Background1

During Spring Break, 2006, Mrs. Haufler and her minor daughter travelled from Canada to Mexico for an all-inclusive vacation. A family friend purchased the vacation from a Canadian travel agency, and while in Mexico they stayed at the Hotel Riu Palace Cabo San Lucas (the “Hotel”). While on vacation, the family went on an all-terrain vehicle (ATV) excursion with an independent tour operator. During the ATV excursion, the minor child was injured. As a result of those injuries, the Haufler family commenced an action in Ontario against Mexican tour operator and the foreign Hotel.

The tour operator never responded to the action. The foreign Hotel was successful in staying the Ontario action against it on the basis that the Ontario court did not have jurisdiction over the dispute.

In writing for the Ontario Superior Court of Justice, Mr. Justice J. Quigley utilized the Supreme Court of Canada’s decision of Club Resorts Limited v. Van Breda, 2012 SCC 17 (“Van Breda”).

Jurisdiction & Forum Motion by a Foreign Defendant

After being served with a Statement of Claim, the Hotel immediately moved for an order staying the action against it on the basis that the Ontario Court had no jurisdiction over it, and in the alternative, if jurisdiction is found, that the Court should decline exercising jurisdiction based on forum non conveniens.

The Supreme Court of Canada in Van Breda recently articulated a new analysis for tort cases. This analysis requires the plaintiff to demonstrate one of four rebuttable presumptive connecting factors before a Canadian court can assume jurisdiction over a foreign defendant:

  1. the defendant is domiciled or resident in the province;
  2. the defendant carries on business in the province;
  3. the tort was committed in the province; or,
  4. a contract connected with the dispute was made in the province.

Further, if the plaintiff cannot satisfy the burden of establishing that one or more of the above four factors exist, the onus is then on the plaintiff to identify a new presumptive connecting factor to establish jurisdiction.

In the event that a court finds that it has jurisdiction over a foreign-defendant, the defendant can still move to have the court decline jurisdiction based on forum non conveniens. In other words, notwithstanding jurisdiction the foreign court would be the most appropriate venue for the hearing of the issues.

The Hotel’s Jurisdiction Motion

Only one presumptive factor was considered for the jurisdiction test in Haufler v. Hotel Riu:

Did the Hotel carry on business in Ontario?

On whether the Hotel carried on business in Ontario, Mr. J. Quigley held that “carrying on business” requires some form of actual presence in the province and it is distinct from simply doing business with province-based companies. In these circumstances, the Hotel itself did not sell or market rooms outside Mexico. Instead, the Hotel sold its rooms to an independent Spanish company, which then sold the rooms to arm’s length travel wholesalers. The travel wholesalers would then bundle the rooms with other products and services and  sell the package to Canadian tourists through its various affiliates and travel agents. The  Court held that the travel wholesaler was an independent entity, and not an agent of the Hotel.

The plaintiffs pointed to Canadian advertising featuring the Hotel to suggest that the Hotel was in fact carrying on business in Ontario. The plaintiffs also relied on periodic annual visits to Canada by a marketing company to advertise the Hotel brand.

The Court found that the Hotel was not responsible for any advertising. The Hotel did not create, publish, fund or distribute any marketing materials in the province. As a result, the existence of advertising brochures, without more, was insufficient to establish the requisite business connection to Ontario. Further, although marketing trips were made to Canada by an independent marketing company to advertise the Hotel’s brand to travel wholesalers, the connection between the foreign Hotel and the province on this basis was weak. The jurisdiction test requires more than occasional visits to a province and solicitation.

The Court also considered whether the existence of a Hotel website, accessible within Ontario only in 2012 was sufficient to establish that the Hotel was carrying on business in Ontario. The Court determined that because  the website was not available at the date of loss, six years earlier, it was not relevant to the question of whether the Hotel was carrying on business in Ontario.

The Court accepted that a foreign defendant could potentially be subjected to Canadian jurisdiction if it was carrying on trade in a province through the use of electronic means, or e-trade. However, the existence of an electronic presence six years after the events in question could not establish the connecting factor necessary to permit the Court to assume jurisdiction.

In addition, the Court noted that the tour operator responsible for the subject ATV excursion had no relationship with the Hotel. Further, the ATV excursion was purchased in Mexico and was operated off Hotel property. Any contract entered into by the plaintiffs relating to the subject-matter of the dispute was formed in Mexico, not Ontario.

This decision is a welcome development for foreign defendants such as international hotels. Foreign defendants may successfully oppose a court’s jurisdiction over the proceeding depending on the circumstances.


1The motion was brought on behalf of the successful foreign defendant by Robert Love and Katherine Ayre, Borden Ladner Gervais LLP.

Authors

Robert L. Love 
RLove@blg.com
416.367.6132

Katherine Ayre 
KAyre@blg.com
416.367.6016

Expertise

Insurance and Tort Liability