The Court of Appeal asserts jurisdiction over absent foreign claimants in Canadian class action
In cases involving international investigations and enforcement actions, it is now common for class plaintiffs to seek collective relief on behalf class members in Canada. In certain cases, however, class plaintiffs have pushed the envelope further, and have sought to include class members based outside Canada. Aside from case management and commonality concerns, this raises an issue of jurisdiction. Specifically, can a Canadian court exercise jurisdiction over potential foreign claimants who do not reside in Canada and who have not otherwise consented or attorned to jurisdiction in Canada? In many circumstances, a foreign claimant may have no awareness of the class proceeding in Canada, and there may be considerable doubt as to whether a further ruling by a Canadian court would even be recognized or enforced in the foreign jurisdiction.
The Ontario Court of Appeal appeared to answer this question in the affirmative in Airia Brands Inc. v Air Canada, 2017 ONCA 792. In its decision, the Court enunciated a framework for determining jurisdiction over absent foreign claimants (AFCs). The Court applied a test based on a “real and substantial connection”, and rejected any requirement that was premised on recognition or enforcement of a judgement of a Canadian court. Applying this framework, the Court concluded that it had jurisdiction over AFCs in the context of a class action involving an alleged conspiracy to fix air freight shipping prices.
Background
The appellants in Airia Brands contended that, between 2000 and 2006, a group of global airlines conspired to fix the prices of air freight shipping services by limiting supply and unreasonably imposing surcharges. The appellants limited their claim in this action to price fixing for shipments of goods to and from Canada by air.
The appellants sought to certify a proposed class which included AFCs, defined as persons who resided, who had entered into contracts or suffered losses outside of Canada and who had not expressly consented to Ontario’s jurisdiction. The proposed class included residents of more than 30 countries.
The respondents contested class certification. As part of their arguments, the respondents argued that the court should exclude AFCs from the definition of the class. In addition, they brought a motion for a declaration that an Ontario court did not have jurisdiction over the AFCs, and sought an order staying the proposed class action on the basis of jurisdiction simpliciter or forum non conveniens. As part of their evidence, the respondents adduced expert evidence from a numerous foreign countries indicating that there was doubt as to whether a foreign court would recognize a class action judgment in Canada as having preclusive effect in their own country, particularly if an AFC had no notice or involvement in the proceedings.
Motion judge’s decision
The motion judge granted this motion, concluding that jurisdiction in Ontario had not been established. The motion judge stayed the action in relation to the AFCs and, in a subsequent order, certified the action as a class proceeding excluding the AFCs from the class.
To determine whether an Ontario court had jurisdiction simpliciter over the AFCs, the motion judge declined to apply the real and substantial connection test. Given the international circumstances of the case, she concluded that the principles of fairness, order, and comity should guide her jurisdictional analysis. Applying these principles, she determined that jurisdiction existed only if the claimants were present in Ontario or had consented to Ontario’s jurisdiction.
In the alternative, the motion judge concluded that if the real and substantial connection test did apply here, its conditions were not satisfied on the facts. Furthermore, she found that Ontario should decline to assert jurisdiction over the AFCs on the basis of forum non conveniens.
Jurisdictional framework for absent foreign claimants
The Court of Appeal allowed this appeal, and took the opportunity to enunciate a framework for determining jurisdiction over absent foreign claimants.
The Court of Appeal held that the motion judge erred, first, by finding that jurisdiction did not exist due to an absence of its traditional bases (namely presence in or consent to the jurisdiction), and, second, by failing to apply the real and substantial connection test articulated in Van Breda.
While jurisdiction may be based on traditional grounds, the Court noted that relying on these factors to ground an assertion of jurisdiction is very different from rejecting jurisdiction in their absence. The guiding principles of order, fairness, and comity, the Court further clarified, are not independent sources of jurisdiction but are subsumed within the real and substantial connection test.
The Court held that jurisdiction may be established over AFCs where:
1.There is a real and substantial connection between the subject matter of the action and Ontario, and jurisdiction exists over the representative plaintiff and the defendants;
2.There are common issues between the claims of the representative plaintiff and AFCs; and
3.The procedural safeguards of adequacy of representation, adequacy of notice, and the right to opt out of the class are provided, thereby serving to enhance the real and substantial connection between AFCs and Ontario.
Significantly, the Court held that jurisdiction may be exercised over an AFC even if there is doubt as to whether a judgment of the Ontario Court would be given preclusive effect in the foreign jurisdiction.
Applying this framework, the Court found that Ontario had jurisdiction over AFCs in this class proceeding. The Court was satisfied that there was a real and substantial connection between the subject matter of the action and Ontario; that common issues were shared between the representative plaintiffs and the AFCs; and that procedural safeguards (particularly, broad notice to potential class members) had been afforded.
The Court, examining Van Breda, further concluded that the motion judge had erred in her consideration of forum non conveniens. There was no clearly more appropriate forum to resolve the AFCs’ claims than Ontario. The Court held that the respondents did not meet the onus of demonstrating otherwise and, further, the evidence demonstrated a robust connection between the parties and Ontario
Key takeaways
This decision serves as a caution for defendants engaged in Canadian class actions regarding their potential liability to absent foreign claimants. Defendants should be aware that in appropriate circumstances courts may be willing to assert jurisdiction over a broad class of non-resident claimants with little connection to Ontario. In addition, the Court’s decision raises fundamental considerations of fairness, since many have argued that jurisdiction should follow enforcement and recognition. Namely, the decision raises the question of why should an Ontario court adjudicate the claims of AFCs, if ultimately its decision may never be enforceable in the home jurisdiction of the AFC. A robust defense strategy must consider a potentially broad scope of global liability.