Court rulings in Canada deny jurisdiction of Ontario courts where the connection to Ontario in a contract is deemed insufficient
Canadian Courts Strengthen Criteria for Cross-Border Jurisdiction in Contractual Disputes
The Supreme Court of Canada (SCC) has clarified and refined the Van Breda test, a crucial guideline for Canadian courts to determine jurisdiction over foreign defendants in cross-border disputes. The test, originally established in the Club Resorts Ltd. v. Van Breda case in 2012, now requires a more rigorous assessment of connections between disputes and the Canadian province where the claim is filed.
The Van Breda test assumes jurisdiction over a foreign defendant only if there is a "real and substantial connection" between the dispute and the province. This connection is established through certain presumptive connecting factors such as the location where a contract was made or a tort occurred. However, this presumption can be rebutted by the defendant.
In the recent Sinclair v. Venezia Turismo case, the SCC provided specific clarifications for contract-based jurisdiction in cross-border disputes. A contract made in a Canadian province may presumptively give that province’s courts jurisdiction over the dispute, but this presumption applies only to each individual defendant based on their connection to the contract or the dispute. Having jurisdiction over one defendant cannot be used to establish jurisdiction over others.
The court emphasized that jurisdiction must be assessed from the perspective of each defendant separately, and defendants can rebut the presumption by showing insufficient connection to the jurisdiction. In Sinclair, the court upheld an order striking the claims against foreign defendants (Italian water taxi companies) due to lack of a sufficient real and substantial connection to Ontario, despite some contractual nexus through travel services arranged in Canada.
The requirements under the Van Breda test, as clarified in Sinclair, are:
- Establish a real and substantial connection based on presumptive connecting factors like contracts made in the province or torts committed there.
- Apply these factors individually to each defendant.
- Allow defendants to rebut the presumption of jurisdiction.
- Refuse jurisdiction where that connection is not sufficiently demonstrated for the specific defendant.
This framework tightens the criteria for exercising jurisdiction in cross-border contractual disputes and prevents overreach by Canadian courts in multi-defendant international cases.
Litigants need to ensure they have provided an evidentiary basis to establish the existence of the presumptive factor, particularly for the fourth presumptive connecting factor (a contract made in the province). The first step of the Van Breda test requires a court to weigh a non-exhaustive list of "presumptive" connecting factors to determine the existence of a real and substantial connection. At the second step of the Van Breda test, the court will assume jurisdiction unless the defendant rebuts the presumption by showing the factor is not strong enough to ground jurisdiction in Ontario.
The SCC's decision in Sinclair v. Venezia Turismo clarified that jurisdiction simpliciter is analytically distinct from the common law doctrine of forum non conveniens. The court found the connection between the cardholder agreement and the water taxi incident to be weak, and the link between the Italian defendants and the cardholder agreement was also found to be tenuous.
The decision is of particular interest to businesses based outside of Canada or with ties to Canada. The SCC emphasized the importance of detailed pleadings to establish the existence of the presumptive factor, particularly for contracts. The court also emphasized the importance of courts meaningfully engaging with the circumstances and terms of the alleged contract to ensure its formation in the relevant forum.
In conclusion, the Sinclair v. Venezia Turismo case provides valuable insights into the application of the Van Breda test in cross-border contractual disputes. It underscores the need for litigants to provide a strong evidentiary basis for the presumptive connecting factors and for courts to meaningfully engage with the circumstances and terms of the alleged contract to ensure its formation in the relevant forum.
- In light of the Sinclair v. Venezia Turismo case, businesses based outside of Canada or with ties to Canada need to focus on providing a strong evidentiary basis for contracts made in Canada as a presumptive connecting factor, when engaging in cross-border transactions.
- The clarified Van Breda test, following the Sinclair v. Venezie Turismo case, requires Canadian courts to assess each defendant's connection to a contract individually, ensuring businesses understand the potential implications for cross-border business disputes.
