Determination of jurisdiction over absent foreign claimants in class proceedings under the real and substantial connection test: A Canadian Perspective

Abstract

Jurisdiction based on the real and substantial test is one of the trending ways of asserting jurisdiction over a foreign litigant in Canada. The test has also been applied in class proceedings but whether the test is equally applicable on absent foreign claimants in class proceeding is a question to be decided based on the interpretations given to the real and substantial connection test by the Canadian courts starting from the morguard case to the case of Van Breda v. Village Resorts Ltd.

The jurisdictional scheme of Canada allows the provincial courts to assert jurisdiction on an out of province defendant on the basis of Real and Substantial connection test apart from other basis of jurisdiction such as consent, residence, presence or domicile based jurisdictions. The Real and Substantial connection test allows the provincial courts in Canada to assume jurisdiction over an out-of-province defendant or a foreign defendant in another country when there is a real and substantial connection between the parties or the subject matter of the action and the forum. The circumstances justifying the assumption of jurisdiction under this category should be capable of having a substance as opposed to illusory existence. The assertion of jurisdiction on the basis of real and substantial connection does not depend on the consent of the defendant or service within the territory of the court’s jurisdiction. Sec 92[1] of the Constitution Act, 1867 of Canada grants the provinces of Canada their basic legislative authority. As per section 92 (13), the legislature of each province may exclusively make laws in relations to matters concerning the property and Civil Rights in the Province. The Canadian constitution does not explicitly contain any provision which is directed to the issue of conflict of laws. Before the historical case of Morguard,[2] the law relating to conflict of rules, in most of the common law provinces was product of judicial decision. However after the historical case of Morguard and series of other cases following the Morguard case, the whole body of conflict of law rules is subject to constitutional scrutiny whether they are common law or statutory rules.[3]  The main issue in the case of Morguard was whether a personal judgment validly given in Alberta against an absent defendant may be enforced in British Columbia where he now resides?  Affirming the answer positively the court held that the defendant may be sued outside the province of his residence if there is real and substantial connection with the jurisdiction where the case is instituted and the judgment is equally entitled to be recognised and enforced in other provinces notwithstanding the fact that at the time of assuming jurisdiction against the defendant, the defendant was absent from the jurisdiction of such court and hence the court is not entitled to assume jurisdiction. The principle also affords some protection to the defendant against being pursued in jurisdictions having little or no connection with the transaction or the parties. The substantial connection between the defendant and the forum province should be of such a kind that gives a reasonable inference of the defendant voluntarily submitting himself to the risk of litigation in the court of province. If there is no reasonable inference on the facts of the case, the court cannot summon the defendant on the ex-juris service rule, on the ground of reasonable and substantial connection with the case. In this case the court held that the Alberta court had jurisdiction, and its judgment should be recognized and be enforceable in British Columbia. The cases following the Morguard’s case tried to refine the real and substantial connection test to the maximum possible limit. In  Muscutt v. Courcelles,[4] case the court tried to lay down the circumstances which could justify the court in the assuming jurisdiction on real and substantial test connection. It laid down eight factors which directly justified the court in asserting jurisdiction over an out-of- province defendant. These eight factors are: The connection between the forum and the plaintiff’s claim, The connection between the forum and the defendant, Unfairness to the defendant in assuming jurisdiction, Unfairness to the plaintiff in not assuming jurisdiction, The involvement of other parties to the suit, The court’s willingness to recognize and enforce an extra-provincial      judgment rendered on the same jurisdictional basis, Whether the case is interprovincial or international in nature and Comity and the standards of jurisdiction, recognition and enforcement prevailing elsewhere. But the test laid in Muscutt case to assume jurisdiction was held to be a highly discretionary test. It was thought that the test gave wide discretionary powers to the court to assume jurisdiction over a defendant on the basis of real and substantial connection test. It gave no guidance to motion judges on how to weigh the various factors. The discretionary nature of the test led to significant academic criticisms that the Muscutt test was too unpredictable[5].

Ultimately, it was the case of Van Breda v. Village Resorts Ltd,[6] which gave a new certainty to the test of ‘real and substantial connection’ after attempt was made in Muscutt v. Courcelles,[7] case . The case involved the issue as to when Ontario Courts should assume jurisdiction over an out of province defendants. In this case the Supreme Court of Canada outlined an non-exhaustive list of presumptive connecting factors that, prima facie, entitled the courts in Canada to assume jurisdiction over a dispute, if

(a) The defendant is domiciled or resident 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.

After this case every court in Canada were constitutionally bound to follow the principles laid down in Van Breda case at the very first stage of enquiring into the question of asserting jurisdiction over the foreign defendants.

However, the Van Breda case did not deal with the issues arising in the cases where the courts were to deal with jurisdiction over absent foreign claimants in class proceedings. The issue came for consideration in the case of Airia Brands Inc. V. AIR  Canada[8]. The brief facts of the case are that the plaintiffs/Appellants  (Airia Brands) commenced a class action against airlines Air Canada, AC Cargo Limited Partnership (“Air Cargo”), and British Airways PLC (“BA”) (collectively the “respondents”) and other airlines, operating in locations all over the world, participated in a conspiracy to increase the price of air freight shipping services between the years 2000 and 2006. Specifically, they allege that the respondents and others conspired to limit or unduly lessen the supply of air freight shipping services, or to enhance unreasonably the price of associated fuel and security surcharges.

The appellants sought an order certifying the class action with a class that included AFCs. The proposed class was to include persons who directly purchased air freight shipping services for shipments from or to Canada and indirect purchasers who purchased such services through a freight forwarder. In response, the respondents and others brought a motion for a declaration that the Ontario court did not have jurisdiction over AFCs  (Absent Foreign Claimants) and that the class should be defined to exclude such parties (the “jurisdiction motion”). The respondents also served a notice questioning the constitutional applicability of the real and substantial connection test on class proceedings for determining the issue of jurisdiction and also sought a stay order on the proposed action.

 The motion judge refused to apply the real and substantial test for assuming jurisdiction over the absent foreign claimants and stayed the class action on the grounds that the conflict of law rules prevailing in all the countries of the world justify only the presence, submission or consent based jurisdictions. Since in this case the claimants have neither submitted nor consented or made personal presence before the court in Canada, it is not justifiable in asserting jurisdiction over them on the real and substantial basis instead the principles of order, fairness and comity should guide the decision. One of the reasons why motion judge refused to exercise jurisdiction over the absent foreign claimant was the fear that the decree pronounced for the absent foreign claimant without their being attorned to the jurisdiction of Canada may not get recognition and enforcement outside Canada, which clearly showed that the motion judge’s decision was dominated by the foreign law on recognition to the exclusion of all other relevant factors.

But, the Court of Appeal, reversed the decision of the motion Judge and concluded that the motion judge erred in law in concluding that the real and substantial connection test was inapplicable and that jurisdiction existed only if AFCs were present in Ontario or consented to the Ontario court’s jurisdiction[9].

The Court of Appeal concluded that jurisdiction may be established over AFCs where[10]:

1) there is a real and substantial connection between the subject matter of the action and Ontario, and jurisdiction exists over the representative plaintiff and the defendants;

2) there are common issues between the claims of the representative plaintiff and AFCs; and,

3) the procedural safeguards of adequacy of representation, adequacy of notice, and the right to opt out are provided, thereby serving to enhance the real and substantial connection between AFCs and Ontario.

In view of the court the above stated conditions provides the necessary safeguards to establish that jurisdiction properly exists and ensures the protection of the values of order and fairness.

As per the court the factors of order and fairness described in Van Breda are subsumed by the real and substantial connection test and do not amount to a stand-alone test. The claim of Jurisdiction by a court on the traditional grounds of consent or presence is different from rejection of jurisdiction on the basis of absenteeism. When traditional grounds of jurisdiction cannot be applied, then analysis of the jurisdictional question should be started from real and substantial connection test. The Hona’ble Court gave to interpretations to the test of real and substantial connection for the purpose of asserting jurisdiction over absent foreign claimants: one expansive and second restrictive. The expansive approach focuses on commonality of interest between claims of residents and non-resident class members[11].  Alternatively the court also quoted  the American approach on Expansive view which stated that where the defendant had a sufficient connection with the forum state, the forum court would have jurisdiction over a plaintiff class which included non-resident persons having no connection to the forum state provided they had been given adequate notice plus an opportunity to be heard, an opportunity to opt out of the action, and there was adequate representation by the representative plaintiff[12]. Under the restrictive approach to the real and substantial connection test a substantive connection between the non-resident class members and the adjudicating forum is required beyond common interest[13]. Applying the expansive approach the Court of Appeal held that the motion judge erred in simply anchoring her jurisdiction analysis in a negation of the traditional bases for jurisdiction, namely presence or consent, and in failing to apply the real and substantial connection test articulated in Van Breda[14].

Conclusion

The decision of the Canada’s Court of Appeal assuming jurisdiction over the Absent foreign claimants in class proceedings ignoring the traditional rules of jurisdiction in private international law prevailing in other countries would pose problems in recognition and enforcement of the judgment given by the Canadian Court who still adhere to the traditional grounds of recognition and enforcement of foreign judgments. The decision of the hon’able Court of Appeal reflects the impatient attitude of the court in not letting the case go out its hand by moulding the real and substantial test according to their interpretations. But on the other hand the decision of the Court of Appeal has given a ray of hope to those absent foreign claimants who by whatsoever reason been unable to join the identified class members , an equal right to claim by removing the so called jurisdictional barriers and encircling them within a single case. Since, it is only the decision of Court of Appeal, the judgment of Supreme Court of Canada will be the final authority to settle down the position of absent foreign claimants in class proceedings.


This Article is written by Dr. POONAMDEEP KAUR working as an Assistant Professor at Rayat Bahra College of Law Hoshiarpur.


References:

[1]              Canadian Constitution Act, 1867, s.92.

[2]              Morguard Investment Ltd. v. De savoye  [1990] 3 SCR 1077.

[3]              Supra  note 2.

[4]              (2002), 213 DLR (4th) 577 (Ont.CA).

[5] John A. Olah Roman J. Myndiuk and Beard Winter, “Unlocking The Mysteries of Jurisdiction    :The Van Breda Case “, available at: www.beardwinter.com  (last Visited on February 3,          2014).

[6]2012 SCC 17  ( CanLII).

[7] (2002), 213 DLR (4th) 577 (Ont.CA).

[8]  Airia Brands Inc. v. Air Canada, 2017 ONCA 792.

[9] Ibid, Para 8.

[10] Ibid, para 107.

[11] Ibid, para 71.

[12] Ibid, para 75.

[13] Ibid,para 79.

[14] Ibid, para 103.

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