Court of Appeal Allows Ontario Class Action to Include Absent Foreign Claimants: Part 2

30 October 2017

By Khrystina McMillan
This is the second of a two-part post on the Court of Appeal’s decision in Airia Brands Inc. v Air Canada. In last week’s post,  we summarized the nature of the claim and the Court of Appeal’s framework for establishing jurisdiction over absent foreign claimants. In this week’s post, we summarize the Court of Appeal’s analysis of the real and substantial connection test for establishing jurisdiction over class proceedings. We also briefly explain the difference between the real and substantial connection test and the test for forum non conveniens. 
Real and Substantial Connection:  Jurisdiction over a matter may be based on traditional grounds such as presence or consent, or on the existence of a real and substantial connection. In the seminal decision of Club Resorts Ltd. v Van Breda, the Supreme Court of Canada outlined the framework for the assumption of jurisdiction based on the real and substantial connection test. 
Where a real and substantial connection exists “in respect of a factual or legal situation, the court must assume jurisdiction over all aspects of the case” and not just the parts of the claim directly connected with the court’s jurisdiction. The Supreme Court set out four non-exhaustive presumptive connecting factors that, unless rebutted by the party opposing jurisdiction, entitles a court to assume jurisdiction over a dispute:
1. The defendant is domiciled or resident in the province;
2. The defendant carries on the business in the province;
3. The tort was committed in the province; and
4. A contract connected with the dispute was made in the province.

The principles of fairness, efficiency and comity inform the test, but are not stand alone connecting factors. In particular, Van Breda did not invite judges to devise their own test for jurisdiction and, indeed (as the Court of Appeal noted in Airia Brands), expressly cautioned judges against resolving jurisdiction issues on a case-by-case basis “however laudable the objective of individual fairness may be.”  
Forum Non Conveniens: The forum non conveniens analysis is separate and apart from the question of whether the court has prima facie jurisdiction over a matter. The doctrine of forum non conveniens allows a court to decline to adjudicate a matter over which it has jurisdiction where there is a clearly more appropriate forum. In such an analysis, the burden is on the defendants to show that another jurisdiction both (1) has a real and substantial connection to the claim; and (2) is a clearly more appropriate forum.
In Van Breda, the Supreme Court outlined a list of non-exhaustive factors to consider in assessing whether another jurisdiction is the more appropriate forum: the location of the parties and the witnesses; the cost of transferring the case to another jurisdiction or declining the stay of proceedings in Ontario; the impact of a transfer on the conduct of litigation or on related parallel proceedings; the possibility of conflicting judgments; problems related to recognition and enforcement of judgments; and the relative strength of connection of the parties.

The Airia Brands Decision: The motion judge, in Airia Brands Inc. v Air Canada, concluded that the prevailing law outside of Canada is that jurisdiction is based on presence, consent or submission; parties may only become plaintiffs if they bring the claim themselves or join in an existing claim. She therefore agreed with the defendant airlines that the real and substantial connection test in Canada is a “radical departure from the norms adhered to by other countries”. She noted that the Class Proceedings Act is a procedural statute that cannot create jurisdiction where there is none, and concluded that Ontario’s opt-out regime for class proceedings (wherein persons who fall within the certified class definition are automatically included in the class and, therefore, bound by the decision unless they take active steps to opt out of the action) cannot be applied outside of Ontario.

Turning to the issue of jurisdiction in this case, the motion judge concluded that previous decisions from the Supreme Court of Canada invited courts to develop approaches to jurisdiction to meet constitutional requirements and recognize order and fairness. Having regard to the specific circumstances of this case – parties who are not present in Ontario and who have not consented or attorned to Ontario’s jurisdiction – she decided that the principles of order, fairness and comity should guide the jurisdictional analysis, not the real and substantial connection test. Based on this analysis, she held that, in this case, the court did not have jurisdiction over absent foreign claimants and the class action in relation to them was stayed.

The Court of Appeal disagreed. In Ontario, the real and substantial connection test has been consistently applied to the question of jurisdiction in class actions. The motion judge erred, therefore, in failing to apply the real and substantial connection test. While it is true that jurisdiction may be based on traditional grounds (presence or consent), the Court of Appeal emphasized that relying on those factors to ground jurisdiction is very different from rejecting jurisdiction based on their absence. The motion judge erred in doing the latter. Where the traditional grounds for jurisdiction are not available, the real and substantial connection test has to be the start of the analysis.

The Court of Appeal held that the motion judge further erred in accepting the defendants’ argument that Ontario was forum non conveniens and suggesting that the absent foreign claimants pursue individual actions within their own jurisdictions. In doing so, the motion judge failed to ask whether any jurisdiction was clearly more appropriate than Ontario. In this case, the Court of Appeal held, there is no such forum. Moreover, the evidence in this case “clearly demonstrates a robust connection between the parties and Ontario”.

The Takeaway: Following the Court of Appeal’s decision in Airia Brands, potential parties to a class proceeding have confirmation that the jurisdictional analysis for class proceedings involving non-resident class members, is rooted in the real and substantial connection test, in accordance with the specific framework established by the Court of Appeal.

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