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Statutory Interpretation - "Carrying on Business". Canadian Western Trust Company v. Canada
In Canadian Western Trust Company v. Canada (Fed CA, 2024) the Federal Court of Appeal notes authority for the meaning of "carrying on business":[12] At the hearing, the appellant acknowledged that, on the basis of the factors set out in Vancouver Art Metal Works Ltd. v. Canada, 1993 CanLII 2930 (FCA), [1993] 2 F.C. 179 (C.A.) at 187, 47 D.T.C. 5116, it would be considered to be carrying on a business of trading in qualified investments. The Tax Court correctly concluded that subsection 146.2(6) incorporates the well-established test for "“carrying on business” "(Reasons at para. 72), and Vancouver Art sets out some relevant factors to consider in determining whether the purchase and sale of securities amounts to the carrying on of a business. .... . H.M.B. Holdings Ltd. v. Antigua and Barbuda
In H.M.B. Holdings Ltd. v. Antigua and Barbuda (SCC, 2021) the Supreme Court of Canada interpreted the phrase "carrying on business", here as it occured in the Ontario Reciprocal Enforcement of Judgments Act, but also generally to the concept of jurisdiction simpliciter:(1) Interpretation of “Carrying on Business”
[30] The REJA does not define “carrying on business”, but this concept has a long history at common law. As a matter of statutory interpretation, common law terms and concepts are presumed to retain their common law meaning when used in legislation (R. Sullivan, Sullivan on the Construction of Statutes (6th ed. 2014), at § 17.14).
[31] At common law, the concept of “carrying on business” forms part of the law on the traditional bases of jurisdiction. As this Court explained in Morguard Investments Ltd. v. De Savoye, 1990 CanLII 29 (SCC), [1990] 3 S.C.R. 1077, under the traditional bases of jurisdiction at common law, a foreign judgment could be recognized and enforced in Canada only if the defendant in the original action had been present in the foreign jurisdiction at the time of the action there or had consented in some way to the foreign court’s jurisdiction (p. 1092; see also Chevron, at para. 29; Pitel and Rafferty, at pp. 164 and 168). In this context, a corporation is said to be “present” in a jurisdiction if it is established that the corporation was “carrying on business” in that jurisdiction at the time of the action (Chevron, at para. 85; Pitel and Rafferty, at p. 170; J. Walker, Castel & Walker: Canadian Conflict of Laws (6th ed. (loose-leaf)), at p. 14-24).
[32] The Canadian common law of recognition and enforcement has developed beyond the traditional bases of jurisdiction. Notably, in Morguard itself, the Court held that the judgment of a court in one province could be recognized in another province on the basis of a “real and substantial connection” to the original jurisdiction rather than the traditional bases of jurisdiction. Nonetheless, the common law bases of presence and consent remain important, and in this case are critical to understanding s. 3(b) of the REJA.
[33] The REJA was first enacted in 1929. It is based on a model statute approved by the Conference of Commissioners on Uniformity of Legislation in Canada in 1924, which in turn was based on the United Kingdom’s Administration of Justice Act, 1920, 10 & 11 Geo. 5, c. 81 (see Proceedings of the Seventh Annual Meeting of the Conference of Commissioners on Uniformity of Legislation in Canada, App. G, The Reciprocal Enforcement of Judgments Act (1924)). Section 3(b), which has not changed since 1929, is nearly identical to s. 9(2)(b) of the United Kingdom’s statute.
[34] Section 3(b) codified the traditional common law bases of jurisdiction as a prerequisite for registration. In Morguard, the Court recognized the connection between the traditional bases of jurisdiction and British Columbia’s equivalent to s. 3(b) (p. 1111). Academic commentators also accept the connection between the traditional bases of jurisdiction and s. 3(b) (Pitel et al., at p. 481). Likewise, English jurisprudence recognizes that the Administration of Justice Act, 1920, is “based on the common law and fall[s] to be interpreted in accordance with the common law” and that the provision equivalent to s. 3(b) reflects common law principles of jurisdiction (Vizcaya Partners Ltd. v. Picard, [2016] UKPC 5, [2016] 3 All E.R. 181, at paras. 5 and 8). Moreover, the codification of the traditional common law bases of jurisdiction in s. 3(b) is reflected in the language of the provision. Section 3(b) plainly addresses presence-based jurisdiction in its references to carrying on business and residence, and consent-based jurisdiction in its reference to voluntary appearance or submission to the court’s jurisdiction.
[35] As a result, contrary to the appellant’s assertion, jurisdiction simpliciter principles are helpful in interpreting s. 3(b) of the REJA. In particular, the jurisprudence governing the traditional bases of jurisdiction codified in s. 3(b) is directly applicable to assist in the interpretation and application of this provision. Chevron is helpful in this case to the extent that it clarifies the traditional grounds of jurisdiction. I turn now to that jurisprudence and the meaning of “carrying on business”.
[36] Before Chevron, courts generally relied on English cases, and in particular the English Court of Appeal’s decision in Adams v. Cape Industries Plc., [1990] 1 Ch. 433, to interpret the meaning of “carrying on business”. In Adams, Lord Justice Slade, writing for a unanimous court, held that English courts will be likely to treat a foreign corporation as present within the jurisdiction of the courts of another country only if either: (1) it has established and maintained at its own expense, whether as owner or lessee, a fixed place of business of its own in the other country and for more than a minimal period of time has carried on its own business at or from such premises by its servants or agents; or (2) a representative of the foreign corporation has for more than a minimal period of time been carrying on the corporation’s business in the other country at or from some fixed place of business (p. 530). In both of these two cases, the foreign corporation’s presence can be established only if it can be said that its business has been transacted at or from the fixed place of business.
[37] In cases involving a representative, the question of whether the representative has been carrying on the foreign corporation’s business or has been doing no more than carry on their own business will necessitate an investigation of the functions they have been performing and all aspects of the relationship between them and the foreign corporation (p. 530). In particular, the following questions are relevant to the assessment of whether the representative has been carrying on the foreign corporation’s business:(a) whether or not the fixed place of business from which the representative operates was originally acquired for the purpose of enabling them to act on behalf of the foreign corporation;
(b) whether the foreign corporation has directly reimbursed the representative for the cost of their accommodation at the fixed place of business and the cost of their staff;
(c) what other contributions, if any, the foreign corporation makes to the financing of the business carried on by the representative;
(d) whether the representative is remunerated by reference to transactions (e.g., by commission), by fixed regular payments or in some other way;
(e) what degree of control the foreign corporation exercises over the running of the business conducted by the representative;
(f) whether the representative reserves part of their accommodation and part of their staff for conducting business related to the foreign corporation;
(g) whether the representative displays the foreign corporation’s name at their premises or on their stationery, and if so, whether the representative does so in a way as to indicate that they are a representative of the foreign corporation;
(h) what business, if any, the representative transacts as principal exclusively on their own behalf;
(i) whether the representative makes contracts with customers or other third parties in the name of the foreign corporation or otherwise in such manner as to bind it; and
(j) if so, whether the representative requires specific authority in advance before binding the foreign corporation to contractual obligations (pp. 530-31). Lord Justice Slade further held that even this list of questions is not exhaustive and that the answer to any of them is not necessarily conclusive as to whether a representative has been carrying on a foreign corporation’s business in a certain jurisdiction (p. 531).
[38] In Chevron, this Court followed the Adams approach and explained how the term “carrying on business”, as part of traditional presence-based jurisdiction at common law, should be interpreted in Canada. Gascon J., writing for the Court, stated the following:To establish traditional, presence-based jurisdiction over an out-of-province corporate defendant, it must be shown that the defendant was carrying on business in the forum at the time of the action. Whether a corporation is “carrying on business” in the province is a question of fact. In Wilson, in the context of statutory registration of a foreign judgment, the Alberta Court of Appeal was asked to assess whether a company was carrying on business in the jurisdiction. It held that to make this determination, the court must inquire into whether the company has “some direct or indirect presence in the state asserting jurisdiction, accompanied by a degree of business activity which is sustained for a period of time”. These factors are and always have been compelling indicia of corporate presence; as the cases cited in Adams v. Cape Industries Plc., [1990] 1 Ch. 433 [Ch. Div.], at pp. 467-68, per Scott J., demonstrate, the common law has consistently found the maintenance of physical business premises to be a compelling jurisdictional factor. LeBel J. accepted this in Van Breda when he held that “carrying on business requires some form of actual, not only virtual, presence in the jurisdiction, such as maintaining an office there”. [Emphasis added; citations omitted; para. 85.] [39] It should be noted that the term “carrying on business” appeared in Van Breda as a presumptive connecting factor in the tort context for the purposes of assumed jurisdiction. Although this Court in Chevron cited Van Breda for the meaning of that term in the context of traditional presence-based jurisdiction, it is important to remember that traditional presence-based jurisdiction is an independently sufficient ground of jurisdiction that operates alongside the assumed jurisdiction of Van Breda (para. 79). If the term “carrying on business” held the same meaning in both contexts, this would create overlap between the two tests (see Pitel and Rafferty, at p. 94). If a corporate defendant were carrying on business in a jurisdiction such that a plaintiff could simply serve that defendant in juris and establish traditional presence-based jurisdiction, it is not clear why that plaintiff would ever try to establish “carrying on business” as a mere presumptive connecting factor going to assumed jurisdiction. This suggests that “carrying on business” as it appears in Van Breda, as a mere presumptive connecting factor for assumed jurisdiction, may be a less onerous standard than “carrying on business” for the purpose of establishing traditional presence-based jurisdiction.
[40] I need not decide here whether the term “carrying on business” as it appears in Van Breda carries the same meaning as in the case law on traditional presence-based jurisdiction. However, it is safe to say that if the Van Breda standard is different, it is lower. In any event, the Van Breda requirements for “carrying on business” must also apply for the purposes of traditional presence-based jurisdiction. In Chevron, this Court recognized as much by quoting LeBel J.’s remark that “carrying on business requires some form of actual, not only virtual, presence in the jurisdiction, such as maintaining an office there”, in describing what it means to “carry on business” for the purposes of presence-based jurisdiction.
[41] Chevron thus provided a clear definition of “carrying on business” as part of traditional presence-based jurisdiction at common law. For the reasons given above, this informs the interpretation of s. 3(b) of the REJA. In sum, to determine whether a defendant is carrying on business in a jurisdiction, the court must inquire into whether it has some direct or indirect presence in the jurisdiction, accompanied by a degree of business activity that is sustained for a period of time. Whether or not a corporation is “carrying on business” is a question of fact, and in order to determine whether this definition is met, the court should consider the 10 Adams indicia listed above. And some kind of actual presence, whether direct or indirect, is required. A physical presence in the form of maintenance of physical premises will be compelling, and a virtual presence that falls short of an actual presence will not suffice.
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