Assuming Jurisdiction in Tort Cases Over Non-Contracting Parties

Trillium v. General Motors of Canada et al, 2013 ONSC 2289 (CanLII) [“Trillium“] attempts to answer the lingering question of how and when will a court assume jurisdiction in a tort case over contractual non-parties.

In Trillium, some 207 GM Canada dealers commenced a class action following termination of dealerships by GMCL as a result of the financial crisis and “auto bailout” in the summer of 2009. The terminated dealers allege that the defendant GMCL forced them to sign Wind-Down Agreements (“WDAs”) in breach of provincial franchise law. The plaintiff class further alleges that the defendant Cassels, Brock & Blackwell (“CBB”), the dealers’ legal counsel, was negligent in failing to provide appropriate advice—primarily about the protections available under provincial franchising law and about the need for and benefit of collective action. The national class action has been certified and is currently proceeding to a common issues trial.

GMCL denied that it breached provincial franchise law and CBB takes the position that it was retained by the Canadian Automobile Dealers Association and not by any of the individual dealerships.

Belobaba J. identifies the analytical gap left by the Supreme Court of Canada in Van Breda:

[1]              The Supreme Court made clear in Van Breda[1] that a court can assume jurisdiction in tort cases if “a contract connected with the dispute was made in the province.”[2] What the Court did not make clear is what this means.

[2]              Consider the following scenario: Jim, who lives in Ontario, and Fred, who lives in B.C. are vacationing at a resort in Cuba. They meet in the hotel bar and begin a heated discussion about a recent hockey trade between the Toronto Maple Leafs and the Ottawa Senators. The discussion degenerates into a fist fight. Jim is badly beaten. After recovering from his injuries and returning to his home in Ontario, he sues Fred in tort for damages. Can the Ontario court assume jurisdiction because “a contract connected with the dispute [i.e. the hockey trade agreement] was made in the province?”

[3]              Of course not.

[4]              Just because the bar fight in Cuba was caused by a disagreement about a sports contract made in Ontario does not mean that an Ontario court is entitled to assume jurisdiction over the dispute. More is needed. But what and how much?

[5]              The question is made all the more difficult because the Court in Van Breda did not really explain how it came up with this fourth presumptive connecting factor. All it said was that “[c]laims related to contracts made in Ontario would also be properly brought in the Ontario courts (rule 17.02(f)(i)).”[3]

However, and here’s the strategic gambit: CBB brought third party claims seeking contribution and indemnity from the third party local lawyers which provided the individual dealers with the independent legal advice required by GMCL before the WDA was signed.

 CBB has added some 150 local lawyers and law firms as third party defendants: 67 are based in Ontario, 32 in Quebec, and 51 in the eight remaining provinces (19 in Alberta, seven in Nova Scotia, six in each of British Columbia, Saskatchewan and Manitoba, five in New Brunswick, and one in each of Newfoundland and P.E.I.). Six of the law firms, described by the third parties as “national firms”, have offices in Ontario. The list of out-of-province third party defendants reads like a veritable “Who’s Who” of Big Law Firms. See if you can spot your law firm in the style of cause:

CanLII   2013 ONSC 2289  CanLII

Justice Belobaba then asks:

[33]         Does it matter that in this case the non-contracting party that was brought within the scope of the Ontario contract was the local lawyer/defendant rather than the plaintiff as in Van Breda? In my view it does not. What matters is that the non-party defendant was brought within the scope of the relationship created by the Ontario contract and that a sufficient connection has been established between the defendant and the forum.

[34]         Did “the events that gave rise to the [tort] claim flow from the relationship created by the [Ontario] contract?” In my view, they did. Recall that the substance of CBB’s third party claim is that if CBB is liable to class members/dealers for failing to provide proper legal advice regarding the WDA, so too are the local lawyers that were retained by the same dealers. The local lawyers were obliged by the terms of the ILA Certificate to not only explain the nature and effect of the WDA and its various waivers and releases (including, one would assume, the waiver in Article 5(a)(v) of any rights or protections otherwise available under provincial franchise law) but also to ensure that the dealer/client was “fully advised and informed” thereto. In short, the dispute between CBB and the third party defendants about whether the latter provided proper legal advice arises and flows out of the relationship created by the WDA and the required ILA.

The learned judge then analyzes the Court of Appeal decision in Export Packers Co. v. SPI International Transportation,2012 ONCA 481 (CanLII), 2012 ONCA 481, [2012] O.J. No. 3126 at para. 22. and surmises :

[39]         The Court of Appeal concluded that the three Ontario contracts had no connection to EDN other than that they anticipated that the cargo would be picked up at EDN’s warehouse in Quebec. The dispute between SPI and EDN related only to the alleged negligence of EDN in releasing the cargo and “the contracts relied upon [did] not address the issue of release of the cargo by EDN as storer” (my emphasis).

[40]         Here however, the dispute between CBB and the local lawyers relates to the alleged negligence in the provision of legal advice and here, to track the language just quoted, the Ontario contract that is being relied upon, i.e. the WDA, does indeed address the issue of the provision of legal advice by the local lawyers. Thus, Export Packers, in my view, provides support for my conclusion that the WDA is sufficiently connected with the tort claim against the local lawyers so as to raise a presumption of a real and substantial connection between the subject matter of the litigation and Ontario.

Belobaba J.also held that it would be reasonable to expect that the out-of-province local lawyers would be called to answer the legal proceedings in Ontario: (1) the local lawyers reviewed the WDA and knew that it contained a forum selection/governing law clause specifying Ontario;  (2) while not parties to the WDA, they were brought into the contractual relationship through the dealer’s need for legal advice arising under the signed ILA Certificate. As Belobaba, J. wryly notes:

[43]         Given this backdrop, if it turned out, as it did, that the terminated dealers banded together and commenced a class action in Ontario against CBB for failing to provide the legal advice that arguably should have been provided by the local lawyers in the context of the ILA Certificate, it should not surprise the local lawyers if they were added as third parties to the Ontario class action that was brought by their clients. Indeed it would be crazy for CBB not to do so.

Finally, Belobaba J. did not think much of the forum non conveniens argument:

[49]         Here we have 67 defendants in Ontario, 32 in Quebec and the rest scattered across the remaining eight provinces. It cannot be seriously maintained that Quebec (with only 32 lawyers) or Alberta (with only 19 lawyers) are “clearly more appropriate” forums. If CBB’s third party action against the 150 local lawyers proceeds,[29] it must proceed in Ontario. This is by far the most appropriate and convenient forum.

Compare Belobaba J.’s analysis in Trillium with the decision of Stinson J. in Central Sun Mining Inc. v. Vector Engineering Inc.2012 ONSC 7331 (CanLII) (Ont. SCJ) [“Central Sun Mining”].

The action in Central Sun Mining arose from a major landslide occurring on October 21, 2007 at the Bellavista Gold Mine in Costa Rica which brought operations to a halt and permanently closed the mine. The plaintiff, a Toronto based holding company, and the indirect owner of the mine, brought an action in Ontario against a number of out-of-province defendants seeking damages of damages of $150,000,000 for negligence, negligent misrepresentation and breach of contract with respect to the development, construction and operation of the mine from the mid-1990s to 2007. The plaintiff sued various engineers and engineering firms involved in the engineering, design and construction of the Bellavista Mine. On September 9, 2011 the Vector Colorado Defendants served and filed a statement of defence to the SRK defendants’ crossclaim.

With respect to the third factor (“The tort was committed in the province” (rule 17.02(g)) Stinson J. notes:

[41]           In relation to the complaint of negligent misrepresentation, the plaintiff argues that the reports, advice and recommendations made by the moving defendants were ultimately received and acted upon by its senior management in Toronto, where the relevant executive decisions were made regarding the plaintiff’s investment in the Bellavista Mine. In negligent misrepresentation cases, the wrong occurs where the representation is received and relied upon: National Bank of Canada v. Chance, 30 O.R. (3d) 746, 1996 CarswellOnt 3493 (Ont. SCJ) at para 32. See also C.B. Distribution Inc. v. BCB International Inc.,2003 CanLII 29523 (ON SC), 2003 CanLII 29523 (ON SC) at para. 29, leave to appeal refused [2003] O.J. No. 4345 (Div.Ct.); Venezia/Sincies v. King,2010 ONSC 6453 (CanLII), 2010 ONSC 6453 (“Venezia/Sincies”) at paras. 180-192 (S.C.J.); and Brisbin v Lunev 2011 ONCA 14 (CanLII), 2011 ONCA 14.

[43]           This is plainly a case involving multi-jurisdictional torts. The physical damage occurred in Costa Rica. The alleged errors by the SRK Defendants took place there and in Colorado, where they carried out their analyses, and arrived at their recommendations and advice. In turn, that advice was transmitted to British Columbia, where it was digested by employees of the plaintiff who in turn made recommendations to head office. The consulting work performed by the Vector Costa Rica Defendants was also performed outside Ontario. Although the ultimate business decisions may have been made in Toronto (and thus, arguably, the element of reliance occurred here) I would characterize the Toronto connection as tenuous.

Justice Stinson distinguishes the decision in Venezia/Sincies v. King,2010 ONSC 6453 (CanLII), 2010 ONSC 6453 (“Venezia/Sincies”) at paras. 180-192 (S.C.J.); (see my previous post here)  which involved the assumption of jurisdiction relating to negligent advice resulting in damages suffered by plaintiff, an Italian client who successfully moved to enforce the resulting Italian judgment in Ontario:

[46]           In Venezia/Sincies there was both a direct connection and direct communication between the professional advisor and the recipient client in the foreign jurisdiction. By contrast, in the present case, none of the communications between the SRK Defendants and the plaintiff took place in Ontario. While some of the contacts between the Vector Costa Rica Defendants were with the plaintiff’s Ontario head office, that was by no means the only avenue of communication.

Stinson J. further rejected the plaintiff’s argument of “negligence simpliciter”, stating:

[53]           Corporations that operate in more than one country, such as the plaintiff, often suffer damages as a result of torts occurring in other jurisdictions. I agree with the submission of the defendants that if all that is required to create a “tort committed in Ontario” is that an Ontario based company suffer damages, then Ontario courts would have jurisdiction over torts committed all over the world as long as even a small percentage of the damages were suffered here, regardless of where the tort actually occurred.

[54]           Therefore, despite the fact the plaintiff may have suffered some of its damages in Ontario, I would not accept this as a presumptive basis for establishing jurisdiction in Ontario. I am also conscious that, quite apart from the damages allegedly suffered in Ontario, the physical losses caused by the alleged negligence of the defendants occurred entirely in Costa Rica. Thus, the tort also occurred there. Another potential situs of the tort of negligence is where the negligent services were performed, in this case both Costa Rica and Colorado. The presence of these other loci delicti reinforces the limited connection between the plaintiff’s claims and Ontario. To the extent that damages suffered in Ontario may qualify as a presumptive connecting factor, I hold (for these as well as the reasons discussed in para. 47 above) that the moving defendants have successfully rebutted that presumption.

[55]           The plaintiff acknowledges that, as a general rule, negligence simpliciter claims are governed by the law of the jurisdiction in which the wrong occurred, i.e. the lex loci delicti.  It argues, however, that courts retain discretion to apply the law of the forum in some international cases, such as this, where the application of the lex loci delicti would result in injustice.

[56]           Given that virtually all of the moving defendants are located and therefore may be sued in the United States, where the largest measure of their services were performed, I am not persuaded that the application of the lex loci deliciti would work an injustice on the plaintiff. There is no reason to believe that the tort standards of Colorado would place the plaintiff at a disadvantage when pursuing these defendants, or that the plaintiff would otherwise suffer “an injustice” if required to sue there.

[57]           I therefore reject the submission of the plaintiff that this Court should assume jurisdiction over the dispute on the basis of a tort that was committed in Ontario.

The attempt to expand the presumptive factors to include rule 17.02(a), “in respect of…personal property in Ontario” meets a similar fate:

[82]           The basis for the plaintiff’s characterization of its claim as one “in respect of … personal property in Ontario” is that it involves a claim in respect of Central Sun’s reputation and goodwill in Ontario, which were significantly damaged as a result of the defendants’ wrongful conduct. In my opinion this is, in effect, an attempt to reintroduce damages as a presumptive category, a concept rejected by the Supreme Court in Van Breda (see para. 89), as it was by the Ontario Court of Appeal in its decision in Van Breda. See Van Breda v. Village Resorts Limited, 2010 ONCA 84 (CanLII), 2010 ONCA 84 at para. 72. I therefore decline to accept the plaintiff’s submission on this point.

Finally, the plaintiff did not rely on rule 17.02(f)(i) (“contract made in Ontario”), but did attempt to rely on sub-rule 17.02(f)(iv) (“breach of contract has been committed in Ontario), as a presumptive category. Stinson J. rejected this circuitous approach,  noting that in Van Breda,

[87]           Significantly, on appeal, the Supreme Court did not provide such a broad an endorsement of the rule 17.02 scenarios that warrant presumptive effect. InVan Breda the plaintiff alleged both negligence and breach of contract, and relied on the fact that the claim was, in part, founded on a contract made in Ontario. Although the Supreme Court accepted that as a presumptive connecting factor, despite the fact that the Court of Appeal had identified breach of contract committed in Ontario as a presumptive connecting factor, the Supreme Court did not reach the same conclusion. The omission by the Supreme Court in Van Breda of breach of contract committed in Ontario as a presumptive factor, suggests it should not be accorded presumptive status under the jurisdictionsimpliciter analysis.

[88]           Even if I were prepared to recognize breach of contract in Ontario as a presumptive connecting factor, the same considerations are relevant regarding the degree of the connection between this jurisdiction and the dispute, the plaintiff and the moving defendants. For the same reasons I have previously articulated, in my view the connection is tenuous at best, and on that basis I would hold that the presumption has been rebutted.

[89]           I therefore reject the submission of the plaintiff that this Court should assume jurisdiction over the dispute on the basis of a breach of contract committed in Ontario.

[90]           For the foregoing reasons, in my view there are no presumptive factors that support this Court assuming jurisdiction over this litigation. At its heart, this dispute involves complaints by an Ontario company about a loss to property in a foreign country, that was allegedly caused by foreign defendants, performing services in a foreign country or countries. It lacks the requisite real and substantial connection with Ontario. On that basis, I conclude that this Court should not assume jurisdiction over the moving defendants. To the extent there may exist a connection between the dispute and this province, in my opinion that connection is tenuous. On that alternative basis, I would hold that the moving defendants have successfully rebutted any presumptive connection with this jurisdiction.

I imagine an appeal is likely and it may provide an opportunity for appellate court clarification of the concurrent contract/tort presumptive connecting factor confusion.

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4 Responses to “Assuming Jurisdiction in Tort Cases Over Non-Contracting Parties”

  1. David Cheifez Says:

    Antonin,

    Except that the claims between CBB and the various third parties aren’t tort claims. They’re contribution claims which aren’t tort claims.

    That not-too-small error – which the motion judge shouldn’t have made – probably isn’t relevant to the merits of his conclusion.

    But it does mean his statement of the issue in this case

    “[12] In short, for the purposes of the Fourth PCF, Van Breda appears to stand for the following proposition: an Ontario court has jurisdiction over a tort claim brought by a non-party to an Ontario contract that is connected with the dispute, if the non-party can be brought within the scope of the contractual relationship by the terms of the contract, and if the events that gave rise to the claim flowed from the relationship created by that contract.”

    is literally wrong.

    And, it does invalidate his analysis to the extent it’s (somehow) necessarily based on the notion that the contribution claim is a tort claim.

    Perhaps it’s not. For example, we could restate [12] this way:

    [12] In short, for the purposes of the Fourth PCF, Van Breda appears to stand for the following proposition: an Ontario court has jurisdiction over a contribution claim brought by a non-party to an Ontario contract that is connected with the dispute, if the non-party can be brought within the scope of the contractual relationship by the terms of the contract, and if the events that gave rise to the contribution claim flowed from the relationship created by that contract.

    However, a better way to analyze the issue is to ask whether there’s something about contribution claims that provides an answer to the Van Breda form of jurisdictional analysis.

    Of course, this being Ontario, Murphy’s Law mandates that the ONCA will (as it generally does) butcher the contribution law analysis and, in any event, by the time the SCC finally decides the issue, it will be moot because Ontario will have adopted a form of “Court Jurisdiction and Proceedings Transfer Act” which will make the analysis in the decision, whatever it is, moot, thus creating more work for lawyers.

    However, perhaps I’m being overly optimistic.

    Cheers,

    David

  2. Antonin I. Pribetic Says:

    Thanks for your comment, David. I suppose contribution claims are sub-specie of tort claims under the Negligence Act for apportionment of liability between or among joint tortfeasors.

    My problem with the court’s reasoning is the continued conflation of the traditional distinction between contract and tort theory and the imposition of extra-contractual liability on non-privies. Product liability and sale of goods is a prime example. A huge mess, in my view.

    All the best,

    Antonin

  3. David Cheifetz Says:

    No form of currently existing contribution claim is a tort claim. Some members of the ONCA know that. Placzek v. Green, 2009 ONCA 83.

    As to the conflation of contract and tort, why should we expect a mere provincial or territorial appellate court to be doctrinal coherent if the SCC isn’t inclined to?

    Cheers,

  4. David Cheifetz Says:

    In Canada, there’s no form of contribution claim which is a tort claim. It’s a form of restitutionary claim. Some members of the ONCA know that: Placzek v. Green, 2009 ONCA 83.

    As for doctrinal coherence, if the SCC isn’t inclined to, why should a mere provincial or territorial appellate court bother?

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