January 24 2017
The Ontario Court of Appeal recently affirmed that Ontario courts will not assume jurisdiction over a claim merely because Ontario is the only remaining forum available. In Cook v 1293037 Alberta Ltd(1) the Ontario Court of Appeal held that the forum of necessity doctrine, an exception to the assumption of jurisdiction analysis set out by the Supreme Court of Canada in Van Breda v Village Resorts Ltd,(2) will not ordinarily apply to allow an Ontario court to assume jurisdiction over a matter where the limitation period in the proper forum has expired. The doctrine is reserved for exceptional circumstances where access to justice would be frustrated by a strict application of the Van Breda principles. A party deliberately sitting on its rights in the proper jurisdiction, while electing to bring the claim in another, will be unable to meet the high threshold required to invoke the doctrine.
The plaintiff, an Ontario resident, was injured at the defendant's hotel in Alberta. The plaintiff commenced an action against the hotel corporation in Ontario. The defendant moved to stay the Ontario action on the basis that the action had no real and substantial connection to Ontario. The plaintiff did not preserve its right of action in Alberta, and the limitation period in Alberta expired before the defendant's motion challenging jurisdiction in Ontario was heard.
The defendant argued that Alberta was the more appropriate forum for the action, since:
The defendant's only real connection to Ontario was that one of its directors moved there after the accident.
Justice Mulligan first considered(3) whether the Ontario court should assume jurisdiction over the action based on a real and substantial connection to Ontario. Mulligan applied the analysis in Van Breda, the leading Canadian case on the assumption of jurisdiction, which involves a two-stage test:
To establish jurisdiction simpliciter, the court considers whether there is a real and substantial connection between the matter, the parties and the jurisdiction. In Van Breda the Supreme Court identified four presumptive factors which, in the context of tort claims, establish a real and substantial connection between the claim and the jurisdiction:
Mulligan concluded that there was no real and substantial connection to Ontario since the defendant, an Alberta corporation, was domiciled in and carried on business in Alberta, and the plaintiff's accident occurred while he was a guest in the Alberta hotel. Mulligan dismissed the plaintiff's argument that the defendant directed its business at Ontario clients, as there was no evidence that the hotel marketed or solicited guests outside Alberta.
The only tangible connection between the defendant and Ontario to which the plaintiff could point was that the directing mind of the defendant corporation resided in Ontario. Mulligan found that this fact was entirely irrelevant, as the defendant hotel corporation and its directors were separate entities in law. Mulligan held that it would be inappropriate to pierce the corporate veil in the circumstances or attribute the director's residence to the corporation. Accordingly, Mulligan concluded that Ontario did not have jurisdiction simpliciter.
Forum non-conveniens or forum of necessity
At the second stage of the Van Breda analysis, the court may exercise its residual discretion to hear or dismiss the action. If jurisdiction simpliciter is established at the first stage, the claim may proceed in the jurisdiction, subject to the court's discretion to stay the proceedings on the basis of the doctrine of forum non-conveniens. If, however, the court concludes after the first stage that it lacks jurisdiction simpliciter, the court must dismiss or stay the action unless it exercises its residual discretion to apply the forum of necessity doctrine.
The forum of necessity doctrine is a narrow exception to the real and substantial connection test. It allows a court to assume jurisdiction over a claim even though there is no real and substantial connection between the claim, the defendant and the forum. It is a residual discretion applied in extraordinary and exceptional cases where there is no other forum in which the plaintiff can reasonably seek relief.
The plaintiff argued that because the limitation period in Alberta had expired, Ontario was now the only forum in which he could seek relief. The plaintiff argued that it was an appropriate circumstance to apply the forum of necessity doctrine because staying the action in Ontario would effectively mean that he could not bring the claim in any jurisdiction.
A plaintiff must meet a high threshold to warrant the use of this doctrine. The plaintiff must establish that there is no other forum in which he or she could reasonably obtain access to justice.(4) The doctrine is reserved for extraordinary and exceptional cases, such as where there has been a breakdown in diplomatic or commercial relations with the foreign state or where the plaintiff would be exposed to a risk of serious physical harm if the matter was litigated in the foreign court.(5)
Mulligan concluded that this was not an appropriate case to apply the forum of necessity doctrine. It would be inappropriate to allow the plaintiff to take advantage of the doctrine because he deliberately chose to bring the claim in Ontario and allowed the limitation period in the proper forum to expire. This was not the sort of exceptional circumstance that warranted applying the court's discretion.
In reaching this conclusion, Mulligan distinguished the Ontario Court of Appeal decision in Ibrahim v Robinson,(6) in which the court applied the necessity doctrine because the relevant limitation period in the proper jurisdiction had expired. In that case the defendant deliberately delayed serving a motion to challenge Ontario's jurisdiction until the limitation period in the proper forum had expired. The defendant deliberately lulled the plaintiffs into a false sense of security, effectively denying them access to the courts in the proper forum. This conduct had the express aim of preventing the resolution of the action on its merits in either jurisdiction. This was an exceptional circumstance that warranted the use of the forum of necessity doctrine to prevent an unjust result.
In contrast, Mulligan found that the instant case was more analogous to several Ontario decisions which have held that the expiry of a limitation period in a proper foreign forum is not an exceptional circumstance warranting the application of the forum of necessity doctrine.(7) No exceptional circumstances were present here:
Accordingly, the court stayed the action.
In a per curiam judgment, the Ontario Court of Appeal dismissed the appeal and affirmed the lower court's decision.
No real and substantial connection
The court agreed that none of the presumptive Van Breda factors were satisfied on the facts of the case. The court also agreed that the residence of a director of the defendant corporation was not an appropriate basis to pierce the corporate veil or to create a new presumptive factor.(8) The residence of a defendant corporation's director, in the absence of further facts, is irrelevant to the Van Breda analysis.
Forum of necessity doctrine
The court upheld Mulligan's decision not to apply the forum of necessity doctrine and affirmed the high threshold required to invoke the doctrine. It is inappropriate to apply the exception where a party makes a tactical decision to bring their action in Ontario instead of an appropriate foreign jurisdiction. In such circumstances, "it is not appropriate to relieve the party of the consequences of that tactical decision" since the plaintiff was the author of his own misfortune.(9)
On appeal, the plaintiff attempted to argue that, following the commencement of the action, he was unfairly disadvantaged by a change in the law resulting from Van Breda. The plaintiff argued that he would have been permitted to bring his action in Ontario under the pre-Van Breda framework, and that it would be unfairly prejudicial for him to lose his right of action because of a change in the law. The court rejected this argument, holding that the plaintiff was not prejudiced by the change in the law, since Ontario would not have been the proper forum even under the pre-Van Breda framework.
This decision affirms the narrow scope of the forum of necessity doctrine. Even if Ontario is the only jurisdiction in which a plaintiff can bring a claim, due to the expiry of the limitation period in the appropriate forum, it does not necessarily follow that Ontario will assume jurisdiction over the matter. A court will not exercise its discretion under the forum of necessity doctrine if the necessity is the result of the plaintiff's actions or mismanagement. It is only in circumstances analogous to those in Ibrahim – where it would be unjust to leave the plaintiff without a remedy – that the court will apply this extraordinary doctrine.
In light of this decision, plaintiffs must be cautious at the outset of litigation in choosing the forum in which to bring their claim. A plaintiff should not assume that an Ontario court will exercise jurisdiction over a matter just because Ontario is the most convenient forum for the plaintiff and the matter has some connection to Ontario. Further, as an action with a connection to multiple jurisdictions progresses, plaintiffs must remain cognisant of limitations periods in alternative forums and take steps to preserve their rights accordingly. There will be no 'do-over' if a plaintiff chooses an improper forum and the limitation period in the proper jurisdiction expires.
For further information on this topic please contact Rebecca Studin or Robert Stellick at Dentons by telephone (+1 416 863 4511), fax (+1 416 863 4592) or email (firstname.lastname@example.org or email@example.com). The Dentons website can be accessed at www.dentons.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.