Understanding jurisdiction in cross-border claims

The Supreme Court of Canada’s (SCC) decision in Sinclair v. Venezia Turismo, offers important guidance on when a contract created in Canada may allow Canadian courts to assume jurisdiction over foreign defendants.¹

KPMG Law’s breakdown of the decision and insights can be found below.

Implications and key takeaways

The importance of pleadings

Unless the existence of a contract is obvious and undisputed, parties arguing that a contract connected with the dispute was made in the province must plead facts that establish the contract’s formation, its connection to the dispute, and, crucially, where it was formed.
The strength of a contract’s connection to each defendant matters

Jurisdiction is determined on a case-by-case basis, focusing on each defendant’s specific connection to the forum. Courts will consider the defendant’s reasonable expectations when determining the strength of connection between a contract and the defendant. A weak connection between a contract and a defendant may rebut the presumption even when the contract is connected to the forum and the dispute.
Uncertainty regarding the standard of proof

Unlike the dissent, the majority of the SCC refused to apply a specific standard of proof in the test for jurisdiction, which will continue to be a point of uncertainty until it is addressed in future cases.
Tort claim vs contractual claim

This SCC decision ultimately applies to a tort claim rather than a contractual claim. In a tort claim, contractual terms have limited influence on jurisdiction. By contrast, in a contractual claim, parties can reliably determine applicable laws through choice of law clauses, making contracts a stronger tool for defining rights and obligations.

Background

Mr. Sinclair held an American Express Centurion credit card with Amex Canada Inc. (Amex Canada) and used the concierge and travel agent service to book a trip to Europe for himself, his wife and their son from Ontario. While in Italy, Mr. Sinclair contacted the Amex Canada concierge service to book a water taxi ride from the airport in Venice to their hotel. Amex Canada then made the necessary arrangements with a third-party provider. The water taxi crashed, causing serious injuries to Mr. Sinclair and his wife (Sinclairs). The Sinclairs commenced a tort action in Ontario seeking damages from several defendants including Amex Canada and the Italian companies (Italian Defendants) that operated the water taxi.

Jurisdiction and the Van Breda test

In 2012, the SCC set out a two-stage test (Van Breda test) for establishing jurisdiction in tort cases in Club Resorts Ltd. v. Van Breda. The first stage requires the plaintiff to establish one or more of the following non-exhaustive presumptive connecting factors:

The defendant is domiciled or resident in the province
The defendant carries on business in the province
The tort was committed in the province
A contract connected with the dispute was made in the province

If the plaintiff is able to establish one of the presumptive connecting factors, the defendant has the opportunity to rebut the presumption by showing there is no real and substantial connection between the dispute and the jurisdiction where the claim is filed. This case dealt with the fourth factor: whether a contract connected with the dispute was made in Ontario.

Ontario Superior Court of Justice

The Italian Defendants brought a motion to dismiss the action against them on the basis that the Ontario Court lacked jurisdiction over them. The motion judge found that the Sinclairs had established a “good arguable case” that multiple contracts related to the dispute were sufficiently connected to Ontario and dismissed the Italian Defendants’ motion.

Ontario Court of Appeal

The Court of Appeal for Ontario reversed the decision and unanimously held that Ontario lacked jurisdiction as there was no real and substantial connection between the Italian Defendants and the cardmember agreement with Amex Canada (Amex Credit Card Agreement).

Supreme Court of Canada's decision

In a 5-4 split, the majority of the SCC sided with the Italian Defendants and held that the Ontario courts do not have jurisdiction over the dispute as it relates to them. At the first stage of the Van Breda test, the majority found that a presumptive connecting factor was established, as the Amex Credit Card Agreement was entered into in Ontario and was connected to the dispute.

However, the majority concluded the Italian Defendants had successfully rebutted the presumption of jurisdiction. The majority stated the connection between the Amex Credit Card Agreement and the tort that occurred in Italy was weak, if not non-existent. The only connection the majority found between the Amex Credit Card Agreement and the dispute was that Mr. Sinclair made a non-binding reservation by way of Amex Canada through a third-party service. The Court found an even weaker connection between the Amex Credit Card Agreement and the Italian Defendants.

The dissent would have allowed the appeal and sided with the motion court judge on the basis that the Italian Defendants had not rebutted the presumption of jurisdiction.

The bottom line

The SCC’s decision provides important guidance on when a Canadian court should assert jurisdiction over foreign defendants. The SCC confirms that a weak or tenuous connection is not sufficient for Canadian courts to assert jurisdiction over foreign defendants. Each case will be assessed individually, focusing on each defendant’s connection to the forum.