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New framework to be used for foreign claimants

|Written By Shannon Kari
New framework to be used for foreign claimants
Paul Bates says the Ontario Court of Appeal came up with a 'made-in-Canada approach' in setting out the framework to determine if there is jurisdiction over absent foreign claimants.
The Ontario Court of Appeal has outlined a new framework to be used when deciding if there is jurisdiction over foreign claimants within a global class action that originates in this province.

 The three-part test on "absent foreign claimants" involves an analysis of whether there is a "real and substantial connection" to the action and Ontario and jurisdiction over the representative plaintiff and defendants, common issues related to the foreign claimants and sufficient procedural protections for all parties.

“This framework provides the necessary safeguards to establish that jurisdiction properly exists and ensures the protection of the values of order and fairness,” wrote Justice Sarah Pepall in Airia Brands Inc. v. Air Canada, for a unanimous three-judge panel.

The Court of Appeal overturned a lower court ruling that declined to include the absent foreign claimants as part of the class in a long-running action alleging a global price-fixing conspiracy involving air freight shipping services from or to Canada.

Superior Court Justice Lynne Leitch incorrectly focused on potential hurdles to enforcement of the action in other countries, the Court of Appeal stated. 

"When addressing jurisdiction, issues of foreign recognition and enforcement are not preclusive of all other factors," wrote Pepall, with Justices Eileen Gillese and Jean MacFarland concurring in the decision issued Oct. 17. 

The appellate court’s ruling means that certain foreign claimants can be added to the class in the action against Air Canada and British Airways.

Linda Visser, co-counsel for the plaintiffs, notes that there have been "slightly different approaches" by Canadian courts in this area of the law. 

"The Court of Appeal decision provides clarity on when you can certify an international class action, on what test to apply," says Visser, a partner at Siskinds LLP.

There has been widespread litigation around the world related to the prices charged by airlines for air freight shipping services. The case before the Court of Appealwas restricted to shipping services from or to Canada. The absent foreign claimants were defined as persons that did not reside in Canada and entered into shipping contracts outside of the country.

Leitch, in her decision issued in August 2015, relied on foreign expert evidence presented by the defendants that an Ontario court judgment would not be recognized or enforced in other countries. "Instead, absent foreign claimants will be able to bring further litigation against the defendants in their ‘home’ countries, where the preclusive effect of the Ontario judgment will be ignored," the judge wrote. As a result, defendants could be exposed to "double recovery" in any Ontario settlement if the class is expanded to include the foreign claimants, she suggested.

The Court of Appeal disagreed and found that it was an error to restrict the analysis to “traditional bases for jurisdiction” such as presence or consent. 

Instead, the first step should be to apply the real and substantial connection test set out by the Supreme Court of Canada in 2012 in its Van Breda decision.

Paul Bates, senior counsel at Siskinds and co-counsel for the plaintiffs in Airia, suggests that the Court of Appeal came up with a “made-in-Canada approach” in setting out the framework to determine if there is jurisdiction over absent foreign claimants. 

“The decision is balanced in its interpretation of past jurisprudence with respect to class proceedings, rather than allowing it to be determined by foreign laws,” Bates says.

In outlining whether there was a real and substantial connection, the Court of Appeal noted that the defendants carry on business in Ontario, there are common issues over which the court has jurisdiction and part of the alleged conspiracy took place in this province. 

As well, there has been widespread notice issued by the plaintiffs with potential class members from more than 30 countries already registered to receive information about the action.

"There are a number of contextual factors that connect this case to Ontario," says Bates. 

The court heard that at least 11,000 customers in Ontario were “arguably impacted” by the price-fixing conspiracy. The addition of absent foreign claimants could more than double the class number.

Kevin O’Brien, a partner at Osler Hoskin & Harcourt LLP in Toronto, who was not involved in this case, says the ruling provides guidance in this area of class action litigation. 

"Any time the Court of Appeal can address certainty and predictability in multi-jurisdictional class actions, that is a welcome development," says O’Brien, who specializes in corporate and commercial litigation. At the same time, for lawyers that defend class actions, double recovery remains a concern if foreign courts do not recognize Ontario’s jurisdiction and plaintiffs in their home country "try to get a better deal," he notes. 

"The defendant may effectively have to pay twice," says O’Brien.

Arguing that Ontario is not the appropriate forum for a global class action is often a high bar for defendants. 

As a result, "considerations of fairness" — which are often very fact specific — will likely be put forward to state why absent foreign claimants should not be included in an action, O’Brien explains.

If the defendants decide to seek leave to appeal to the Supreme Court, it may well be granted, suggests O’Brien. "Its application to global class actions is an important issue," he says.

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