Tort litigation is common in the business world and encompasses a wide variety of wrongdoings, including fraud, defamation, and conspiracy. Such litigation frequently involves people and businesses that are based outside of the province. The question often arises of whether courts in Ontario have jurisdiction to hear matters involving such parties. A series of legal tests and principles is used to make that determination. Recently, courts have grappled with applying those principles in situations involving torts and contracts. This post will provide an overview of the issues presented by those situations.

Overview of the “Real and Substantial Connection” Test As It Applies to Tort Litigation

In Ontario, a Court will only have jurisdiction simpliciter (the power to hear a case) if there is a “real and substantial connection” between the subject matter of the dispute and this province. This is not to be confused with the issue of “forum non conveniens,” which involves the question of whether the court should hear the case. However, a court cannot hear a case unless jurisdiction simpliciter is first established.

The leading case on jurisdiction simpliciter is Club Resorts Ltd. v. Van Breda from 2012. In that case, the Supreme Court of Canada set out the principles that apply in determining whether a court has jurisdiction. It noted that the party arguing in favour of the court’s jurisdiction has the burden of identifying one of several “presumptive connecting factors” that link the subject matter of the litigation to the court, thus giving rise to a “real and substantial connection” between them.

The Four Presumptive Connecting Factors

The Court described four presumptive connecting factors that, on their face, permit a court to assume jurisdiction where the litigation in issue concerns a tort. Those factors are:

(a) the defendant resides in or is domiciled in the province;

(b) the defendant carries on business in the province;

(c) the tort was committed in the province; and

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

As the Court confirmed, this is not an exhaustive list, and courts may add new presumptive connecting factors to it if doing so is consistent with the values of “order, fairness, and comity.”

It is important to emphasize that these factors can be rebutted. The party arguing that a court should not assume jurisdiction bears the burden of rebutting the factors. As the Court pointed out, that party can do so by establishing facts that demonstrate “that the presumptive connecting factor does not point to any real relationship between the subject matter of the litigation and the forum or points only to a weak relationship between them.”

Confusion Over the Fourth Presumptive Factor

The Ontario Court of Appeal recently split on how the fourth presumptive factor is to be applied in determining whether a court has jurisdiction simpliciter.

The case of Sinclair v. Amex Canada Inc. concerned an accident that occurred in Italy. The plaintiffs were injured after the water taxi in which they were passengers, with their son, crashed in Venice. They commenced a negligence action in Ontario against Amex Canada Inc. (“Amex”), which operated a travel service, as well as other parties, including the water taxi dispatching company, the company that owned the water taxi involved in the accident, and the driver of the water taxi. Amex was connected with Ontario, but the claim also involved Italian companies, and the driver of the water taxi allegedly resided in Italy. There was no allegation that the Italian companies had an ongoing contractual relationship with Amex or another co-defendant, Carey International, Inc.

Three of the defendant Italian companies brought a motion for an order to dismiss or stay the action because the Ontario Superior Court of Justice lacked jurisdiction over them. The motion was dismissed, and the companies appealed.

The sole issue before the motion judge was whether the court had jurisdiction over the Italian companies because of the fourth presumptive connecting factor – “a contract connected with the dispute was made in the province.”

A majority of the Court of Appeal observed that each defendant’s position must be considered independently to determine jurisdiction. It noted that each defendant must have a “presumptive connecting factor. ” Ultimately, the majority found that the fourth factor did not apply to the Italian companies.

At issue in Sinclair was the degree to which the fourth presumptive connecting factor should be broadly applied. The majority of the Court of Appeal concluded that it should not. In support of its position, it noted the comment of a dissenting judge in Van Breda that this factor “should be limited to claims in tort where the defendant’s liability in tort flows immediately from his contractual obligations, and where that contract was ‘made in’ Ontario.” As the majority wrote regarding the Italian corporate defendants, they “cannot be reasonably swept into the jurisdictional reach of Canadian courts based solely on the fact that [the plaintiffs] had a contractual relationship with Amex Canada.”

The majority went on to find that, even if the fourth connecting factor was established, it had been rebutted. The majority found that the Italian corporate defendants had shown that the contract between the plaintiffs and Amex Canada had “little or nothing to do with the subject matter of the litigation.” Further, nothing in that contract even contemplated that those defendants would be involved. As the Court observed, the fact that the plaintiffs made their travel arrangements through a credit card company carrying on business in Ontario did not establish a relationship between them and the Italian corporate defendants “that could sustain a finding of jurisdiction.”

In Sinclair, the dissenting judge likewise found that the fourth presumptive connecting factor had been rebutted but disagreed with the finding that the factor did not apply. The dissenting judge noted that the words “in connection with” are to be given a very broad meaning and cited comments of the Supreme Court of Canada to the effect that the defendant doesn’t need to be a party to the contract. It is enough if the defendant’s conduct “brings him or her within the scope of the contractual relationship and that the events that give rise to the claim flow from the relationship created by the contract.”

The appeal was ultimately allowed. The Supreme Court of Canada has also granted leave to appeal, although no decision has yet been rendered on the case.

Campbell Litigation: Kitchener-Waterloo Tort Litigation Lawyer

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