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Order in the Court? The Van Breda Trilogy – Part V – Constitutional Issues

Posted in Conflict of Laws, Constitutional, Features, Media, Procedure, Torts, Van Breda Trilogy
Brandon KainElder MarquesByron Shaw

The constitutionalization of private international law has been one of the major projects of the Supreme Court of Canada since the decision in Morguard. However, the precise relationship between the Constitution, and the “real and substantial connection” test, has yet to be fully defined. In the Van Breda Trilogy, the Supreme Court returned to this issue, and sought to provide private international law with a clearer constitutional foundation. Paradoxically, the result is a new approach to the role of superior courts and provincial legislatures in the Canadian federation, which raises more questions than it answers.

The Role of the Constitution in Van Breda

The Court began its analysis in Van Breda by indicating that “[c]onflicts rules must fit within Canada’s constitutional structure”. (para. 21) It then drew a distinction between two ways in which the “real and substantial connection” test had been used in the jurisprudence: (1) as a constitutional rule; and (2) as a conflict of laws rule. The basic insight of Van Breda is that the constitutional rule explains, but does not exhaust, the conflict of laws rule.

According to the Court, the constitutional rule is designed to ensure that the exercise of jurisdiction respects the territorial limits of provincial power in s. 92 of the Constitution Act, 1867. LeBel J. suggested that this is so regardless of whether the jurisdiction being exercised is “adjudicative” jurisdiction (i.e., the jurisdiction of courts to decide extraterritorial disputes) or “legislative” jurisdiction (i.e., the jurisdiction of provincial legislatures to enact laws with extraterritorial effect). In the view of the Court, the territorial limits in s. 92 – and the real and substantial connection rule formulated in response to them – place constraints upon both forms of jurisdiction:

 … In its constitutional sense, [the real and substantial connection test] places limits on the reach of the jurisdiction of a province’s courts and on the application of provincial laws to interprovincial or international situations.

Since Hunt, the real and substantial connection test has been recognized as a constitutional imperative in the application of the conflicts rules. It reflects the limits of provincial legislative and judicial powers and has thus become more than a conflicts rule.

…With respect to the constitutional principle, the territorial limits on provincial legislative competence and on the authority of the courts of the provinces derive from the text of s. 92 of the Constitution Act, 1867. These limits are, in essence, concerned with the legitimate exercise of state power, be it legislative or adjudicative. The legitimate exercise of power rests, inter alia, upon the existence of an appropriate relationship or connection between the state and the persons who are brought under its authority. The purpose of constitutionally imposed territorial limits is to ensure the existence of the relationship or connection needed to confer legitimacy.

…[T]he real and substantial connection test… has evolved into an important constitutional test or principle that imposes limits on the reach of a province’s laws and courts. As I mentioned above, this constitutional test reflects the limited territorial scope of provincial authority under the Constitution Act, 1867. … [emphasis added] (paras. 23, 28, 31 and 69)

The Court went on to note that this “constitutional test aimed at maintaining the constitutional limits on the powers of a province’s legislature and courts” (para. 34) only sets the “outer boundaries” within which the real and substantial connection test as a conflict of laws rule can be applied. It does not itself determine when a provincial court may assert jurisdiction over a dispute, since that is the role of the conflict of laws rule. As LeBel J. put it:

The constitutionally imposed territorial limits on adjudicative jurisdiction are related to, but distinct from, the real and substantial connection test as expressed in conflicts rules. Conflicts rules include the rules that have been chosen for deciding when jurisdiction can be assumed over a given dispute, what law will govern a dispute or how an adjudicative decision from another jurisdiction will be recognized and enforced. The constitutional territorial limits, on the other hand, are concerned with setting the outer boundaries within which a variety of appropriate conflicts rules can be elaborated and applied. The purpose of the constitutional principle is to ensure that specific conflicts rules remain within these boundaries and, as a result, that they authorize the assumption of jurisdiction only in circumstances representing a legitimate exercise of the state’s power of adjudication. (para. 33)

LeBel J. also held that the constitutional rule does not require the provinces to adopt a uniform conflict of laws rule:

… To be clear, however, the existence of a constitutional test aimed at maintaining the constitutional limits on the powers of a province’s legislature and courts does not mean that the rules of private international law must be uniform across Canada. Legislatures and courts may adopt various solutions to meet the constitutional requirements and the objectives of efficiency and fairness that underlie our private international law system. Nor does this test’s existence mean that the connections with the province must be the strongest ones possible or that they must all point in the same direction.

The development of an appropriate framework for the assumption of jurisdiction requires a clear understanding of the general objectives of private international law. But the existence of these objectives does not mean that the framework for achieving them must be uniform across Canada. Because the provinces have been assigned constitutional jurisdiction over such matters, they are free to develop different solutions and approaches, provided that they abide by the territorial limits of the authority of their legislatures and their courts. (paras. 34 and 71)

However, LeBel J. did suggest that the conflict of laws rules adopted by the provinces cannot simply track the open-ended “real and substantial connection” test of the constitutional rule. Instead, they should require the existence of one or more objective connecting factors among the province, the litigants and the dispute before permitting the assertion of jurisdiction by the courts. Where such a connecting factor is present, it may be presumed that the constitutional rule has been satisfied:

… What rules would satisfy its status as a constitutional imperative? Two approaches are possible. One approach is to view the test not only as a constitutional principle, but also as a conflicts rule in itself. If it is viewed as a conflicts rule, its content would fall to be determined on a case-by-case basis by the courts in decisions in which they would attempt to implement the objectives of order and fairness in the legal system. The other approach is to accept that the test imposes constitutional limits on provincial powers, but to seek to develop a system of connecting factors and principles designed to make the resolution of conflict of laws issues more predictable in order to reduce the scope of judicial discretion exercised in the context of each case. …

The development and evolution of the approaches to the assumption of jurisdiction reviewed above suggest that stability and predictability in this branch of the law of conflicts should turn primarily on the identification of objective factors that might link a legal situation or the subject matter of litigation to the court that is seized of it. At the same time, the need for fairness and justice to all parties engaged in litigation must be borne in mind in selecting these presumptive connecting factors. But in recent years, the preferred approach in Canada has been to rely on a set of specific factors, which are given presumptive effect, as opposed to a regime based on an exercise of almost pure and individualized judicial discretion.

… The plaintiff must establish that one or more of the listed factors exists. If the plaintiff succeeds in establishing this, the court might presume, absent indications to the contrary, that the claim is properly before it under the conflicts rules and that it is acting within the limits of its constitutional jurisdiction… (paras. 30, 75 and 80)

We discussed the operation of these connecting factors in a previous post.

Potential Significance

It is not yet clear what the long-term implications of Van Breda will be for the relationship between constitutional and private international law in Canada. However, the Court’s treatment of this issue involves several points of departure from its prior jurisprudence, often without any analysis or even discussion of this fact. The failure to engage with these issues in Van Breda raises some important questions, and casts doubt upon whether the Court has fully captured the constitutional foundation of the conflict of laws.

First, the Court in Van Breda suggests that the territorial limits of superior court jurisdiction are derived from the territorial limits on provincial legislative power in s. 92 of the Constitution Act, 1867. Yet this ignores the fact that superior courts are not simply statutory tribunals created by provincial legislation pursuant to s. 92, but courts of inherent jurisdiction continued under s. 129 of the Constitution Act, 1867. Judges of the Superior Courts are also appointed and paid by the federal government under s. 96. As the Supreme Court said in Canada (Human Rights Commission) v. Canadian Liberty Net:

… The unique historical feature of provincial superior courts, as opposed to the Federal Court, is that they have traditionally exercised general jurisdiction over all matters of a civil or criminal nature. This general jurisdictional function in the Canadian justice system precedes Confederation, and was expressly continued by s. 129 of the Constitution Act, 1867, “as if the Union had not been made”. Under s. 92(14), the provinces exercise authority over the “Administration of Justice in the Province”, including the “Constitution, Maintenance, and Organization” of provincial superior courts. The unique institutional feature of these courts is that by s. 96 of the Constitution Act, 1867, judges of provincial superior courts are appointed by the Governor General, not by the provinces. Responsibility for s. 96 courts is thus shared between the two levels of government, unlike either inferior provincial courts, or courts created under s. 101. Estey J., in Attorney General of Canada v. Law Society of British Columbia, [1982] 2 S.C.R. 307, at pp. 326-27, explained the unique nature of provincial superior courts in the following way:

The provincial superior courts have always occupied a position of prime importance in the constitutional pattern of this country. They are the descendants of the Royal Courts of Justice as courts of general jurisdiction. They cross the dividing line, as it were, in the federal-provincial scheme of division of jurisdiction, being organized by the provinces under s. 92(14) of the [Constitution Act, 1867] and are presided over by judges appointed and paid by the federal government (sections 96 and 100 of the [Constitution Act, 1867]). [emphasis added] (para. 26)

It therefore seems strange to suggest that the territorial limits of superior court jurisdiction are derived solely or even primarily from s. 92. Indeed, it is been clear since at least Re Residential Tenancies Act that the provincial legislatures lack the constitutional authority to create tribunals whose central functions involve exercising the same judicial powers as those possessed by superior courts at the time of Confederation. Since the provincial legislatures are constitutionally incapable of creating superior courts, the adjudicative jurisdiction of the superior courts should not be limited by s. 92 of the Constitution Act, 1867.

This is underscored by the fact that responsibility for superior courts is shared by the federal government. Unlike the provinces, the extraterritorial legislative jurisdiction of the federal government under the Constitution Act is unlimited by virtue of the Statute of Westminster, 1931. Further, the superior courts often apply federal rather than provincial legislation when resolving disputes, as for instance in the bankruptcy context. In such circumstances, the Supreme Court has held that a superior court sits as a “national court”, which is subject to modified principles of private international law: Sam Lévy & Associés Inc. v. Azco Mining Inc. at paras. 28 and 71-78. It is unclear what the result would be in such a case under the Van Breda analysis. For instance, how or why would s. 92 of the Constitution Act, 1867 place territorial limits upon a superior court seeking to assert adjudicative jurisdiction over a civil action involving both provincial laws (e.g., claims under consumer protection legislation) and federal laws (e.g., Competition Act claims)?

Second, it also seems anomalous for the “real and substantial connection” test to operate as a constitutional rule for both adjudicative and legislative jurisdiction simultaneously. While Van Breda suggests that the real and substantial connection test “reflects the limits of provincial legislative and judicial powers”, the Supreme Court has previously held that the real and substantial connection test for adjudicative jurisdiction is different from the territorial test for provincial legislative jurisdiction. In Unifund Assurance Co. v. Insurance Corp. of British Columbia, Binnie J. stated:

…The territorial limits on the scope of provincial legislative authority prevent the application of the law of a province to matters not sufficiently connected to it: J.-G. Castel and J. Walker, Canadian Conflict of Laws (5th ed. (loose-leaf)), at p. 2.1. As will be seen, a “real and substantial connection” sufficient to permit the court of a province to take jurisdiction over a dispute may not be sufficient for the law of that province to regulate the outcome.

The required strength of the relationship varies with the type of jurisdiction being asserted. A relationship that is inadequate to support the application of regulatory legislation may nevertheless provide a sufficient “real and substantial connection” to permit the courts of the forum to take jurisdiction over a dispute. This happens regularly. The courts, having taken jurisdiction, then apply the law of the other province applying rules of conflict resolution governing choice of law issues. Thus, in Tolofson itself, there was a sufficient relationship between British Columbia and the parties for the British Columbia courts to hear the case, but it was determined that Saskatchewan law should apply to determine the outcome of the dispute. (paras. 58 and 80)

The Court made no mention of this distinction in Van Breda, despite citing Unifund in support of its constitutional analysis. Unfortunately, the Court also passed up an opportunity to clarify the constitutional relationship between extraterritorial adjudicative and legislative jurisdiction subsequent to Van Breda, when it recently denied leave to appeal from the B.C. Court of Appeal’s decision in Torudag v. British Columbia (Securities Commission), a case we discussed in a previous post. It is hoped that the Court will seize a similar opportunity in the future.

Third, it is significant that the facts of Van Breda involved the assertion of jurisdiction over a defendant situate in another country, as opposed merely to another province. Although the Supreme Court has previously held in Beals v. Saldanha, that the “real and substantial connection” test may apply to international and not simply interprovincial litigation, it has also maintained that “the notion of comity among independent nation States lacks the constitutional status it enjoys among the provinces of the Canadian federation”: Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers, at para. 55. Therefore, the constitutional foundations of the real and substantial connection test may differ as between the international and interprovincial planes. On the interprovincial level, the need for a constitutional “real and substantial connection” rule appears driven not only (if at all) by the territorial limits upon provincial legislative power in s. 92 of the Constitution Act, 1867, but by the basic demands of federalism itself. In Spar Aerospace Ltd. v. American Mobile Satellite Corp., LeBel J. himself observed:

I agree with the appellants that Morguard and Hunt establish that it is a constitutional imperative that Canadian courts can assume jurisdiction only where a “real and substantial connection” exists: see La Forest J. in Hunt, supra, at p. 328: “courts are required, by constitutional restraints, to assume jurisdiction only where there are real and substantial connections to that place” (emphasis added). However, it is important to emphasize that Morguard and Hunt were decided in the context of interprovincial jurisdictional disputes. In my opinion, the specific findings of these decisions cannot easily be extended beyond this context. In particular, the two cases resulted in the enhancing or even broadening of the principles of reciprocity and speak directly to the context of interprovincial comity within the structure of the Canadian federation… .

In Hunt, supra, at p. 321, La Forest J. stated that a central idea in Morguard was comity. It is apparent from his reasons in both cases, however, that federalism was the central concern underlying both decisions. … At p. 323 of Hunt, La Forest J. drew a clear distinction between the rules pertaining to an international situation and the rules applicable to interprovincial disputes…

Morguard and Hunt have been cited by this Court in a number of cases which seem to confirm that the “real and substantial connection” was specially crafted to address the challenges posed by multiple jurisdictions within a federation. … In my view, there is nothing in these cases that supports the appellants’ contention that the constitutional “real and substantial connection” criterion is required in addition to the jurisdiction provisions found in Book Ten of the C.C.Q. (paras. 51 and 53-54)

Indeed, to return to the first point made above, these comments suggest that the constitutional foundation of the “real and substantial connection” test is not attributable to the s. 92 limits on provincial power at all, since those limits – and hence the constitutional status of the test – should apply regardless of whether they are invoked in the international sphere. Rather, LeBel J.’s remarks in Spar suggest that the true constitutional foundation of the “real and substantial connection” test is the unwritten constitutional principle of federalism, recognized in cases like Reference re Secession of Quebec. It is unfortunate that the Court did not develop this possibility further in Van Breda. It would appear to hold much greater potential as a constitutional organizing principle for adjudicative jurisdiction in the conflict of laws than the territorial limits on provincial power in s. 92.