by Michael F. Smith*

      Canadian trial lawyers sometimes look with envy at the huge

judgments recorded in the United States. But on the other hand,

counsel will advise their business clients to strictly avoid litigation

in America. A recent seminar held in Toronto was playfully entitled,
"The Top Ten Reasons Why Not to Get Sued in the U.S." The

$160-million Mississippi judgment which crippled Canadian-based

Loewen Funeral Homes was near the top of the list. The

apparently unlimited exposure of defendants in the U.S. is in stark

contrast to the Canadian caps placed on general damages for

personal injury ($300,000) and punitive damages ($1,000,000).

      In any case, counsel practising transportation law will

inevitably face the issue of choosing, or choosing to avoid,

proceedings in a foreign court and will certainly be called on to

advise on the determination of issues of international judicial

comity such as: 1. a court's proper jurisdiction in relation to

foreign defendants; 2. the recognition and enforcement of a

foreign judgment; and, 3. the appropriate forum for a proceeding

(forum non conveniens). The recent decision by Ontario's Court of

Appeal, Muscutt v. Courcelles¹, provides a helpful review of this

complex area of law.

1.   Assumption of Jurisdiction

      Traditionally courts have been concerned to protect their own
jurisdiction and to avoid intrusion by foreign states. The rigid

common law rules developed by the English courts in the 19th

century reflected those concerns. Jurisdiction over foreign

defendants was then based on either i) the defendant's presence

within the jurisdiction of the court, or ii) the defendant's consent

to such jurisdiction².

      A third basis of jurisdiction - assumed jurisdiction - has

become increasingly important because of the global movement of

capital, commodities and people. Development of Canada's,

modern, liberal approach to judicial comity was initiated by the

decision of the Supreme Court of Canada in Moran v. Pyle National

(Canada) Ltd.³, a product liability case in which an injured Ontario

resident was allowed to bring action in Ontario against the foreign

manufacturer of a defective product. In the circumstances of that

case the court ruled :

      Where a foreign defendant carelessly manufactures a product       in a foreign jurisdiction which enters into the normal channels       of trade and he knows or ought to known both that as a       result of his carelessness a consumer may well be injured and       it is reasonably foreseeable that the product would be used or       consumed where the plaintiff used or consumed it, then the       forum in which the plaintiff suffered damage is entitled to       exercise judicial jurisdiction over that foreign defendant.¹

      This rule, referred to as the "damage sustained" rule has been

given a generous and liberal interpretation by the courts.⁵ More

fundamental change in the correlative concepts of assumed

jurisdiction and the recognition and enforcement of foreign

judgements occurred in Morguard Investments Ltd. v. De Davoye.⁶

      La Forest, J., held that the proper assumption of jurisdiction

depends on two principles: i) the need for order, fairness and

judicial restraint; and ii) a real and substantial connection between

the forum and the case. The recent decision of the Ontario Court

of Appeal in Muscutt and four other cases⁷ argued with it

represent a useful elaboration of those principles.

      In Morguard, a case which involved the recognition and

enforcement of a foreign judgement, La Forest, J., wrote:

      It hardly accords with principles of order and fairness to       permit a person to sue another in any jurisdiction, without       regard to the contacts that jurisdiction may have to the       defendant or the subject-matter of the suit... Thus, fairness       to the defendant requires that the judgment be issued by a       court acting through fair process and with properly restrained       jurisdiction.⁸

      In the opinion of La Forest, J., it was the "real and substantial
connection" test which would bring about the judicial restraint

necessary to a court's decision to assume jurisdiction over extra-

provincial (and foreign) defendants.

      In Muscutt the Ontario Court of Appeal, in giving the "real and
substantial connection" test the flexibility the Supreme court had

called for, considered two approaches: i) a personal subjection

approach; ii) a broader, administration of justice approach.

      The first approach would require a significant degree of

contact between the defendant and the forum before jurisdiction

would be assumed. This approach is akin to the "minium contacts"

analysis developed by the U.S. courts in balancing the obligations

to give "full faith and credit" to judgments of sister states (Article

IV) and the due process guarantees of the Fifth and Fourteenth

Amendments.⁹ The American courts have regarded the "minimum

contacts" test as fulfilling two important goals: protecting

defendants against the burden of litigating in distant or

inconvenient forums; and, imposing restraint on State courts

within this federal system.¹⁰

      Ontario's Court of Appeal , however, preferred a broader, more

flexible approach to the interpretation and application of the "real

and substantial connection" test.

      Upon reviewing the post- Morguard case law from several

provinces, the court concluded that the guidance provided by the

Supreme Court in Morguard and its decision in Hunt v. T&N plc¹¹

allowed that a meaningful connection could be found either

between the forum and the defendant or between the forum and

the subject matter of the action. Although not advocating a "fixed

formula" which would deprive the test of flexibility, for the

purposes of clarity and certainty the court identified eight factors

(including the connection between the forum and the defendant)

which should be considered in assuming jurisdiction over a foreign

defendant.¹²

      1.   The connection between the forum and the plaintiff's

             claim. - Residency and "damage sustained" are important.

      2.   The connection between the forum and the defendant.

      3.   Unfairness to the defendant in assuming jurisdiction.

             - Significant unfairness to the defendant would have a

             bearing on the assumption of jurisdiction even in a case

             of sufficient contact (i.e. under the "minimum contact"

             analysis).

      4.   Unfairness to the plaintiff in assuming jurisdiction.

      5.   The involvement of other parties to the action. - Avoiding
             a multiplicity of proceedings and inconsistent judgments

             is a valid consideration. The core of the action in relation
             to foreign and domestic parties should be considered.

      6.   The court's willingness to recognize and enforce an extra-
             provincial judgment rendered in the same jurisdictional

             basis. - Such reciprocity is seen as central to the

             judgments in Morguard and Hunt.

      7.   Whether the case is interprovincial or international in

             nature. - The assumption of jurisdiction is more easily

             justified in interprovincial cases. Within Canada all

             superior court judges are federally appointed and their

             judgments are subject to final review by the Supreme

             Court of Canada.

      8.   Comity and the standards of jurisdiction, recognition and

             enforcement prevailing elsewhere. - International

             standards and standards prevailing in the defendant's

             jurisdiction may be helpful in deciding whether the "real

             and substantial connection" test has been met on the

             basis of damage sustained within the jurisdiction.

2.   Recognition and Enforcement of foreign judgments

      In the absence of specific legislation¹³, there are two ways to
enforce a foreign judgment in Ontario: i) by initiating action in

Ontario based on the original cause of action or ii) by bringing

action in Ontario based on the foreign judgment, itself. The second
way, which would require recognition of the judgment by the

Ontario court, would preclude the possibility of the defendant

raising substantive defences to the underlying claim. However,

pre-Morguard such recognition of the foreign judgment would only

be extended on the basis that jurisdiction had been properly

assumed by the foreign court on the basis of the defendant's

presence in, or consent to, the jurisdiction of the foreign court.¹⁴

      Post-Morguard, provided that the foreign tribunal has assumed
jurisdiction on the basis of a "real or substantial connection" in

accordance with the criteria discussed above, and has exercised

that jurisdiction "through a fair process"¹⁵, the Ontario court will

recognize and enforce that judgment, giving it "full faith and

credit".

3.   Forum Non-Conveniens

      The forum non conveniens doctrine, which allows a court to

decline jurisdiction on the ground that there is a more appropriate

forum, is distinct from the issue of assumption of jurisdiction. The

latter issue depends on legal rules, or principles of general

application while the forum non coneniens test is a discretionary

one focused on the particular parties and facts of the case.¹⁶

Therefore, even where there is a real and substantial connection

between the forum and the case to justify an assumption of

jurisdiction, the court retains a residual discretion to decline

jurisdiction where there is a more appropriate forum.¹⁷

      The factors which may be considered in applying the forum

non- conveniens test include¹⁸:

      - the location of the majority of the parties

      - the location of key witnesses and evidence

      - contractual provisions that specify applicable law or accord

      jurisdiction

      - the avoidance of a multiplicity of proceedings

      - the applicable law and its weight in comparison to the

      factual questions to be decidede

      - geographical factors suggesting the natural form

      - whether declining jurisdiction would deprive the plaintiff of a

      legitimate juridical advantage available in domestic court

Conclusion

      Ontario law is developing in line with a realistic appreciation

that the growth of international business and travel requires the

facilitation of cross-border litigation. International comity based on
broadly accepted principles of fairness and a real and substantial

connection with the forum will contribute to a fairer, more efficient
determination of rights in an international context.

*Bennett Best Burn LLP, Toronto, Ontario.

Endnotes:

1.      Muscutt v. Courcelles (2002) 60 O.R. (3d) 320.

         Comity is the recognition which one nation allows within its
         territory to the legislative, executive or judicial acts of
         another nation, having due regard both to international duty          and convenience, and to the rights of its own citizens or of
         other persons who are under the protection of its laws...
         Adopted by La Forest, J., in Morguard (infra note 9) from
         Hilton v. Guyot, 159 U.S. 113 (U.S. N.Y. , 1895) at 163-
         164. See Muscutt at para 101.

2.      Consent could be found in voluntary submission, attornment
         by appearance and defence or prior agreement to submit
         disputes to the jurisdiction . See Muscutt (supra n.1) at
         para 19.

3.      Moran v. Pyle National (Canada) Ltd.[1975] 1 S.C.R. 393.

4.      Moran, supra n. 3, at 408-409.

5.      Poirer v. Williston (1981) 31 O.R. (2d) 320 (Ont.C.A.)

6.      [1990] 3 S.C.R. 1077.

7.      Gajraj v. DeBernardo (2002) 60 O.R. (3d) 68 (Ont.C.A.);
         Sinclair v. Cracker Barrel Old Factory Store (May 29, 2002),
         DOC, CA C35699, 2002 CarswellOnt 1755 (Ont.C.A.);
         Leufkens v. Alba Tours International Inc. (May 29, 2002)
         DOC, CA C36006, 2002 CarswellOnt 1811 (Ont.C.A.); and
         Lemmex v. Bernard (May 29, 2002) DOC CA C37455, 2002
         CarswellOnt 1812 (Ont.C.A.) Muscutt involved in an auto
         collision in Alberta. The court assumed jurisdiction of the
         Claim issued by an Ontario resident. Gajraj involved an auto
         collision in New York. The court declined jurisdiction

8.      Morguard, supra n. 76, pp. 1103-1104 (per La Forest, J.)
         Applied in Tolofsen v. Jensen [1994] 3 S.C.R. 1022.

9.      International Shoe Co. v. State of Washington (1945), 326
         U.S. 310 (U.S. Wash.)

10.      World-Wide Volkswagen Corp. v. Woodson (1980), 444 U.S.          286 at 291 (U.S. Okl.)

11.      [1993] 4 S.C.R. 289 (sub. nom. Hunt v. Lac D'Amiante du
         Québec Ltée. 109 D.L.R. (4th) 16.

12.      Muscutt, supra n. 1 at pp. 25-31, para 76-109.

13.      See for e.g. Reciprocal Enforcement of Judgments Act,
          R.S.O. 1990, c.R.S. (applicable to judgments of other
          common law provinces) and Reciprocal Enforcement of
          Judgments (U.K.) Act, R.S.O. 1990. c. R 6 (all other
          provinces (except Quebec) and territories have similar
          legislation). See also the Reciprocal Enforcement of
          Support Orders Act, R.S.O. 1990, c.R.7.

14.      See no. 2, above.

15.      Morguard, supra n. 6, at 1103.

16.      Muscutt, supra n. 1, at 18, para 43.

17.      Tolofson, supra n. 8, at p. 1049, per La Forest, J.

18.      Muscutt, supra n. 1, at p. 18, para 41. See also the
         leading case Amchem Products Inc. v, British Columbia
         (Workers' Compensation Board) [1993] 1 S.C.R. 897
         (S.C.C.)

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Michael F. Smith


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