Ciao, Ontario! SCC denies Ontario courts’ jurisdiction where contractual link to Ontario is insufficient

On July 31, the Supreme Court of Canada released its judgment in Sinclair v. Venezia Turismo, clarifying when Canadian courts have jurisdiction simpliciter over a legal proceeding. The decision is of particular interest to businesses based outside of Canada, or with ties to Canada, who may be required to defend against proceedings commenced in Canada. 

The decision clarifies what constitutes a real and substantial connection, particularly where alleged jurisdiction is grounded in the existence of a contract made in Ontario, and it reminds litigants of the burden to meet for a Canadian court to exercise its jurisdiction over a dispute.

Establishing jurisdiction: The ‘Van Breda test’ 

Canadian courts cannot adjudicate civil disputes in the absence of jurisdiction simpliciter.¹ Whether a court has jurisdiction simpliciter over a case typically requires that court to analyze whether there is a “real and substantial connection” to the Canadian province or territory in question.² Since 2012, a two-stage test established by the SCC in Club Resorts Ltd. v. Van Breda has been used to determine if a matter has a real and substantial connection to the Canadian jurisdiction where the claim is filed.³

First, 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: 

• Whether the defendant is domiciled or resident in the province; 
• Whether the defendant carries on business in the province; 
• If a tort was committed in the province; and 
• Whether a contract connected with the dispute was made in the province.⁴

Second, if a presumptive factor is established, the court will assume jurisdiction unless the defendant rebuts the presumption by showing the factor is not strong enough to ground jurisdiction in Ontario.⁵

Background to Sinclair and lower court decisions

While vacationing in Venice, Italy, the Sinclairs were injured in an accident during a water taxi ride. The ride was arranged through their concierge service provided by the defendant, Amex Canada Inc. (carrying on business as Centurion Travel Service). The Sinclairs brought a tort action in Ontario seeking damages in negligence against a number of defendants, including the Italian companies that operated the water taxi and Amex. The claim against the Canadian defendants concerned Amex’s negligent engagement of Carey International, a third-party supplier, whereas the claim against the Italian companies concerned the negligent driving of the water taxi and the negligent engagement of the taxi driver. 

The Italian defendants moved to stay the Ontario action for lack of jurisdiction. The Ontario Superior Court of Justice dismissed the motion, finding jurisdiction because the travel arrangements were contracted in Ontario through Amex Canada.⁶ The Ontario Court of Appeal overturned this decision, emphasizing the need to avoid jurisdictional overreach, and holding that the appellants had successfully rebutted the presumptive connecting factor, since there was no contractual relationship between the Italian companies and Amex Canada or the Sinclairs.⁷ The Italian defendants appealed.  

SCC’s decision in Sinclair v. Venezia Turismo

In a 5-4 split decision, the SCC affirmed the Court of Appeal’s decision, holding that Ontario courts did not have jurisdiction simpliciter as the Italian defendants had rebutted the presumptive connecting factors.⁸ 

The SCC confirmed Van Breda and clarified its application.⁹

With respect to the first step, the SCC clarified that:

• The threshold for establishing a presumptive factor remains “an objectively ascertainable and relatively low bar,” with the caveat that in cases of multiple defendants, such a factor must apply to each defendant.¹⁰
• Litigants need to ensure they have provided an evidentiary basis to establish the existence of the presumptive factor, particular for the fourth presumptive connecting factor (a contract made in the province).¹¹ The party asserting jurisdiction must identify an actual contract connected with the dispute that was formed in the jurisdiction.¹²
• Lower courts need to meaningfully engage with the circumstances and terms of the alleged contract to ensure its formation in the relevant forum before determining the existence of a connection.¹³ If there are multiple contracts, each one must be individually assessed.

At the second step, the SCC reiterated the importance of the details of contract formation in assessing the strength of the connection, stressing that this second step must not be overlooked:

• Other relevant factors to assess the strength of the connection include the specific terms of the contract, how and where the contract contemplated performance, the place of origin of the tort, and the location of the parties. ¹⁴
• A weak connection between a contract and the foreign defendants could lead to a presumption of jurisdiction simpliciter being rebutted.¹⁵

The SCC concluded that the connection between the cardholder agreement and the water taxi incident was weak, and the link between the Italian defendants and the agreement was even more tenuous. ¹⁶

Takeaways 

The SCC’s application of the Van Breda framework in Sinclair is instructive:  

• Detailed pleadings: For litigants involved in disputes that carry jurisdictional risks, pleadings should be specific in establishing the existence of the presumptive factor. Where a contract serves as the connecting factor in a dispute, the details of its formation (offer, acceptance and consideration) should be readily ascertainable for a court. A lack of evidence and specificity in pleadings may create an opportunity for the connection to be rebutted.
• Courts will more closely scrutinize the rebuttal stage: The rebuttal stage is likely to start assuming a more significant role in lower courts’ decision-making. Though the burden at the rebuttal stage is still not onerous (the SCC characterized it as a shift in perspective rather than a shift in difficulty), it is likely to be the subject of more scrutiny moving forward.

The authors would like to thank Michèle-Lise Lepage, summer student, for her contribution to preparing this legal update.