Trips,Traps and Jurisdiction

When you are put on notice of claims arising within Ontario, or when you are notified of claims or lawsuits against insureds arising outside of the province, claims handlers should immediately turn their minds to the question of jurisdiction. Questions about the proper jurisdiction of the case should be considered at the outset, and should inform any actions taken by the claims handler during investigation of the loss. These questions should also be kept in mind by the claims handler through any dealings with claimants or, eventually, their counsel.

Attornment

It is critical that claims handlers and in-house counsel ensure they do not unintentionally “attorn” to the Ontario or another jurisdiction, if it is their intention to challenge a party’s right to claim in Ontario or another jurisdiction. Attornment occurs where a defendant, by its conduct, consents or submits to the jurisdiction, either by filing a pleading or entering an appearance, or by participating in the litigation process without reserving its right to challenge the claimant’s chosen jurisdiction at a later stage. If there is even a suggestion that jurisdiction may be a concern, the best course is to immediately seek advice and refer the question to counsel without taking any steps, to avoid compromising the insurer’s ability to challenge the chosen forum.

Jurisdiction defined

Jurisdiction is the first of three questions that have to be addressed when determining whether the plaintiff has brought his or her claim in the proper place. In asking whether it has jurisdiction, the question is: Is this claim connected in a real and substantial way to the place where the claim is being brought, and therefore can a claim be brought there? The second question is whether the proposed forum for the claim is the best forum, or whether there is a forum with a better connection to the claim elsewhere. Finally, a third question to be asked is whether a party can be served outside Ontario with a claim pursuant to Ontario’s Rules of Civil Procedure. We will only addresses the first question.

On May 29, 2002, the Ontario Court of Appeal released five decisions on cases dealing with this very issue.1 Each of the cases was slightly different on its facts, but all dealt with situations where actions had been brought in Ontario relating to accidents that had occurred outside the province. Four of the cases dealt with accidents that occurred outside Canada (New York State, Costa Rica and Grenada), and one dealt with an accident that occurred in Alberta.

The fact pattern was similar in each of the five cases. An Ontario resident suffered serious personal injury in another province or another country. The injured party returned home to Ontario, endured pain and suffering, received medical treatment, and suffered loss of income and amenities of life, all as a result of the injury sustained outside the province. As the Court set out in its decisions, the question to be answered in each case was whether the courts of Ontario should entertain the injured party’s suit against the out-of-province defendants who are alleged to be liable in tort for damages.2

The eight-part test for jurisdiction

The Court in Muscutt v. Courcelles, and the companion cases, went over the conflicting lines of cases that had been previously decided that discussed the different approaches to the determination of jurisdiction. The Court concluded a broader approach was required than simply determining whether or not the defendant had a connection to the forum. The Court listed eight factors to be considered in determining whether a real and substantial connection exists between an action and a forum, and by extension whether jurisdiction can be assumed against an out-of province defendant. None of these factors, according to the Court, are determinative, but they must be viewed as a whole and a decision made on the basis of the totality of the factors.

Connection between Ontario and the plaintiff’s claim

The first factor to be considered is whether there is a connection between Ontario and the plaintiff’s claim. Does the claimant live in Ontario? Did he or she at the time of the loss? If it is a personal injury action, where did the injury occur, and where was the plaintiff treated for his or her injuries? If it is a breach of contract case, where was the contract made?

Take, for example, the situation of a resort in Florida, which advertises in Ontario newspapers and solicits business from Ontario residents by inviting them to book vacations at the resort through the resort’s website. An Ontario resident books a trip, visits the hotel, slips on a wet floor and falls, sustaining injuries. The visitor then returns to Ontario and is treated for the injuries over several months. In that case, the connections to Ontario could be the business was solicited in Ontario, the plaintiff is from Ontario and is treated in Ontario. There are several contacts with the province that would support jurisdiction in Ontario.

Connection between Ontario and the defendant

The second factor is whether there is any connection between Ontario and the defendant to a claim. Here the court will examine whether any of the defendants are individuals or companies residing in Ontario. If not, did they do business in Ontario? In the frequent case of travel suppliers (such as resort chains), did the defendant advertise or solicit business in Ontario? Did it have an Ontario office?

Looking again at our Floridian resort, assume the resort was in Florida and run by an Floridian company, but that the resort conducted its advertising and did its bookings through an Ontario company located in Burlington, Ont. In this case, the defendant’s office in Ontario and its direct advertising to Ontario residents clearly indicate the defendant, although a resident in Florida, does business in Ontario. This, again, could support jurisdiction in Ontario.

Potential unfairness to defendant

The third factor is the potential unfairness to the defendant in assuming jurisdiction. In other words, what loss of juridical advantage or other prejudice would the defendant sustain, if they are not from Ontario, by having to litigate in this province? What would be involved in bringing necessary witnesses and documents to Ontario for a trial, and what would be the cost? What is critical to note about this factor is that the Courts have ruled that the presence of insurance on the part of an out-of-province defendant mitigates against the unfairness to that defendant in having to litigate in Ontario rather in the out-of-province forum where the claim arose.

Using the same example, assume that our fictional resort in Florida has boxes of documents and a dozen witnesses to call, each of whom states the plaintiff deliberately took a shortcut across a freshly-washed floor, which was clearly marked as a hazard. In addition, the Floridian resort is self-insured. In that instance, the fact that the Floridian resort would have to transport its liability witnesses to Ontario without insurance coverage will militate against jurisdiction in Ontario.

Potential unfairness to plaintiff

The fourth factor is the potential unfairness to the plaintiff in not assuming jurisdiction. What loss of juridical advantage or other prejudice would an Ontario plaintiff sustain if forced to bring his or her claim elsewhere? What would be the difficulty or cost of bringing the plaintiff’s witnesses to another location for trial? What travel would be involved? Generally, where the plaintiff is an individual Ontario resident and the defendant is an out-of-province corporation with adequate insurance coverage, the balancing process favours the plaintiff.

For example, if our fictional plaintiff would have difficulty traveling to Florida for a trial, and had a dozen doctors who would have to testify on his behalf as to the treatment he obtained and the damages he sustained in Ontario, this would point toward jurisdiction in Ontario.

Involvement of other parties

The fifth factor is the involvement of other parties to the suit. The court will inquire whether those other parties are essential to the determination of the dispute, and if so, where are those parties located? If jurisdiction was assumed in Ontario, would another proceeding be required elsewhere to seek relief against the other involved parties?

Suppose the wet floor was caused not by any negligence on the part of the resort, but by a local Florida supplier who left a large puddle on the floor after a delivery of fresh fish. The resort might have to claim for contribution and indemnity against the fish supplier. Generally, courts try to avoid a multiplicity of proceedings wherever possible. As a result, the involvement of the local supplier would speak against jurisdiction in Ontario.

Court’s willingness to enforce a similar judgment from elsewhere

Another factor is the court’s willingness to enforce a similar judgment against a domestic defendant rendered on the same jurisdictional basis. In other words, would an Ontario court enforce a judgment against an Ontario defendant if they were sued in a different jurisdiction on the same basis upon which the foreign defendant is being sued in Ontario?

Referring again to our example, say the situation was reversed, and it was an Floridian resident who slipped and fell in an Ontario ski resort. The Floridian resident broke several bones and was transported back to Florida, where she continued to be treated for her injuries for several months. If the Ontario resort was sued in Florida and judgment rendered against it, would the Ontario court enforce that judgment? If the answer is no, then this factor suggests the Ontario court should not take jurisdiction.

International or Interprovincial?

The seventh factor is whether the case is international or interprovincial in nature. The Courts are generally more likely to assume jurisdiction in interprovincial cases on the basis that Canadian federalism demands a high level of acceptance and co-operation between the provinces. Although Florida is by no means a distant destination, and although its legal system is not very different from our own, if the resort were located in Nova Scotia rather than Florida this would favour the Ontario jurisdiction more strongly.

Comity and Standards Prevailing Elsewhere

The last factor is comity and the standards of jurisdiction, recognition and enforcement prevailing elsewhere. What are the rules governing jurisdiction in the forum where the loss occurred? Do these differ or are they similar to Ontario’s? Are there any treaties in place which would assist the Court in determining whether to assume jurisdiction in a particular case?3

If there was a reciprocal enforcement treaty between Ontario and Florida which stated the courts of each of those jurisdictions would uphold decisions taken by the courts of the other, this would strongly support the Ontario jurisdiction. If, however, it was found there is a rule in Florida which states that no foreign companies may be sued in Florida for claims arising in Ontario or elsewhere, this would favour the Ontario jurisdiction.

Jurisdiction and claims handling

When faced with a claim in Ontario against a non-resident insured, or when faced with a claim elsewhere in relation to a loss sustained in Ontario, it is critical to address at the outset the potential jurisdictional issue. The claim must be fully investigated at an early stage to determine the location of the parties, the witnesses and any relevant documents. A full understanding must be developed from the beginning of the true indentity of all the parties. Where corporate entities are involved, it is crucial to understand from the outset what their corporate structure is, and where all of their subsidiaries and affiliates are located and/or reside. Armed with this information, it is possible to determine what the appropriate forum is, and it is possible for counsel to properly advise as to where claims should be litigated if they reach that stage.

Conclusion

Jurisdiction is one of the fundamental building blocks of any case. After establishing a forum has jurisdiction is not the end of the jurisdictional inquiry, however. The next step is to decide whether it should be brought there, or if there is another connected forum that would be more appropriate. We look forward to answering that second question in a future article.

John Olah is a partner in the law firm of Beard Winter LLP, and has been litigating at all levels of court for over 30 years. Melissa Kehrer joined Beard Winter LLP’s litigation team upon her call to the Bar in 2002. John and Melissa have worked together on inter-jurisdictional cases involving Canada, the United States, Europe and the Caribbean.

1. Muscutt v. Courcelles (Docket No. C35934); Sinclair v. Cracker Barrel Old Country Store Inc. (Docket No. C35699); Leufkens v. Alba Tours International Inc. (Docket No. C36006); Lemmex v. Sunflight Holidays Inc. et al. (Docket No. C37455) and Gajraj v. DeBernardo (Docket No. C36992).

2. Muscutt, paragraph 2.

3. Muscutt v. Courcelles, at paragraphs 77-110; see also Sinclair v. Cracker Barrel Old Country Store Inc., 2002 CarswellOnt 1755 (Ont. C.A.); Leufkens v. Alba Tours International Inc., 2002 CarswellOnt 1811 (Ont. C.A.); Lemmex v. Sunflight Holidays Inc. et al. 2002 CarswellOnt 1812 (Ont. C.A.); and Gajraj v. DeBernardo, 2002 CarswellOnt 1766 (Ont. C.A.).