurisdictional principles.