Tag Archive for: Canada

Tourism and Jurisdiction to take Centre Stage in Supreme Court of Canada

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On March 21, 22 and 25, 2011 the Supreme Court of Canada will hear appeals in four private international law cases.  Each is a case in which the Ontario court has held that it has jurisdiction to hear the dispute and that the proceedings should not be stayed in favour of another forum. 

Two of the cases – Van Breda (information here) and Charron (information here) – involve Ontarians who were killed or severely injured while on holiday in Cuba.  They now seek to sue various foreign defendants in Ontario.  These cases involve tourists in the traditional sense of the word.  Two of the cases – Banro (information here) and Black (information here) – involve claims for defamation over the internet and damage to reputation in Ontario.  There is some allegation that these cases involve what has become known as “libel tourism”, especially in England and in the United States.

Several parties have already been granted leave to appear as intervenors and others are seeking such leave.  The decisions in these four cases could be very important for the Canadian law on jurisdiction.

The Supreme Court of Canada now posts PDFs of the written submissions of litigants as they are received, so those wanting more details about the cases should click on the “factums” button for each case.

Canadian Case on State Immunity

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In Kazemi (Estate of) v. Islamic Republic of Iran, 2011 QCCS 196 (available here) the estate of Zahra Kazemi and her son, Stephan Kazemi, sued Iran and certain state officials in Quebec, alleging that in 2003 Ms. Kazemi was tortured and assassinated in Iran.  The defendants argued that the claim could not succeed due to state immunity. 

Much of the court’s analysis involves the provisions of the State Immunity Act, R.S.C. 1985, c. S-18.  The court has to consider whether this statute is a complete code on the issue of state immunity or whether it is open to courts to create exceptions to the statutory immunity beyond those listed in the statute.  The court also has to address whether aspects of the statute are constitutional. 

The court ends up concluding that the estate has no claim because the wrongs done to her occurred in Iran and so are covered by the immunity under the statute.  However, the court allows the claim by Stephan Kazemi, a claim for his own losses arising from hearing the reports of what was done to his mother, to continue since his losses were suffered in Quebec, not Iran, and so the immunity does not cover them (see section 6 of the statute). 

The decision is lengthy (220 paragraphs), and yet it does not mention the recent decision of the Supreme Court of Canada on state immunity: Kuwait Airways Corporation v. Republic of Iraq from October 2010.

Kuwait Airways Corporation v. Iraq in the Supreme Court of Canada

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In yet another, but not the final, step in the very long-running litigation between KAC, IAC and the Republic of Iraq, the Supreme Court of Canada has held that the enforcement in Quebec of a 2008 judgment of the English Commercial Court ordering Iraq to pay CAD$84 million to KAC is not barred by soveriegn immunity (decision here).

Many on this list will be familar with the facts.  After the 1990 invasion of Kuwait, KAC sued IAC in England for conversion of several airplanes.  As part of that litigation, KAC was able to claim against Iraq for the costs of the actions that had been brought.  This claim flowed from Iraq’s having controlled and funded IAC’s defence, and it was not barred by sovereign immunity in England because it fell within the commercial activity exception.  Iraq did not defend this claim and default judgment was granted.

KAC discovered immovable property owned by Iraq in Quebec and also some undelivered airplanes Iraq was buying from Bombardier Aerospace.  It thus brought proceedings in Quebec to enforce the English judgment.  Two lower courts held the claim was barred by sovereign immunity but the Supreme Court of Canada found that it fell within the commercial activity exception.

The court applied the State Immunity Act, RSC 1985, c S-18 and held that it applied to proceedings to enforce a foreign judgment (paras. 19-20).  The English decision, which addressed the issue of sovereign immunity, was not binding in Canada and was not res judicata (since to be so it would first have to be recognized in Canada, which was the very issue before the court) (para. 22).  The application of the commercial activity exception to the facts is somewhat brief (para. 35), though there is some useful discussion of the scope of the exception in the United Kingdom, the United States and Canada (paras. 25-33).

Two other points of interest: 1. the court does not wade into the issue of whether there are any exceptions to sovereign immunity beyond those set out in the statute (para. 24), and 2. the court accepts the factual findings of the English decision as part of its analysis, prior to concluding that the decision is enforceable in Canada (para. 34).  This latter point seems somewhat hard to explain, and the court does not offer much explanation.

The Supreme Court of Canada did not determine if the English judgment is enforceable in Quebec – it only dealt with the sovereign immunity issue.  The case was therefore remanded to the court of first instance to hear the claim for enforcement.  Iraq likely has some further arguments to advance, such as that the Quebec court lacks jurisdiction over it and that the English default judgment is not entitled to recognition and enforcement (for example, due to the lack of a real and substantial connection between England and the claim advanced against Iraq).

Looking Back and Looking Forward at Canadian Private International Law

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At the recent 40th Annual Workshop on Commercial and Consumer Law at the University of Toronto, three leading Canadian conflict of laws scholars – Vaughan Black of the Schulich School of Law, Joost Blom of the University of British Columbia and Janet Walker of Osgoode Hall Law School – presented a paper looking back at the last forty years in private international law and offering thoughts on what lies ahead.  Each author picked out a particular theme: a judicial trend toward uniformity between provincial conflicts rules, the impact of Morguard on the structure of conflicts rules, and how the profile of the field has changed over time.  The paper is not currently available on the web but will be published in an upcoming issue of the Canadian Business Law Journal.

The paper was supplemented at the Workshop by Genevieve Saumier of McGill University’s oral comments on trends in Quebec’s private international law.  The session was chaired by Elizabeth Edinger of the University of British Columbia.

New Articles in Canadian Publications

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Two recent publications contain several topical articles:

In the 2010 issue (volume 60) of the University of New Brunswick Law Journal are the following five articles: Catherine Walsh: “The Uses and Abuses of Party Autonomy in International Contracts”; Joshua Karton, “Party Autonomy and Choice of Law: Is International Arbitration Leading the Way or Marching to the Beat of its own Drummer?”; Stephen Pitel, “Reformulating a Real and Substantial Connection”; John McEvoy, “‘After the Storm: The Impact of the Financial Crisis on Private International Law’: Jurisdiction”; and Elizabeth Edinger, “The Problem of Parallel Actions: The Softer Alternative”.  This journal is available to subscribers, including through Westlaw.

In Jeff Berryman & Rick Bigwood, eds., The Law of Remedies: New Directions in the Common Law (Toronto: Irwin Law Inc., 2010) are four articles that relate to the conflict of laws: David Capper, “Mareva Orders in Globalized Litigation”; Scott Fairley, “Exporting Your Remedy: A Canadian Perspective on the Recognition and Enforcement of Monetary and Other Relief”; Garry Davis, “Damages in Transnational Tort Litigation: Legislative Restrictions and the Substance/Procedure Distinction in Australian Conflict of Laws”; and Russell Weaver & David Partlett, “The Globalization of Defamation”.  This collection of articles is available for purchase here.

Court of Appeal for Ontario Rejects “Fourth Defence” to Enforcement of Foreign Judgments

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The long-running litigation between the United States and a group of defendants who operated a cross-border telemarketing business selling Canadian and foreign lottery tickets to Americans has reached another mile-post with the decision of the Court of Appeal for Ontario in United States of America v. Yemec, 2010 ONCA 414 (available here).  The defendants were likely riding high before this decision, having done quite well in resisting the enforcement of the judgment of an Illinois court finding them liable for $19 million and permanently enjoining them from telemarketing any product or service to anyone in the United States.  But the tables are now turned, with the Court of Appeal for Ontario ordering enforcement of the Illinois judgment.

The most notable jurisprudential issue in the case concerns the scope of the defences at common law to an action to recognize and enforce a foreign judgment.  At common law there are three central defences: fraud, denial of natural justice, and public policy.  However, the Supreme Court of Canada indicated in Beals v. Saldanha, [2003] 3 S.C.R. 416 that this was not a closed list and in the appropriate circumstances a new defence might be created.  In Yemec the motions judge of the Superior Court of Justice hearing the case was persuaded that there was a genuine issue requiring a trial on the question of a “fourth defence”, namely “denial of a meaningful opportunity to be heard”.  The Court of Appeal has now held that there is no such defence: that concerns of this nature fall comfortably within the scope of the denial of natural justice defence.  Further, on the facts, the appellate court found that the defendants were not denied an opportunity to be heard in the courts of Illinois (paras. 26-29). 

The case is one of several in the wake of Pro Swing Inc. v. Elta Golf Inc., [2006]  2 S.C.R. 612 to enforce a foreign non-monetary order, namely the permanent injunction.  The Court of Appeal found the criteria for enforcement set out by the Supreme Court of Canada in Pro Swing were met in this case (paras. 45-53).

The case raises one other interesting issue.  The United States had, at the outset of the litigation in Illinois and Ontario, obtained a freezing order (Mareva) and a civil seizure order (Anton Piller).  These interlocutory orders were subsequently dissolved, in part for failure of the United States to make full disclosure when moving ex parte to obtain the orders.  The defendants then insisted on a damages inquiry under the undertaking in damages the United States had provided as a condition of obtaining the orders.  The plaintiff argued that such an inquiry should not proceed, given that in effect the defendants were seeking to recover lost profits from a business the Illinois court had concluded was illegal.  The Court of Appeal for Ontario held that the damages inquiry should proceed, stressing the importance of enforcing the general undertaking in damages (paras. 69-72).  It did note, though, that there was evidence that the defendants had violated both Canadian and American law (paras. 78-83) and that accordingly it would be difficult for them to establish compensable damages.  But they were entitled to try (paras 85-86).

Canadian Articles on Multijurisdictional Class Actions

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Three recent articles have been published about multijurisdictional class actions in Canada.  One of the most critical issues is whether the courts of a province will enforce a class action judgment from another province or another country approving a settlement that purports to bind plaintiffs resident in the province.  I know that similar issues are under consideration in other countries, so this literature could be of value as comparative law.

Genevieve Saumier, “Competing Class Actions Across Canada: Still at the Starting Gate after Canada Post v. Levine” (2010) 48 C.B.L.J. 462

Tanya Monestier, “Personal Jurisdiction over Non-Resident Class Members: Have We Gone Down the Wrong Road?” (2010) 45 Texas International Law Journal 537

Peter W. Hogg & S. Gordon McKee, “Are National Class Actions Constitutional?” (2010) 26 N.J.C.L. 279

These take their place alongside several other articles on this topic from the past few years.

Limitation Period for Enforcing Foreign Arbitration Award

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In Yugraneft Corp. v. Rexx Management Corp., 2010 SCC 19 (available here) the Supreme Court of Canada has upheld the decision of two lower courts that the plaintiff’s claim to enforce a Russian arbitration award was brought after the expiry of the applicable provincial limitation period.

Following a contractual dispute, Yugraneft commenced arbitration proceedings before the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation.  The arbitral tribunal issued its final award on September 6, 2002, ordering Rexx to pay US$952,614.43 in damages to Yugraneft.  Yugraneft applied to the Alberta Court of Queen’s Bench for recognition and enforcement of the award on January 27, 2006, more than three years after the award was rendered.

The court was required to interpret article 3 of the New York Convention, which provides that recognition and enforcement shall be “in accordance with the rules of procedure of the territory where the award is relied upon”.  This raised an issue in Canadian litigation since the Supreme Court of Canada has held (in Tolofson v. Jensen, [1994] 3 S.C.R. 1022) that limitation periods are substantive and not procedural.  The court rightly concludes that this does not mean that the forum’s limitation period cannot be applied to the enforcement action (paras. 18-29). 

The remainder of the decision deals with what the limitation period is under Alberta law.  The plaintiff attempted to convince the court to apply a ten-year period, applicable to a “claim based on a judgment or order for the payment of money” (para. 43).  The court, based on the clear wording of the statute, had to conclude that an arbitration award did not fall within this language (para. 44).  As a result, the claim was governed by the general two-year period and so was, on the facts, time barred (para. 63).

The court does suggest that the two-year time period will not start to run until the plaintiff discovers, or should have discovered, that the defendant has assets in the place where enforcement is sought (para. 49).  This fact is not strictly part of the cause of action.  Still, this statement, if accepted as correct, should provide some comfort in the face of the relatively short two-year period.  However, this statement draws in part on the specific language of s. 3(1)(a)(iii) of the Alberta limitation statute, which deals with knowing whether a proceeding is “warranted” (see para. 61).  If so, the analysis could be different under a statute that did not have this specific language as part of the test of discoverability (see for example the language in s. 5(1)(a)(iv) of the Ontario limitation statute).

This area would benefit from a clear legislative solution, namely a provision containing an express limitation period for claims on foreign arbitration awards.  Such a period should, in recognition of the issues involved, be longer than the province’s general limitation period.

Two New Books

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Two new books on private international law have recently been published in Canada.

The first is a new textbook: Stephen G.A. Pitel & Nicholas S. Rafferty, Conflict of Laws (Toronto: Irwin Law Inc., 2010).  Though I say it myself, for those in other countries this book should serve as a useful comparative reference to the Canadian law on the subject.  More information is available here.

The second is the third edition of the Canadian casebook in the area: Nicholas S. Rafferty, general editor, Private International Law in Common Law Canada: Cases, Text, and Materials, 3d ed. (Toronto: Emond Montgomery Publications Limited, 2010).  There are seven contributors to the casebook: Professors Nicholas Rafferty, Joost Blom, Elizabeth Edinger, Genevieve Saumier, Stephen Pitel, Janet Walker and  Catherine Walsh.  More information is available here.

Reformulating a Real and Substantial Connection

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In Canada, the test for taking jurisdiction over an out-of-province defendant requires that there be “a real and substantial connection” between the dispute and the forum.  In 2002 the Court of Appeal for Ontario created a framework for analyzing a real and substantial connection, setting out, in Muscutt v. Courcelles, eight factors to consider.  This framework became the standard in Ontario and was adopted by appellate courts in some other Canadian provinces.  However, in 2009, in preparing to hear two appeals of decisions on motions challenging the court’s jurisdiction, the Court of Appeal for Ontario indicated that it was willing to consider whether any changes were required to the Muscutt framework.  The two cases, consolidated on appeal as Van Breda v. Village Resorts Limited, 2010 ONCA 84 (available here), each concerned serious injuries that were suffered outside of Ontario.

Rule 17.02 of the Ontario Rules of Civil Procedure provides that a plaintiff may serve a defendant outside Ontario with an originating process in certain defined categories of cases.  Prior to Morguard Investments Ltd. v. De Savoye, the analysis of jurisdiction centered on whether the plaintiff’s claim fell within one or more of the enumerated categories.  However, Morguard established, and Muscutt confirmed, that rule 17.02 did not in itself create jurisdiction.  Separate and apart from whether the claim fell inside the categories, the plaintiff had to establish that there was a real and substantial connection between the dispute and the forum.

In Van Breda the court made a significant change to the relationship between the categories in rule 17.02 and the real and substantial connection requirement.  It has now held that if a case falls within the categories in rule 17.02, other than rules 17.02(h) and (o), a real and substantial connection with Ontario shall be presumed to exist.  The central catalyst for this change is section 10 of the model Civil Jurisdiction and Proceedings Transfer Act.  Section 3 of that statute provides in quite general terms that a court has jurisdiction when there is a real and substantial connection between the dispute and the forum.  However, section 10 contains a list of specific situations in which a real and substantial connection is presumed to exist.  Ontario has not adopted the CJPTA, but in Van Breda the court has adopted the CJPTA’s basic approach. 

Even with this presumption, a framework for analyzing whether there is a real and substantial connection is still required in any case where a defendant seeks to refute the presumption, any case in which a plaintiff is relying on rule 17.02(h) or (o) so that no presumption arises, and any case in which a plaintiff does not rely on 17.02 at all and instead seeks leave of the court to serve a defendant outside Ontario under rule 17.03.  Prior to Van Breda the courts used the Muscutt framework, which considered the following eight factors to determine whether there was a real and substantial connection to Ontario: (1) the connection between the forum and the plaintiff’s claim, (2) the connection between the forum and the defendant, (3) unfairness to the defendant in taking jurisdiction, (4) unfairness to the plaintiff in not taking jurisdiction, (5) the involvement of other parties, (6) the court’s willingness to enforce a foreign judgment rendered on the same jurisdictional basis, (7) whether the dispute is international or interprovincial, and (8) comity and the standards of jurisdiction used by other courts.

In Van Breda the court determined that it was necessary to “simplify the test and to provide for more clarity and ease in its application”.  It held that “the core of the real and substantial connection test” is factors (1) and (2), and held that factors (3) to (8) will now “serve as analytic tools to assist the court in assessing the significance of the connections between the forum, the claim and the defendant”.  The court affirms that factors (3) to (8) remain relevant to the issue of jurisdiction, but the court nevertheless reworks the framework, ostensibly so that no one factor from factors (3) to (8) could be analyzed separately from the other factors and could be independently determinative of the outcome.  It is not clear that this change was necessary or that it makes the framework clearer and easier to apply.

For many, Van Breda violates the idiom “if it ain’t broke, don’t fix it”.  The Muscutt framework was well-known and was working effectively.  It was relatively easy to explain and to apply.  In time we will know if as much can be said for the use of presumptions and the Van Breda framework, but for the moment there are questions about how the presumption will operate when challenged by a defendant and about the ongoing role of the factors the court now calls analytic tools.