The Innocents Abroad: SCC to Revisit Vacation Torts and Jurisdiction

The Supreme Court of Canada (“SCC”, or the “Court”) will revisit the question of when a contract formed in one province is sufficiently connected to a tort claim to establish jurisdiction over an out-of-province defendant. On January 11, 2024, the SCC granted leave to appeal [40696] the decision in Sinclair v Amex Canada Inc., 2023 ONCA 142 [Sinclair v Amex], setting the stage for a clash that will reshape how Canadian courts approach torts taking place beyond their borders.

Background 

In July 2017, Duncan and Michelle Sinclair (the “Sinclairs”), along with their son, embarked on a European vacation. The Sinclairs planned to fly from Florence to Venice, and Mr. Sinclair arranged for the family to be transported from the airport to their hotel via water taxi. On their way to the hotel, the water taxi crashed into a wooden structure. Both parents were injured, the father seriously. Upon returning to Canada, the Sinclairs brought an action in the Ontario Superior Court of Justice (the “ONSC”) seeking damages arising out of the accident.

Firstly, the Sinclairs sued Amex Canada Inc. (“Amex Canada”), operating under the name Centurion Travel Service. Mr. Sinclair had not only used his Centurion Card membership to book the vacation, but also used it to book accommodations. Amex Canada regularly engages third-party suppliers for travel services, including the water taxi which Mr. Sinclair had booked. Mr. Sinclair did not enter into any direct agreement with third-party suppliers; rather, a complex chain of transactions brought several service providers into the fold. Amex Canada contacted Carey International, Inc., who then contacted Venezia Turismo, an Italian water taxi dispatching company. In turn, Venezia Turismo contacted Venice Limousine S.R.L., the Italian company which owned the water taxi involved in the accident and employed its driver. These parties were all named as defendants to the action

Three Italian corporate defendants, Venezia Turismo, Venice Limousine S.R.L. and its parent company Narduzzi e Solemar S.L.R. (the “Venetian Defendants”), subsequently moved for an order either dismissing the action or entering a stay of proceedings against them. As Italian companies carrying on business in Italy, the Venetian Defendants contended that the ONSC lacked jurisdiction over them. Ramsay J. dismissed the motion and the Venetian Defendants appealed. The sole issue before the Ontario Court of Appeal (the “ONCA”) was whether the motion judge had erred in finding jurisdiction on the basis that the Sinclairs’ tort claim was “connected” to a contract made in Ontario.

Van Breda and its Aftermath

In 2012, the SCC released their decision in Club Resorts Ltd. v Van Breda, 2012 SCC 17 [Van Breda], a watershed moment for Canadian private international law. Van Breda set a national common law standard for assuming jurisdiction over the parties to an action in tort based on a “real and substantial connection”. This standard would be assessed on the basis of objective factors linking the forum to the facts underlying a tort claim (Van Breda, paras 82, 85). In embracing objective factors as bases for a real and substantial connection, Van Breda sought to depart from a regime based largely on judicial discretion. Armed with objective connecting factors, Van Breda contemplated that parties would be better equipped to anticipate when a court will assume jurisdiction over a dispute, fostering order and predictability in Canada’s system of private international law (Van Breda, paras 35, 73-75). 

LeBel J., writing for a unanimous Court in Van Breda, set out four factors which could independently establish a real and substantial connection. The fourth factor provided that a court would presumptively have jurisdiction where a contract “connected with” or “related to” the dispute was made in the province where the claim is brought (Van Breda, paras 88, 90). The ambit of the fourth factor remained elusive, as Van Breda did not provide a clear minimum threshold for establishing that a contract is “related” or “connected” to a tort claim. In the immediate aftermath of Van Breda, Professor Tanya Monestier prophesied, in her article (Still) a Real and Substantial Mess – The Law of Jurisdiction in Canada, that although Van Breda may provide long-term benefits in predicting when Canadian courts will take jurisdiction, the short-term effect would be extensive, protracted litigation designed to untangle the outer limits of each objective connecting factor (p 397). This prediction would prove prescient. 

The SCC would begin the process of untangling the fourth connecting factor in Lapointe Rosenstein Marchand Melançon LLP v Cassels Brock & Blackwell LLP, 2016 SCC 30 [Cassels Brock]. Cassels Brock arose out of the 2009 government bailout of General Motors of Canada (“GM”). As a term of the bailout, GM was required to close more than 200 dealerships nationwide. GM entered into “Wind-Down Agreements” with hundreds of dealers, requiring that each obtain independent legal advice and provide a certificate signed by their lawyer acknowledging that the lawyer had been retained, had read the contract, and had explained its full nature and effect to the dealer.

Thereafter, hundreds of dealers commenced a class action in Ontario, naming Cassels Brock & Blackwell LLP (“Cassels”) as a defendant. The dealers claimed that Cassels, as counsel to the Canadian Automobile Dealers Association, had been negligent in providing legal advice in relation to the Wind Down Agreements. Cassels commenced third-party claims for contribution and indemnity against 150 law firms across Canada who had been retained by dealers and provided them with independent legal advice. A coalition of law firms located outside Ontario moved to challenge the jurisdiction of Ontario courts over the third party claims brought against them.

Abella J., writing for a 6-1 majority of the SCC in Cassels Brock, held that  jurisdiction was not precluded by the fact that the third party law firms were not party to an agreement with Cassels, nor that their liability for professional negligence could not arise out of the Wind Down Agreements (Cassels Brock, paras 32, 44). Rather, all that is required for a contract to be “connected” to the facts of a dispute is:

“[T]hat the defendant’s conduct brings him or her within the scope of the contractual relationship and that the events that give rise to the claim flow from the relationship created by the contract” (Cassels Brock, para 44)

In Cassels Brock, Abella J. nonetheless declined to provide a definite minimum threshold for jurisdiction under the fourth factor. Put simply, it remained unclear how parties might meaningfully gauge when a foreign defendant is within the scope of a contractual relationship and when they are not. After the radiant hopes of order and predictability extolled in Van Breda, the shadow of endless litigation in search of jurisdictional limits remained. It is this issue of circumscribing the fourth connecting factor that would divide the ONCA in Sinclair v Amex, continuing the process of untangling that Van Breda necessitated more than a decade prior. 

The ONCA Decision 

Connecting Flights, Flighty Connections

Nordheimer J.A., writing for the ONCA majority, held that there was nothing in Cassels Brock which could justify taking jurisdiction over the Venetian Defendants. Critically, the contracts grounding jurisdiction in Cassels Brock both contemplated and required the involvement of third-party law firms. The third-party law firms in Cassels Brock knew that such contracts existed, as their advice was specifically sought in respect of those agreements. Further, the third-party law firms knew that the contracts would be both formed in Ontario and governed by Ontario law. Consequently, those firms could reasonably anticipate that they might be expected to defend legal proceedings in Ontario (Sinclair v Amex, paras 23, 32; Cassels Brock, paras 47-48). None of these considerations apply to the Venetian Defendants. 

As Nordheimer J.A. points out, there was nothing in Mr. Sinclair’s Centurion Card agreement with Amex Canada which contemplated or required the Venetian Defendants’ involvement (Sinclair v Amex, paras 29, 32). Although the Venetian Defendants were part of a chain of related contracts, they were separated by multiple links in that chain from the Centurion Card agreement and could not know of its existence. In contrast to Cassels Brock, there was nothing which would allow the Venetian Defendants to anticipate that they would be expected to defend legal proceedings in Ontario. In Justice Nordheimer’s view, this failure to consider the perspective of the defendants disputing jurisdiction in assessing the fourth Van Breda factor amounts to an error of law (Sinclair v Amex, paras 18, 43). 

Lacking a clear minimum threshold for the fourth Van Breda factor, Nordheimer J.A. sought to revisit Côté J.’s dissenting opinion in Cassels Brock as a guiding light. On this approach, presumptive jurisdiction under the fourth Van Breda factor only exists where the defendant’s liability in tort flows immediately from their obligations under a contract formed in the province (Sinclair v Amex, paras 27-29). In Sinclair v Amex, the fact that the Venetian Defendants were not party to the Centurion Card agreement and owed no obligations under it meant that the ONSC lacked jurisdiction over them. 

Searching for a Standard

Harvison Young J.A., concurring in the result, departed from the majority in holding that presumptive jurisdiction over the Venetian Defendants had been established. Harvison Young J.A. pointed out that the SCC’s decision in Cassels Brock broadened the scope of the fourth Van Breda factor beyond the majority’s desired approach, plainly rejecting any requirement that the defendant’s liability flow from their immediate contractual obligations (Sinclair v Amex, paras 55-56).

As a consequence of her conclusion on this point, Harvison Young J.A. was confronted with the issue left unresolved after Cassels Brock—identifying the minimum threshold which separates those tort claims within the scope of the contractual relationship from those which are not. Harvison Young J.A. would adopt a straightforward ‘but for’ test to circumscribe the fourth Van Breda  factor: ‘but for’ the contract made in the province, the plaintiff would not have suffered the harm (Sinclair v Amex, para 64).

Harvison Young J.A. found support for this test in Toews v Grand Palladium Vallarta Resort & Spa, 2016 ABCA 408 [Toews]. In Toews, the Alberta Court of Appeal accepted that but for a “chain of related contracts” flowing from a number of initial agreements formed in Alberta, the plaintiffs would not have stayed at the resort where the tort had occurred. This sufficed to connect the contracts made in the province to the facts underlying the claim, notwithstanding that the out-of-province defendant was not a party to the Alberta agreements (Toews, para 10; Sinclair v Amex, paras 74, 80). The SCC subsequently denied leave to appeal [37450]. 

Applying this test to the facts, Harvison Young J.A. held that ‘but for’ the Centurion Card agreement, Mr. Sinclair would not have been able to book the water taxi and the Venetian Defendants never would have entered the picture. In other words, the chain of related contracts engaging each of the Venetian Defendants can be traced directly to an agreement formed in Ontario. Consequently, each of the Venetian Defendants had been brought within the scope of the contractual relationship, irrespective of the fact that they were not parties to that contract and owed no obligations under it (Sinclair v Amex, paras 78-79).

Foresight for Some

The ‘but for’ test Harvison Young J.A. proposes under the fourth Van Breda factor fills in the blanks after Cassels Brock declined to provide a clear minimum threshold for presumptive jurisdiction. This development is laudable when compared to the status quo, as order and predictability are frustrated where parties are unaware of what it means for a contract to be “connected” to the facts of a tort claim

Nonetheless, the predictability which this ‘but for’ test provides is entirely one-sided. As LeBel J. recognized in Van Breda, the point of having well-defined, objective connecting factors is that it enables the “parties… to predict with reasonable confidence whether a court will assume jurisdiction in a case with an international or interprovincial aspect” (Van Breda, para 73). The critical shortcoming of the ‘but for’ test is that it cannot confer these benefits equally, providing domestic plaintiffs with all the benefits of predictability while foreign defendants caught in the chain of related contracts receive none.

If a real and substantial connection may be established on the basis of a chain of related contracts, there are inevitably going to be members of that chain who expose themselves to foreign lawsuits initiated by plaintiffs they could not have reasonably contemplated dealing with. There is no way for these foreign defendants to anticipate where proceedings might be brought against them when there is no requirement that they know anything about the contract relied on for jurisdiction. These are precisely the circumstances which the Venetian Defendants find themselves in. This unequal distribution of predictability lends credence to Justice Nordheimer’s conclusion that the ‘but for’ test is at bottom a justification for jurisdictional overreach, tilting the playing field in favour of domestic plaintiffs (Sinclair v Amex, paras 29, 44).

More than a decade after Van Breda was decided, the real and substantial connection test has yet to be fully untangled. As the pursuit of jurisdictional limits continues, it now falls to the SCC to articulate a minimum threshold for the fourth connecting factor that respects Van Breda’s intention to further order and predictability for all parties.