Lapointe v Cassels Brock: SCC clarifies the fourth Van Breda presumptive connecting factor

The Supreme Court of Canada’s (“SCC”) decision in Club Resorts Ltd v Van Breda, 2012 SCC 17 [Van Breda] brought greater judicial guidance to the question of when a Canadian court may assume jurisdiction over a claim. The SCC articulated four non-exhaustive presumptive connecting factors (PCFs) that a party may rely on to establish a real and substantial connection between the dispute and the jurisdiction in which they seek to advance the claim.

The SCC’s recent decision in Lapointe Rosenstein Marchand Melançon LLP v Cassels Brock & Blackwell LLP, 2016 SCC 30 [Lapointe] clarified the test governing the fourth Van Breda PCF, which states that jurisdiction may be assumed by the court where a contract connected with the dispute was made in the province.

Facts

Lapointe has roots in the 2009 government bailout of Canadian automotive companies. As a term of the bailout, General Motors of Canada (“GM”) was required to close dealerships across Canada. GM offered compensation to the dealers in “Wind-Down Agreements” (the Agreements). GM required that each dealer obtain independent legal advice and provide a certificate signed by the lawyer acknowledging that the lawyer had been retained, had read the Agreement, and had explained the full nature and effect of the Agreement to the dealer.

Over two-hundred dealers who signed Agreements commenced a class action against GM for breach of provincial franchise laws and against Cassels Brock & Blackwell LLP (“Cassels”) for a failure to provide appropriate legal advice.

Cassels commenced third party claims for contribution and indemnity against 150 law firms across Canada that provided independent legal advice to the dealers. The non-Ontario law firms brought a motion challenging the jurisdiction of Ontario courts over the claim. The motion was denied and 32 Quebec law firms appealed the decision. The Ontario Court of Appeal dismissed the appeal.

The SCC issued a six-to-one decision upholding the Ontario Court of Appeal’s judgement with a strong, sole dissent from Justice Côté.

Where was the connecting contract formed?

The decisions of the majority and dissent differed on the underlying issue of where the Agreements were formed. Applying the rules governing contract formation in Ontario, the divergence rested on which jurisdiction the agreement was accepted in. The uncertainty arose from a letter GM management wrote, stating that the agreement would not be effective “unless and until GM Canada provided written notice to [the] dealers that the acceptance threshold conditions…[had] been met or waived” (para 6).

The majority concurred with the lower courts holding that the Agreement was formed in Ontario when GM management accepted the signed Agreements returned by the dealers.

Justice Côté disagreed, holding that the benchmark of acceptance was reached only when GM notified dealers by email that the acceptance threshold* had been waived. Justice Côté applied Ontario laws on instantaneous communication in contract formation and determined that acceptance and formation were achieved in Quebec.

Were the “Wind-Down Agreements” sufficiently connected to the dispute?

Majority

Justice Abella, writing for the majority, set out a two-step test for determining whether a contract connected with the dispute was made in the jurisdiction:

• Identify the dispute
• Determine whether the dispute is connected to a contract “made” in the province

In framing the test, Justice Abella clarified that the analysis does not differ based on whether a case involves one or multiple contracts.

The majority held that the test does not require the “tortfeasor…be a party to the contract” (paras 32, 44), nor does it require that their “liability flow immediately from their contractual obligations” (para 44). What is required is that the conduct of the party brought them within the scope of the contractual relationship and that the events giving rise to the claim flow from the relationship created by the contract (para 44).

Applying the test to the facts of Lapointe, the majority identified the dispute as a tort claim for professional negligence. On the second prong of the test, the majority found that the dispute was connected to the Agreements which, on an application of Ontario contract law, were made in Ontario.

The majority held that the Agreements were connected to the third party claim as they “contemplated and required” independent legal advice and the signed certificates could not “be divorced from the quality of the legal advice provided” (para 47), which was the core of the dispute.

Dissent

Justice Côté dissented on the issue of whether the contracts were “made” and rejected the majority’s “broad” approach to the fourth Van Breda PCF.  She held that the Agreements were not made in Ontario, and even if they had been, the dispute was not sufficiently connected to the Agreements so as to satisfy the real and substantial connection test.

Justice Côté advocated for a narrower application of the fourth PCF. Her dissent framed the claim in light of two contracts: the retainer agreements between the law firms and the dealers and the Wind-Down Agreements between GM and the dealers. She held the Quebec lawyers “were never brought within the scope of the contractual relationship between GM and the dealers” (para 86) as they were not parties to the Agreement, they did not owe any obligations under the Agreements, and they were not owed any benefit under the Agreements.

Justice Côté argued that the fourth PCF should only be applied where the tortfeasors liability flows directly from their contractual obligations and where that contract was “made” in Ontario (para 87). In her analysis, she noted that only the retainer agreements were sufficiently close to the third party claim, while the Wind Down Agreements were “too remote”.

In supporting her argument that the majority’s approach is overly broad, Justice Côté highlighted three primary consequences of adopting the majority’s approach:

• Based on a survey of other jurisdictions and international benchmarks, Justice Côté argued that other comparable regimes would not assume jurisdiction under the facts of this case and that an application of the majority’s approach was susceptible to jurisdictional overreach.

• Justice Côté emphasized the need for certainty and predictability in this area of law, arguing that the majority’s decision opens the door to “long-winded jurisdictional debates” of the sort Van Breda sought to minimize.

• On a practical level, Justice Côté highlighted the potential implications on the practice of law, noting that the indemnification offered by professional insurance regimes for lawyers often include lower coverage for extra-jurisdictional law suits.

Balancing Flexibility and Predictability

The decision in Lapointe comes at the heels of Van Breda’s legacy of injecting greater certainty to Canadian jurisdictional jurisprudence. This is particularly important in the case of the fourth PCF at issue in Lapointe which, as the dissent noted, was a novel introduction by Van Breda to the Canadian framework of jurisdiction simpliciter analysis. This PCF was engaged in Van Breda itself, however the facts of Van Breda involved a single contract from which a duty of care to the plaintiff was directly derived.

As both the majority and dissent emphasized, the underlying judicial objective of the Van Breda PCFs is to balance flexibility and predictability. However, the majority and dissenting opinions appear to rest on either end of the spectrum in this respect.

While the majority’s decision provides guidance on the process of analysis and what may constitute a “connection” sufficient to ground assumption of jurisdiction, the dissent maintained that this articulation falls short of establishing the benchmark of certainty that is craved in this area of law.

The majority’s approach raises the critical questions of when a contract is too remote to ground a real and substantial connection, and when a party is close enough to the contractual relationship to be caught within its scope. This is particularly poignant in light of the majority’s rejection of a requirement that the defendant be a party to the contract or that the liability flow directly from the defendant’s contractual obligations.

Further, the facts of this case may colour future interpretation. The wording and attributes of the Wind-Down Agreement may be argued with some force to have lent certainty to the third party defendants of their potential exposure to liability, the jurisdictional connection to Ontario, and their relationship to the main contract anchoring Ontario’s jurisdiction.

However, as Justice Côté emphasized, the crux of the issue is not whether the third party may contemplate liability generally, but whether the party may discern which contract relationship(s), if any, may ground jurisdiction, and whether their actions bring them within the scope of the contractual relationship upon which jurisdiction may be anchored.

The judgment casts a practical shadow on the certainty that can be afforded by the fourth PCF more generally by demonstrating that issues of contract formation in and of themselves are not without debate. In complex contractual endeavours, such as the one at issue in Lapointe, the lines of offer and acceptance may not be clear.

Under the majority’s broad approach, the net of potential jurisdiction is cast widely, enabling courts to engage in a fact specific analysis consistent with Van Breda’s ethos of granting jurisdiction where there is a palpable connection between the forum and the dispute, irrespective of the strength of the connection. Justice Côté’s dissent also advances the judicial objectives of Van Breda by raising important considerations that may shape future application of this precedent. The two decisions standing together provide fertile ground for lower courts to temper flexibility towards greater predictability.

*Referring to the minimum number of dealers required to accept the Agreement in order for the Agreements to take effect.