Revising the Assumed Jurisdiction Test in Muscutt v. Courcelles

On July 8, the SCC announced that it will be hearing two appeals regarding the Ontario Court of Appeal’s (OCA) revolutionary decision in Van Breda v. Village Resorts Limited, 2010 ONCA 84. The SCC’s decision is highly anticipated because it will finally put to rest the calls for change that culminated in a five judge panel at the OCA substantially revising the assumed jurisdiction test this past February. This article will summarize and analyze the OCA’s reformulated version of the assumed jurisdiction test.

The Assumed Jurisdiction Test

The test was originally developed by the OCA in Muscutt v. Courcelles (2002), 60 O.R. (3d) 20 (C.A.). In its pre-revised form, a court would consider eight factors to determine whether it should assume jurisdiction over an out-of-province defendant. The test was a key development in a line of cases that relaxed the common law rule restricting a court’s jurisdiction both to its territory and to out-of-province defendants who consented to being subject to the court’s jurisdiction. If these factors indicated that there was a “real and substantial” connection between the action and the province in which the plaintiff desired that the action be tried, then a court could assume jurisdiction. The quintet of cases decided under the Muscutt decision dealt with actions for damages where the damages were sustained within the jurisdiction of the plaintiffs, but the defendants were out-of-province. Since Muscutt, the test has been used for all cases of assumed jurisdiction and not just actions for damages sustained within the plaintiff’s jurisdiction.

By having eight factors, the assumed jurisdiction test was heralded as a flexible approach that would account for the facts of each case, while creating some consistency between cases. After almost one decade of being tested in the courts, the test has ironically been criticized by judges and scholars being “too complicated and too flexible and therefore [leading] to inconsistent application”.

Vacation Tragedies

The two cases determined in the Van Breda decision involved plaintiffs who were injured while vacationing in Cuba. In one case, Morgan Van Breda was accompanying her partner on a week-long work term when she was injured using a resort’s exercise equipment. Her partner had entered into a contract with the resort to teach tennis lessons for board and lodging. This contract was formed in Ontario.  Among other grounds, Van Breda argued that she could serve the out-of-province defendants without a court order because the contract was made in Ontario (rule 17.02(f)(i)). In the second case, the plaintiff was the estate of Claude Charron. Charron and his wife arranged for a resort vacation through a travel agency in Ontario. He was scuba diving under the supervision of his resort when he died. Like Van Breda, the estate of Charron also argued that rule 17.02(f)(i) applied. In both cases, the motions judges held that the assumed jurisdiction test demonstrated that there was a real and substantial connection between the actions and Ontario. As well, they rejected the defendants’ motion to stay the action on the ground of forum non conveniens. Even after revising the assumed jurisdiction test, the OCA upheld both motion judges’ decisions.

The New Assumed Jurisdiction Test

Stage One: The Presumption of a Real and Substantial Connection

In the new first stage of the test, the court must first determine whether the claim falls within one of the subrules in rule 17.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. If the claim falls within any subrule, except subrules (h) and (o), then there is a presumption that a real and substantial connection exists. The defendant has the burden to rebut that presumption. Since the list of presumptions is not exhaustive, where the circumstances do not fall within any of the presumptive connections in the subrules, a plaintiff may prove that a real and substantial connection exists by using the assumed jurisdiction test in stage two.

This new stage is modeled on the Court Jurisdiction and Proceedings Transfer Act (CJPTA) (pdf link). Guided by its belief that a uniform approach to enforcing judgments is required in Canada, the OCA followed suit with other four provinces, and adopted a modified model of the CJPTA. Of particular importance is s. 10 of the CJPTA, which permits service outside the jurisdiction for a list of presumptive connections. Section 10 replaces a province’s rules of court, which in the case of Ontario is rule 17.02. Instead of being a rule that allows a plaintiff to serve an out-of-province defendant without a court order, the connections in rule 17.02 (except for subrules (h) and (o)), are presumptively treated as establishing a real and substantial connection. To support this presumption in favour of the Ontario plaintiff, the OCA observed that the presumptive connections in rule 17.02 are often found by courts to have a real and substantial connection. Since the same could not be said for cases regarding subrules (h) and (o), the OCA excluded them from being presumptive connections.

The exclusion of subrule (h) is particularly significant. In its statutory form, it states that service to an out-of-province defendant is permitted “in respect of damage sustained in Ontario arising from a tort, breach of contract, breach of fiduciary duty or breach of confidence, wherever committed.” Recall that the quintet of cases decided in Muscutt, as well as the two cases in Van Breda, all dealt with damages sustained in Ontario. The OCA’s main reason for excluding subrule (h) is based the absence of an equivalent presumptive connection in the CJPTA. Given that the OCA desired uniformity among the provinces, it was logical not to include subrule (h).

The OCA provides a compelling case for adopting the CJPTA approach. In addition to its observations regarding the types of connections that typically establish a real and substantial connection, it provided a plethora of reasons to support such a major overhaul of its own test. One compelling reason was that giving presumptive effect to rule 17.02 “will simplify and reduce the incidence and cost of litigation on the issue of jurisdiction.” Since the plaintiff no longer has to argue the connection and the court only has to hear the defendant’s arguments, less time is spent on this issue.

On the other hand, the OCA’s reasoning skimmed over this new burden that has been placed on the defendant. If a court is not supposed to favour Ontario residents, then it seems inconsistent to place a one-sided burden on the defendant to rebut a presumption in favour of Ontario residents. It must be borne in mind that the out-of-province defendant is already spending money trying to fend off the plaintiff’s attempt to have jurisdiction assumed by a court favourable to it. The OCA implicitly seems to have resolved this inconsistency by relying on the trend in caselaw that the presumptive connections in rule 17.02 typically establish a real and substantial connection, and by giving the defendant the opportunity to rebut the presumption. Notwithstanding the defendant’s opportunity to rebut the presumption, it still must be borne in mind that the defendant may have greater costs than the plaintiff that are associated with having to defend against the action in a different jurisdiction. With these costs in mind, it seems unfair to give the plaintiff the benefit of the doubt and presumptively bestow a real and substantial connection to it.

Stage Two: The Original Eight Factors

In the new second stage of the test, the court will analyse the factors in the original assumed jurisdiction test where a presumptive connection does not apply. Since parts of the test have been either struck out or altered in terms of their function, the following analysis is organized according to the original eight factors.

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

These two factors are the “core” of the real and substantial connection test. The remaining factors are “analytical tools” that assist in determining the significance of the connections between the forum, the claim, and the defendant. Although both of these free-standing factors comprise the core of the test, it is unclear whether these two factors are to be treated equally. The OCA did uphold its decision in Muscutt that the test should not focus solely or primarily upon the nature and extent of the defendant’s connection to the jurisdiction, though it did not explicitly state the amount of significance that should be accorded to it. The OCA may have left that consideration unanswered on purpose in order to make it easier for judges to weigh the connection between the forum and the plaintiff’s claim and the connection between the forum and the defendant. It may not always be the case that the facts support giving equal significance for each factor. It is foreseeable that the connection between the forum and the plaintiff’s claim may be stronger than the defendant’s connection to the forum, and vice versa.

3. Unfairness to the defendant in assuming jurisdiction.
4. Unfairness to the plaintiff in not assuming jurisdiction.

Unfairness to the parties are no longer free-standing, separate factors. The fairness of assuming or refusing jurisdiction is now one “analytic tool [for] assess[ing] the relevance, quality and strength” of the connections between the form, the plaintiff’s claim and the defendant. Based on the court’s statement that “fairness is not…capable of trumping weak connections”, I hypothesize that there will be fewer decisions where arbitrary or undue emphasis is placed on unfairness so as to establish a real and substantial connection. When discussing the weaknesses of the original test, the OCA noted that the test did not achieve the objective of consistent precedent because the factor of unfairness was often applied too liberally. Although those types of cases may be reduced, this new approach to fairness is not restrictive. In those “exceptional cases where, despite the absence of a real and substantial connection, the need to ensure access to justice will justify the assumption of jurisdiction.” This exception is the forum of necessity doctrine. The OCA stressed that the doctrine is an exception to the real and substantial test, and should not be confused as being another factor in the test.

5. The involvement of other parties to the suit.

The involvement of other parties to the suit is a factor that will only come into play when other parties are actually a possible connecting factor. Consistent with policy underpinning the Rules of Civil Procedure, this factor will also be relevant where the court wants to avoid a multiplicity of proceedings under forum non conveniens.

6. The court’s willingness to recognize and enforce an extra-provincial judgment rendered on the same jurisdictional basis.

Unlike the other factors that have been transitioned into principles or guidelines, this particular principle is designed to discipline judges. They are not to favour Ontario-based plaintiffs. In order to prevent themselves from favouring plaintiffs that are Ontario residents, judges must consider whether they would be prepared to recognize and enforce an extra-provincial judgment against an Ontario defendant on the same jurisdictional basis.

7. Whether the case is interprovincial or international in nature.
8. Comity and the standards of jurisdiction, recognition and enforcement prevailing elsewhere.

Neither of these two factors are free-standing, though they are principles that are relevant to the assessment of whether a real and substantial connection exists.

A Clear Distinction Between Forum Non Conveniens and the Assumed Jurisdiction Test

In addition to revising the assumed jurisdiction test, the OCA stressed the difference between the test and the issue of forum non conveniens. The OCA held that the factors for determining forum non conveniens do not have any bearing on whether a real and substantial connection exists. For the former, the court must focus its inquiry to the sole question of whether there is any other forum in which the plaintiff can reasonably seek relief. If there is no such forum, then the court may exercise its residual discretion whether to assume jurisdiction.

All Roads Lead to Uniformity

The OCA’s well-supported justification for overhauling the assumed jurisdiction tests provides a compelling case for the SCC to uphold its decision. The convergence of five provinces’ approaches via the CJPTA model demonstrates that there is a strong desire for uniformity in Canada.

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