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The Court of Appeal for Ontario has released its decision in Precious Metal Capital Corp. v. Smith (available here).  In many ways the decision is unexceptional: it agrees with a quite sensible decision by the judge at first instance.  But there may be a more interesting, and contentious, aspect to the decision in the way the court has expressed its reasons.

The defendants had raised four separate objections to the litigation proceeding in Ontario: (1) the claims advanced against foreign defendants did not fit within the procedural rules allowing for service outside the province, (2) the court lacked jurisdiction because there was not a real and substantial connection between the dispute and Ontario, (3) the court lacked jurisdiction because the claim concerned foreign land (the Mocambique rule), and (4) if the court had jurisdiction, it should order a stay based on forum non conveniens.   Getting to the right result on each of these objections was not difficult – they all failed both before the motions judge and the Court of Appeal.

The point of interest was in the analysis adopted by the Court of Appeal.  The motions judge had separately considered objections (2) and (3).  In contrast, the Court of Appeal held that issues related to the remedy being sought (in respect of foreign land) should, in cases involving foreign defendants, not be analyzed separately.  Rather, they should be subsumed as part of the court’s analysis of whether there was a real and substantial connection to Ontario (see paras. 15-18 among others).

This works no evils in this particular case, but I question the benefit of running issues (2) and (3) together.  The latter has tended to be a separate question for two reasons: it focuses on subject-matter jurisdiction rather than jurisdiction over the defendant, and as an issue it can arise whether the case is one of service in or service out.  To me it seems a cleaner analysis to continue to treat these as distinct questions rather than running them together.

Does running them together, for example, make it possible for the court to conclude it has jurisdiction even in a case squarely involving title to foreign land and not falling within the historic Penn v. Baltimore exception, based on other elements of the Muscutt test for a real and substantial connection?  Is this then a signal that the Mocambique rule itself is under threat?

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  • Antonin I. Pribetic August 13, 2008, 2:08 am

    Stephen,

    I am pleased that you have posted the Ontario Court of Appeal decision in Precious Metal Capital Corp. v. Smith. You may recall that my recent article critiques the lower court decision of Lederman, J. in Precious Metal Capital Corp. v. Smith: See, Antonin I. Pribetic,”Staking Claims Against Foreign Defendants in Canada: Choice of Law and Jurisdiction Issues Relating to the in Personam Exception to the Lex Situs Rule for Foreign Immovables” (May 5, 2008). Available at SSRN: http://ssrn.com/abstract=1129283.

    While we may differ on the correctness of the result, I agree with you that the traditional “two-step” approach is preferred. The Muscutt factors provide little, if any, guidance for the court in determining subject-matter jurisdiction over foreign defendants. The “real and substantial connection” test, while flexible in application, also does not address the historical, sovereignty and public policy grounds for limiting adjudicatory jurisdiction by a local court over foreign land or foreign title issues. By contrast, the Moçambique (or “lex situs”) rule deals exclusively with subject-matter jurisdiction; while the in personam exception allows for personal jurisdiction to be exercised over a foreign defendant on a four-factored test with general application.

    Whether the Precious Metal Capital decision threatens the Moçambique rule is, in my view, answered in the affirmative. Whether the Moçambique rule (and the in personam exception) is fully understood by Canadian courts as both a jurisdictional and choice of law rule remains debatable.

    Antonin I. Pribetic

  • Antonin I. Pribetic August 13, 2008, 3:20 am

    I have corrected the link to the article:

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1129283

    Antonin I. Pribetic