Stranger in a Strange Land - The Interplay Between Territorial Competence and Certification Hearings

The Saskatchewan Court of Queen’s Bench has recently ruled in a proposed national class action that issues of territorial competence (jurisdiction) should be deferred until the certification hearing is heard.

Knuth et al v Hyatt Hotels et al, 2016 SKQB 224 [Knuth] was an application challenging whether the Saskatchewan courts could exercise territorial competence over Hyatt Hotels of Canada Inc. (“Hyatt Canada”). The Plaintiffs allege in the underlying action that numerous hotels have improperly collected fees known as “destination marketing fees” from their customers. Amongst well over 20 other defendants, the Plaintiff named Hyatt Canada as a defendant. However, Hyatt Canada asserted it did not own or operate, and never owned or operated, any hotels in Saskatchewan. Further, the named plaintiff had never stayed in any of Hyatt Canada’s hotels located in the other provinces in which it did operate.

Hyatt Canada argued that none of the traditional factors which ground territorial competence as enumerated in The Court Jurisdiction and Proceedings Transfer Act, SS 1997, c C-41.1 [CJPTA] existed on the facts and that therefore the Court did not have territorial competence. The Court agreed that if the action were an individual action, it was clear that the Court would not have territorial competence. However, the Court held the fact that the action was a class action could impact on the territorial competence analysis such that it was prudent to leave any decision in this regard to the eventual certification judge.

The Court relied in large part on the reasoning of Jackson J.A. in Microcell Communications Inc. v Frey, 2011 SKCA 136 [Microcell]. In Microcell, it was held, amongst other things, that the certification judge did not err in holding that the Court had territorial competence over a defendant that was in a similar, though not identical, position as Hyatt Canada (the relevant defendant in Microcell was a telecommunications company in an industry wide action that had no operations in Saskatchewan). Jackson J.A. reasoned that the factors listed in the CJPTA were not exhaustive and then identified a myriad of rare factors in that case that supported the certification judge’s decision to find territorial competence, such as the similarity of the claims against all defendants most of whom the Saskatchewan court clearly had territorial competence over.

While not commented on in Knuth, in Microcell, Jackson J.A. made clear that, in general, issues of territorial competence should be decided before issues of certification (Microcell at para 125). It is also not appropriate to find territorial competence simply because the action is certifiable as a class action (at para 124). Jackson J.A. seems to suggest that courts must be careful not to conflate certification considerations with territorial competence considerations, even if evidence in respect to the former may be relevant to the latter.

That said, Jackson J.A. stated in Microcell that the evidentiary record compiled for a certification hearing can in appropriate cases be helpful in determining issues of territorial competence. In Knuth, Elson J. appears to have been influenced by the possibility that factors might arise “in the context of the proposed national class action” that “could carry sufficient substantive force to establish territorial competence in a meaningful way.” He went on to note:

31 …If the designated judge is persuaded that the claims of the class members disclose one or more causes of action that raise common issues, and that a class action would be the preferable procedure for the resolution of those common issues, a real and substantial connection [necessary for territorial competence] could well be established under s. 9 of the CJPTA.

Importantly, the Court in Knuth does not state that territorial competence issues should always be decided alongside certification. The Court notes that it is appropriate to decide territorial competence issues before certification when the determination would benefit all parties, where the determination would further the objectives of judicial efficiency, and/or where the determination relates to time sensitive issues.

There are examples in Saskatchewan where territorial competence applications have been decided heard in advance of certification. For example, in Medvid v Saskatchewan (Health), 2009 SKQB 198 the plaintiff objected to a territorial competence application being heard in advance of a certification application, even though the certification application had not yet been served or scheduled. The Court heard the application and found a lack of territorial competence in relation to the Alberta defendants. Medvid was not an industry wide action and essentially included two groups of defendants under the umbrella of Saskatchewan and Alberta governments. There was also no consideration of whether a procedural certification application could somehow affect the substantive determination of the territorial competence motion.

Another example is found in Wall Estate v GlaxoSmithkline Inc., 2010 SKQB 351 where the Court determined it did not have territorial competence over three foreign GSK companies prior to the certification hearing. The only other defendant was a properly named GSK Canadian company. There was also no consideration of whether a procedural certification application could somehow affect the substantive determination of the territorial competence application. Instead, the court focused on judicial efficiency, noting “it is beneficial to all concerned to remove improperly implicated parties to save costs and simplify the proceedings.”