



COURT OF APPEAL FOR ONTARIO

CITATION: Ontario
    (Attorney General) v. Rothmans Inc., 2013 ONCA 353

DATE: 20130530

DOCKET: C55001; C55003; C55008; C55010; and C55012

Doherty, Simmons and Blair JJ.A.

BETWEEN

Her Majesty the Queen in Right of Ontario

Plaintiff (Respondent)

and

Rothmans Inc., Rothmans, Benson & Hedges
    Inc., Carreras Rothmans Limited, Altria Group, Inc., Philip Morris U.S.A. Inc.,
    Philip Morris International, Inc., JTI-Macdonald Corp., R.J. Reynolds Tobacco
    Company, R.J. Reynolds Tobacco International Inc., Imperial Tobacco Canada
    Limited, British American Tobacco p.l.c., B.A.T. Industries p.l.c., British
    American Tobacco (Investments) Limited, and Canadian Tobacco Manufacturers
    Council

Defendants (Appellants)

Charles F. Scott and Shaun
    Laubman, for the appellant B.A.T. Industries p.l.c.

David R. Byers, Adrian C.
    Lang and Lesley Mercer, for the appellant British American Tobacco p.l.c.

Craig P. Dennis and Owen James,
    for the appellant British American Tobacco (Investments) Limited

Guy J. Pratte, Ira Nishisato
    and Cindy Clarke, for the appellant R.J. Reynolds Tobacco Company and R.J.
    Reynolds Tobacco International Inc.

Christopher M. Rusnak and
    Steven Abramson, for the appellant Carreras Rothmans Limited

William J. Manuel, Lise G. Favreau, Edmund Huang and
    Kevin Hille, for the respondent Her Majesty the Queen in Right of Ontario.

Heard: November 5-7, 2012

On appeal from the order of Justice Barbara Ann Conway of
    the Superior Court of Justice, dated January 4, 2012.

Simmons and Blair JJ.A.:

A.

Overview

[1]

Like several provinces, Ontario has legislation giving it a stand-alone
    statutory right to sue tobacco manufacturers to recover the costs of health
    care services provided to the public as a result of tobacco related disease
    arising out of tobacco related wrongs.  In this action, Ontario seeks to
    assert that statutory right, claiming $50 billion against a large number of tobacco
    company defendants, some of which are domestic corporations and some of which
    are related foreign corporations.

[2]

In substance, Ontarios claim is that, since the 1950s, several of the
    defendants have  been committing tobacco related wrongs by manufacturing and
    distributing cigarettes in Ontario when they knew or ought to have known that
    smoking cigarettes and being exposed to second-hand smoke could cause or
    contribute to disease.  In addition, Ontario asserts that all of the defendants
    have engaged in various conspiracies to mislead the government and the public about
    the dangers of smoking and to suppress information about those dangers. In
    conducting themselves in this manner, all of the defendants have breached a
    number of common law obligations to the people of Ontario flowing from the
    dangerous nature of their product.

[3]

Six of the foreign defendants assert that the Ontario courts do not have
    jurisdiction to determine the claims against them.  They brought a motion to
    set aside the service
ex juris
of Ontarios statement of claim against
    them, and to stay or dismiss the action on the basis of lack of jurisdiction.
    Conway J. dismissed their motion.  We are asked to reverse that decision.

[4]

For the reasons that follow, we decline to do so.

B.

Legislative Framework

[5]

The
Tobacco Damages and Health Care Costs Recovery Act
, 2009
,
    S.O. 2009, c. 13 (the Tobacco Act), was enacted to give Ontario the ability
    to recover from tobacco manufacturers on an aggregate basis the health care
    costs incurred and to be incurred by the province as a result of the treatment
    of tobacco related disease arising from tobacco related wrongs.

[6]

Section 2(1) of the Tobacco Act provides:

2. (1) The Crown in right of Ontario has a direct and
    distinct action against a manufacturer to recover the cost of health care
    benefits caused or contributed to by a tobacco related wrong.

[7]

Section 2(4)(b) permits Ontario to recover health care costs on an
    aggregate basis, for a population of insured persons as a result of exposure to
    a type of tobacco product.

[8]

The parties agree that Ontarios cause of action is statutory and that
    it could not have been asserted at common law.

[9]

Manufacturer, tobacco related disease, and tobacco related wrong
    are defined in s. 1(1) of the Tobacco Act:

manufacturer means a person who manufactures or has
    manufactured a tobacco product and includes a person who currently or in the
    past,

(a) causes, directly or indirectly, through
    arrangements with contractors, subcontractors, licensees, franchisees or
    others, the manufacture of a tobacco product,

(b) for any fiscal year of the person, derives at
    least 10 per cent of revenues, determined on a consolidated basis in accordance
    with generally accepted accounting principles in Canada, from the manufacture
    or promotion of tobacco products by that person or by other persons,

(c) engages in, or causes, directly or indirectly,
    other persons to engage in the promotion of a tobacco product, or

(d) is a trade association primarily engaged in,

(i) the advancement of
    the interests of manufacturers,

(ii) the promotion of a
    tobacco product, or

(iii) causing, directly
    or indirectly, other persons to engage in the promotion of a tobacco product;



tobacco related disease means disease caused or
    contributed to by exposure to a tobacco product;

tobacco related wrong means,

(a) a tort committed in Ontario by a manufacturer
    which causes or contributes to tobacco related disease, or

(b) in an action under subsection 2(1), a breach
    of a common law, equitable or statutory duty or obligation owed by a
    manufacturer to persons in Ontario who have been exposed or might become
    exposed to a tobacco product.

[10]

The
    Act also contains joint liability provisions in s. 4.  They are particularly
    important here because they provide the hook by which Ontario seeks to catch
    the foreign defendants.

[11]

Under
    s. 4(1), two or more defendants are jointly and severally liable for the cost
    of health care benefits if (a) those defendants jointly breached a duty or
    obligation described in the definition of tobacco related wrong, and (b) at
    least one of them is held liable under s. 2(1) for the cost of those health
    care benefits.  Section 4(2) deems certain actions to constitute a joint
    breach.  It states:

4. (2) For
    purposes of an action under subsection 2(1), two or more manufacturers, whether
    or not they are defendants in the action, are deemed to have jointly breached a
    duty or obligation described in the definition of tobacco related wrong in
    subsection 1(1) if,

(a) one or more of those manufacturers are held to
    have breached the duty or obligation; and

(b) at common law, in equity or under an
    enactment, those manufacturers would be held,

(i) to have conspired or
    acted in concert with respect to the breach,

(ii) to have acted in a
    principal and agent relationship with each other with respect to the breach, or

(iii) to be jointly or
    vicariously liable for the breach if damages would have been awarded to a
    person who suffered as a consequence of the breach.

C.

Facts

[12]

The
    six foreign defendants appealing the order of Conway J. are the following:
    British American Tobacco (Investments) Limited (Investments); B.A.T.
    Industries p.l.c (Industries); British American Tobacco p.l.c. (BAT plc);
    Carreras Rothmans Limited (Carreras); and R.J. Reynolds Tobacco Company and
    R.J. Reynolds Tobacco International Inc. (together, the RJR appellants).

[13]

Each
    of these defendants is part of a larger multinational tobacco enterprise (Group). 
    For the purposes of this action, there are four Groups, three of which have within
    them a Canadian manufacturer. They are: (i) the BAT Group (Imperial Tobacco
    Canada Limited is the Canadian manufacturer); (ii) the Rothmans Group
    (Rothmans, Benson & Hedges Inc. and Rothmans Inc. are the Canadian manufacturers);
    (iii) the RJR Group (JTI-Macdonald Corp. and Macdonald Tobacco Inc. are the
    Canadian manufacturers); and (iv) the Philip Morris Group (no Canadian
    manufacturer).

[14]

The
    thrust of Ontarios claim against the appellants is that each is, or was, a
    Lead Company within their respective Groups: Investments (1902-1976),
    Industries (1976-1998) and BAT plc (1998-present) for the BAT Group; Carreras
    for the Rothmans Group (pre-1984); and the RJR appellants for the RJR Group. 
    In that capacity, each is a manufacturer, as broadly defined in the Tobacco
    Act.  Ontario claims that as Lead Companies and manufacturers themselves, the
    appellants conspired and acted in concert with their Canadian manufacturer Group
    members and with each other to mislead Ontario and persons in Ontario and
    elsewhere with respect to the harmful effects of tobacco use, including the
    risks of second-hand smoke.

[15]

The
    details of this conspiracy, as pleaded in the statement of claim, will be
    developed in the section of these reasons dealing with the adequacy of the pleadings.
    In summary, it is framed as three separate but interrelated conspiracies: (i)
    an international conspiracy; (ii) a Canadian conspiracy; and (iii) an intra-Group
    conspiracy.

D.

Issues

[16]

There
    are five issues on the appeal:

1)

Did the motion judge
    err in her ruling on the admissibility of documents?

2)

Did the motion judge
    err in failing to resolve the issue about whether any potential judgment would
    be enforceable in the U.K. or the United States, based on the differing
    experts opinions?

3)

Did the motion judge
    err in concluding that Ontarios claim is in respect of a tort committed
    within Ontario as contemplated by rule 17.02(g) of the
Rules of Civil
    Procedure
?

4)

Did the motion judge
    err in holding that the statement of claim  as pleaded and in light of the
    evidence filed by all parties  adequately sets out a good arguable case
    against the appellants for the purposes of the jurisdiction application?

5)

Did the motion judge
    err in her award of costs in respect of the proceedings?

[17]

We
    did not call on Ontario to respond to the first or second issue.

E.

Analysis

(1)

Admissibility of
    Documents

[18]

The
    parties agreed that any appeal from the motion judges order with respect to
    admissibility of evidence
[1]
would be deferred until the determination of the jurisdiction hearing itself and
    would be dealt with at the same time as any appeal from the order regarding
    jurisdiction.  Given that agreement, and the fact that the admissibility motion
    was simply a step in the overall proceeding attacking jurisdiction, the appeal
    from the admissibility order is appropriately dealt with in this Court.

[19]

We
    would not give effect to it, however.

[20]

The
    appellant Investments, in particular, argued that the motion judge erred in
    admitting certain documentary evidence for purposes of authenticity, certain other
    documentation for purposes of the truth of its contents, and still other
    documentation for purposes of both authenticity and truth of contents.  In most
    cases, the motion judges decision was based on the documents in possession
    rule, and/or on the business records exception to the hearsay rule under s. 35
    of the
Evidence Act
, R.S.O. 1990, c. E.23.  In at least one case, it
    was based on the admissions exception.

[21]

Investments
    complaint rests on the premise that the decision to admit these documents was
    based on an inadequate evidentiary foundation.  This is primarily a question of
    fact, however, and our attention has not been directed to any palpable or
    overriding error in the motion judges findings or in the inferences she drew
    from those findings which would undermine her admissibility decision.

[22]

The
    motion judge recognized that the mere presence of a document in a companys
    files is not sufficient to establish corporate possession for purposes of authenticity.
    Instead, notice of the documents contents must come to the attention of
    someone with authority to deal with its contents: see
R. v. Ash-Temple Co.
(1949), 93 C.C.C. 267 (Ont. C.A.), at paras. 20-24. She also recognized that the
    document must be created in the ordinary course of business to be admissible
    for the truth of its contents under the business records exception.  Investments
    submitted that there was insufficient evidence in the record for her to
    conclude those tests had been met.

[23]

The
    motion judge reviewed the documentation itself as well as the evidence and
    cross-examinations of the appellants witnesses, including answers to
    undertakings given. She considered who the directors, officers and employees of
    each company were at the relevant times, as well as the nature of the positions
    they held and their responsibilities with the company.  In particular, she
    relied on the evidence of Mr. Cordeschi  Investments affiant on which the BAT
    Group appellants also relied for evidence concerning the historical business
    activities of their Group  to the effect that the documents presented to him
    would be business records if prepared today and written by an Investments employee. 
    She also relied on the fact that the very same documents were still in
    Investments files some 30 or 40 years later.

[24]

On
    the basis of that examination, the motion judge made findings and drew
    inferences from those findings that supported her conclusions as to the
    admissibility of the documentation and evidence.  We see no basis for interfering
    with her admissibility ruling.

(2)

The Role of Experts

[25]

The
    appellants also argued that the motion judge erred in failing to give effect to
    their submission that a real and substantial connection with Ontario could not
    be found because an order in the Ontario action may not be enforceable against
    them in the U.K. or the United States.

[26]

There
    was conflicting expert opinion on this issue. Lord Grabiner, Q.C., opined that
    attempting to enforce an order such as that sought by Ontario under the Tobacco
    Act, providing for recovery on an aggregate basis, would be viewed by the
    English courts as an attempt to enforce a penal, revenue or other public law
    and would therefore not be enforceable against the U.K. appellants in the U.K. 
    Professor Briggs gave the opposite opinion. Professor Reimann gave an opinion
    on behalf of the RJR appellants similar to that of Lord Grabiner that an
    Ontario judgment would be potentially unenforceable in the United States. 
    Professor Silberman presented a differing view on behalf of Ontario.

[27]

The
    motion judge recognized the credentials and credibility of all of these
    experts.  The appellants say that she erred in not choosing between them, and
    argue that the evidence on the record supports the view of their particular
    experts.

[28]

The
    enforceability of a judgment obtained in Ontario in a foreign defendants
    jurisdiction is a factor that may be considered in weighing the relative
    strengths and weaknesses of the connection between the claim, the foreign
    defendant and the jurisdiction:
Club Resorts Ltd. v. Van Breda
, 2012
    SCC 17, 1 S.C.R. 572, at para. 103.  For the purposes of this appeal, it is not
    necessary to determine whether the enforceability issue is more appropriately
    weighed in the
forum conveniens
exercise rather than in determining
    jurisdiction
simpliciter
, as Ontario argued.  Nor was it necessary, in
    our view, for the motion judge to choose between the experts for the purpose of
    determining the jurisdiction issue (if, indeed, it would have been appropriate
    for her to do so at all on a motion such as this one, based as it was on affidavit
    evidence and transcripts of cross-examinations).

[29]

Enforceability
    is simply one factor to be considered. The motion judges conclusion on the
    enforceability point is found at para. 116 of her reasons:

In my view, it is far from clear that an Ontario judgment would
    be unenforceable in England and the U.S.  With this degree of uncertainty I am
    not prepared to say that the issue of enforceability should weigh in favour of [the
    appellants] and weaken the strength of the connection to the Province of
    Ontario.

[30]

This
    conclusion was sensible and entirely open to her on the record.

(3)

Tort Committed in
    Ontario and Service under Rule 17.02(g)

[31]

In
Van Breda
, the Supreme Court of Canada confirmed that a claim in
    respect of a tort committed within the jurisdiction gives rise to a presumptive
    connecting factor sufficient to establish a real and substantial connection
    with the jurisdiction. Unless rebutted, this is sufficient to provide the
    domestic court with jurisdiction
simpliciter
to determine the dispute
    before it.  The appellants argue the motion judge erred in holding that
    Ontarios statutory claim under the Tobacco Act constituted such a claim or was
    sufficiently analogous to such a claim that it qualified as a presumptive
    connecting factor.  Alternatively, they argue that the motion judge erred in
    failing to hold that the evidence filed on their behalf rebutted such a
    presumption. Finally, they argue that, even if a claim under the Tobacco Act
    was sufficiently analogous to a
Van Breda
presumptive connecting
    factor to qualify as one itself, that was not sufficient to justify service out
    of the jurisdiction under rule 17.02(g)  tort committed in Ontario.

[32]

We
    would not give effect to these submissions, for the following reasons.

[33]

It
    is central to the appellants argument that Ontarios claim is a
sui
    generis
statutory claim not existing at common law.  Moreover, they say,
    Ontario amended its statement of claim and expressly withdrew its common law
    tort allegations against them.  How can Ontario now assert that the cause of
    action it is putting forward relates to a tort committed within Ontario?

[34]

There
    is an old saying, however, that if something looks like a duck, walks like a
    duck, and quacks like a duck, it probably is a duck.  So it is, in our view,
    with Ontarios claim against the appellants under the Tobacco Act. The Act
    creates, in effect, a statutory tort claim, founded on a tort or tortious
    conduct.  This is apparent from the combined effect of ss. 2(1) and 4 and the
    definition of tobacco related wrong.  In this case, the tort is conspiracy.

[35]

Ontarios
    claim is derived from s. 2(1), which gives the Crown a direct and distinct
    action against a manufacturer to recover the cost of health care benefits
    caused or contributed to by a tobacco related wrong.  To repeat, a tobacco
    related wrong means:

(a) a tort committed in
    Ontario by a manufacturer which causes or contributes to tobacco related
    disease,
or

(b)
in an action under
    subsection 2(1)
,

a breach of a common law
, equitable or
    statutory
duty or obligation owed
by a manufacturer to persons in
    Ontario who have been exposed or might become exposed to a tobacco product.
    [Emphasis added.]

[36]

Ontario
    amended its statement of claim to withdraw the type of claim referred to in
    paragraph (a) above, but continues to assert its s. 2(1) claim for breach of a
    common law duty or obligation owed to persons in Ontario.

[37]

It
    is a breach of a common law duty or obligation to engage in a civil conspiracy
    that causes harm to others.  Moreover, it is well established that a conspiracy
    occurs in the jurisdiction where the harm is suffered regardless of where the wrongful
    conduct occurred:
British Columbia v. Imperial Tobacco Canada Ltd.
,
2006 BCCA 398, 56 B.C.L.R. (4th) 263, at para. 43;
Vitapharm Canada Ltd.
    v. F. Hoffman-La Roche Ltd.
(2002), 20 C.P.C. (5th) 351 (Ont. S.C.). Here,
    that jurisdiction is Ontario.

[38]

Section
    4 of the Tobacco Act addresses this sort of breach, and provides for joint and
    several liability where two or more defendants jointly breach a duty or
    obligation described in the definition of tobacco related wrong.  In
    addition, s. 4(2) underscores the tort-like nature of the claim by deeming
    certain conduct to constitute a joint breach.  For our purposes, two or more
    manufacturers are deemed to have jointly breached such a duty or obligation
    where one or more of them is held to have done so, and if, per s. 4(2)(b)(i), at
    common law, in equity or under an enactment, those manufacturers would be held
    to have conspired or acted in concert with respect to the breach.

[39]

Cutting
    to the core of the statutory framework, then, Ontarios claim in this action is
    founded on the common law tort of conspiracy  a conspiracy alleged in this
    instance to have been committed in Ontario because the damage flowing from the
    conspiracy was, and is, sustained in Ontario.  It is therefore an action in
    respect of a tort committed within Ontario as contemplated by rule 17.02(g).

[40]

The
    courts in British Columbia and New Brunswick have come to similar conclusions
    with respect to tobacco litigation involving virtually identical statutory
    provisions, virtually identical government allegations, and the identical
    parties.  In each of those cases, leave to appeal to the Supreme Court of
    Canada was refused.  See
British Columbia v. Imperial Tobacco Canada Ltd.
,
    2005 BCSC 946; affd 2006 BCCA 398, 56 B.C.L.R. (4th) 263; leave to appeal to
    S.C.C. refused, [2006] S.C.C.A. No. 446; and
New Brunswick v. Rothmans Inc.
,
    2010 NBQB 381, 373 N.B.R. (2d) 157; leave to appeal refused, [2011] N.B.J. No.
    116 (C.A.); leave to appeal to S.C.C. refused, [2011] S.C.C.A. No. 221.

[41]

In
    the British Columbia Court of Appeal, Rowles J.A. cited with approval the B.C. motion
    judges description of the cause of action created by the exact equivalent of
    s. 2(1) of the Ontario Tobacco Act.  The same considerations apply here.  At
    paras. 67-68, Rowles J.A. said:

In his reasons  Holmes J. described the nature of the cause of
    action created by the
Act
this way:

[215]  The cause of action here is
    pursuant to the
Act
however the tobacco related wrongs pleaded by the
    Government are founded on torts and tortious conduct.

[216] Claims brought pursuant to an
    Act but founded on a tort are not uncommon. [
Moran, supra;
[2]
S.D. Eplett & Sons Ltd v. Safety Freight Lines Ltd.
, [1955] O.W.N. 386
    (H.C.J.)]

[217] The torts and tortious conduct
    on which the Government action is founded all occurred in British Columbia. 
    Carreras Rothmans Ltd. are alleged to have conspired with domestic and other
    foreign defendants, and the damage resulting was in British Columbia.

[218] The torts and tortious conduct
    which [form] the subject matter of conspiracy, and in respect of which Carreras
    Rothmans Ltd. acted in concert with the other defendants is alleged to have
    occurred in British Columbia.

In my view, that description of the cause of action is
    correct.  This is a cause of action created by statute but it is founded on
    common law torts, as may be seen from the definition of tobacco related
    wrongs in s. 1(1) of the
Act
.

[42]

We
    agree with that description of the statutory cause of action.

[43]

We
    also agree with the observations of Rowles J.A. (at para. 70) that [t]he
    reason why para. (b) is required in the definition of tobacco related wrong
    is that the action described in s. 2(1) is not within the traditional
    description of a tort action; instead, it is a new form of action that is not a
    subrogated claim, in which the Government may seek to recover health care
    benefits on an aggregate basis.  But this does not mean this new form of
    action is not in substance a tort-related claim, in our view.

[44]

If
    Ontarios statutory claim, founded as it is on a common law tort, is not technically
    a claim in respect of a tort committed in Ontario, it is tantamount to such a
    claim and therefore qualifies as such, because it has all the characteristics
    of such a tort.  At the very least, the statutory claim is sufficiently analogous
    to a tort committed in Ontario that it qualifies as a new connecting factor
    of the sort contemplated in
Van Breda
.  The Supreme Court recognized in
Van Breda

that over time new factors may be identified that
    would also presumptively entitle a court to assume jurisdiction.  In
    identifying new presumptive factors, LeBel J. said, at para. 91, a court
    should look to connections that give rise to a relationship with the forum that
    is similar in nature to the ones which result from the listed factors, one of
    which is a tort committed in the province.  In that regard, he continued, one relevant
    consideration is the [s]imilarity of the connecting factor with the recognized
    presumptive connecting factors.

[45]

Here,
    all of the considerations that apply to the common law tort of conspiracy apply
    to the statutory tort claim created by the legislature.  If a tort committed in
    Ontario is a presumptive factor entitling Ontario courts to assume jurisdiction
    over a dispute, a statutory tort with all of the same trappings, committed in
    Ontario, should be one too.  Recognizing that connection is also in keeping
    with principles of comity, order and fairness  notions that underpin the
    objectives of the conflict of laws regime.

[46]

To
    return to the observations of LeBel J. in
Van Breda
,
at para.
    92, the presumptive connecting factors stemming from the commission of the
    statutory tort in Ontario,

point to a relationship between the subject matter of the
    litigation and the forum such that it would be reasonable to expect that the
    defendant would be called to answer legal proceedings in that forum.  Where
    such a relationship exists, one would generally expect Canadian courts to
    recognize and enforce a foreign judgment on the basis of the presumptive
    connecting factor in question, and foreign courts could be expected to do the
    same with respect to Canadian judgments.  The assumption of jurisdiction would
    thus appear to be consistent with the principles of comity, order and fairness.

[47]

It
    follows that, because Ontarios s. 2(1) claim is a claim in respect of a tort
    committed within Ontario, or one sufficiently analogous thereto, that
    characteristic gives rise to a presumptive connecting factor as between the
    subject matter of the litigation, the appellants and the province, entitling
    Ontario courts to assume jurisdiction over the dispute:
Van Breda
, at paras.
    88-92.

[48]

However,
    the presumption can be rebutted. The appellants argue that this presumption
    should have been rebutted based on the record here.  We do not agree.

[49]

The
    burden of rebutting the presumption is on the appellants, as they are the
    parties challenging the assumption of jurisdiction.  They must establish facts
    which demonstrate that the presumptive connecting factor does not point to any
    real relationship between the subject matter of the litigation and the forum or
    points only to a weak relationship between them:
Van Breda
, at para.
    95.

[50]

Here,
    rather than the presumptive connecting factor not pointing to any real
    relationship, or only a weak one, between the subject of the litigation and
    Ontario, quite the contrary is the case.  What is alleged is a conspiracy to
    breach common law duties and obligations owing to persons in Ontario, and causing
    $50 billion in health care costs to be incurred by Ontario as a result of
    tobacco related wrongs. In
Van Breda
,
the Supreme Court of
    Canada underscored the difficulty in rebutting the presumption where the
    connecting factor involves a tort committed in the jurisdiction.  At para. 96,
    LeBel J. said:

[W]here the presumptive connecting factor is the commission of
    a tort in the province, rebutting the presumption of jurisdiction would appear
    to be difficult, although it may be possible to do so in a case involving a
    multi-jurisdictional tort where only a relatively minor element of the tort has
    occurred in the province.

[51]

It
    can hardly be said that a relatively minor element of the tort has occurred
    in Ontario in this case, assuming that the conspiracy as alleged is made out.  Fifty
    billion dollars in health care costs incurred by the province can hardly be
    said to be minor, particularly when one considers the underlying harm
    suffered by persons in Ontario which those costs reflect.

[52]

In
    our view, the motion judge did not err in concluding that Ontarios claim under
    the Tobacco Act constituted a claim in respect of a tort committed in Ontario
    or an analogous type of claim sufficient to found a presumptive connecting
    factor and trigger the right to effect service out of Ontario under rule
    17.02(g).  Nor did she err in concluding that the presumption had not been
    rebutted in the circumstances of this case.

(4)

Did
    the motion judge err in holding that Ontario established a good arguable case
    for assuming jurisdiction?

[53]

In
    addition to arguing that Ontarios statutory cause of action is not a tort
    committed within Ontario and is not sufficiently analogous to such a claim to
    qualify as a presumptive connecting factor, the appellants submit that Ontario
    has not established a good arguable case for assuming jurisdiction.

[54]

It is well
    established that an Ontario court will assume jurisdiction against a foreign
    defendant only where the plaintiff establishes a good arguable
case for

assuming jurisdiction through either the allegations
    in the statement of claim or a combination of the allegations in the statement
    of claim and evidence filed on a jurisdiction motion:
Tucows.Com Co. v.
    Lojas Renner S.A
.
, 2011 ONCA 548; 106 O.R. (3d) 561, at para. 36;
Ecolab
    Ltd. v. Greenspace Services Ltd.
(1998), 38 O.R. (3d) 145 (Div. Ct.), at pp.
    149-154;
Schreiber v. Mulroney
(2007), 88 O.R. (3d) 605 (S.C.), at para. 18
.

[55]

The
    appellants raise two main issues concerning whether Ontario established a good
    arguable case for assuming jurisdiction in this instance. One issue relates
    largely to the elements of the good arguable case standard; the second relates
    largely to the application of the standard.

[56]

The
    appellants first argument is that, as a preliminary matter, the good arguable
    case standard required that the motion judge determine whether Ontarios
    statement of claim discloses a reasonable cause of action under rule
    21.01(1)(b) of the
Rules of Civil Procedure
. Instead, the motion judge
    held that Ontarios pleading is sufficient for jurisdictional purposes, thus
    implying that a lesser standard of pleading is acceptable on a jurisdiction
    motion. The appellants say this conclusion is an error in law. Moreover, they
    contend that Ontarios pleading fails to disclose a reasonable cause of action
    within the meaning of rule 21.01(1)(b) and that it was not therefore capable of
    meeting the good arguable case standard.

[57]

Second,
    the appellants say that the motion judge erred by treating undenied allegations
    in the statement of claim as true for the purposes of the jurisdiction motion.
    The appellants argue that, in a broadly framed cause of action such as this
    one, Ontario cannot rely on the allegations in its pleadings alone to establish
    jurisdiction, but must also lead evidence demonstrating a good arguable case.
    Some of the appellants also argue that the motion judge made palpable and
    overriding errors in assessing whether Ontario established a good arguable
    case.

[58]

Before
    addressing the appellants arguments in detail, we will briefly review the
    statement of claim and the motion judges reasons concerning this issue.

(a)

The statement of
    claim

[59]

Ontarios
    statement of claim names 14 corporations as defendants. Ontario alleges that
    four of the defendants are Canadian tobacco companies, that one of the
    defendants is the trade association for the Canadian tobacco industry, and that
    the remaining nine defendants are foreign tobacco companies (or former tobacco
    companies). Ontario claims that:

·

all of the defendants are manufacturers as defined in the
    Tobacco Act;

·

there are four multinational tobacco Groups whose member
    companies have engaged directly or indirectly in the manufacture and promotion
    of cigarettes sold in Ontario and throughout the world;

·

each of the Canadian tobacco companies is a member of one of the
    four multinational tobacco Groups;

·

each of the Canadian tobacco companies has engaged directly or
    indirectly in the manufacture and promotion of cigarettes in Ontario;

·

the manufacturers within each multinational tobacco Group had
    common policies relating to smoking and health and these common policies were
    directed and coordinated by one or more of the defendants (Lead Companies);
    and

·

each of the foreign defendants is or was a Lead Company within
    their respective multinational tobacco Group.

[60]

As the
    motion judge noted, Ontario alleges that, by 1950, the defendants knew or ought
    to have known that nicotine is addictive and that smoking cigarettes can cause
    or contribute to disease. By 1970, they knew that exposure to second-hand smoke
    can also cause or contribute to disease.

[61]

The
    statement of claim asserts that, while armed with this knowledge, the
    defendants committed tobacco related wrongs by breaching four duties owed to
    persons in Ontario:

·

the duty to design and manufacture a reasonably safe product;

·

the duty to warn the public about the risks of smoking;

·

the duty not to misrepresent to the public the risks of smoking;
    and

·

the duty to prevent children and adolescents from starting or
    continuing to smoke.

[62]

Among
    other ways, Ontario alleges that the defendants breached these duties and
    thereby committed tobacco related wrongs by the following conduct:

·

manufacturing, selling and promoting the sale of cigarettes
    knowing that cigarettes are addictive to smokers and cause serious disease and
    that exposure to second-hand smoke also causes disease;

·

manipulating the level and availability of nicotine in their
    cigarettes, thus increasing the risk of smoking;

·

suppressing information and scientific and medical data about the
    risks of smoking and of exposure to second-hand smoke;

·

misrepresenting to the public and government that filters reduce
    the risk of smoking and that filtered, mild, low tar and light
    cigarettes were safer than other cigarettes;

·

misrepresenting the risks of smoking and exposure to second-hand
    smoke by, for example, misrepresenting that the defendants were aware of no
    credible research establishing a link between smoking or exposure to
    second-hand smoke to disease;

·

failing to adequately warn the public that cigarettes are
    addictive and cause disease, and engaging in promotional activities to
    neutralise the effectiveness of the warnings on cigarette packaging; and

·

targeting children and adolescents in advertising, promotional
    and marketing activities for the purpose of inducing them to start or continue
    to smoke.

[63]

As a
    result of the tobacco related wrongs, Ontario alleges that Ontarians started or
    continued to smoke cigarettes manufactured and promoted by the defendants and
    suffered tobacco related disease as well as an increased risk of tobacco
    related disease.

[64]

According
    to Ontario, the defendants conspired, and acted in concert in committing
    tobacco related wrongs, through three levels of conspiracy: i) a conspiracy
    within the international tobacco industry; ii) a conspiracy within the Canadian
    tobacco industry; and iii) conspiracies within the multinational tobacco
    Groups.

[65]

Ontario
    claims that the international conspiracy originated in 1953 and early 1954 and
    was intended to prevent Ontario and persons in Ontario and other jurisdictions
    from acquiring knowledge of the harmful and addictive properties of cigarettes.
    It alleges that in a series of meetings and communications, representatives of
    the Lead Companies or of their predecessors agreed to:

·

jointly disseminate false and misleading information regarding
    the risks of smoking;

·

make no statement or admission that smoking causes disease;

·

suppress or conceal research regarding the risks of smoking;

·

orchestrate public relations programs with the objects of
    promoting cigarettes, protecting cigarettes from attack based on health risks
    and reassuring the public that smoking was not hazardous.

[66]

According
    to Ontario, to facilitate this conspiracy, between late 1953 and the early
    1960s, the Lead Companies formed or joined several research organisations so
    that they could publicly misrepresent that objective research was being
    conducted concerning the link between smoking and disease. In reality, the Lead
    Companies conspired with these research organisations to distort the research
    and publicise misleading information.

[67]

Subsequently,
    the Lead Companies, and some or all of the defendants, continued to meet and
    formulate policies aimed at suppressing research regarding the risks of smoking
    and providing misinformation to governments and the public.

[68]

Ontario
    alleges that the conspiracy within the Canadian tobacco industry was aimed at
    preventing the Crown and persons in Ontario from acquiring knowledge of the
    harmful and addictive properties of cigarettes and at committing tobacco
    related wrongs. The conspiracy was entered into and continued through
    committees, conferences and meetings convened and held in Canada and through
    written and oral directives and communications among some or all of them.

[69]

The
    Canadian conspiracy was continued through actions such as the following:

·

agreeing not to compete with each other by making health claims
    regarding the risks of smoking;

·

misrepresentations to the Canadian Medical Association that there
    was no causal connection between smoking and disease;

·

formation of an Ad Hoc Committee on Smoking and Health, which
    later became the Canadian Tobacco Manufacturers Council (collectively CTMC);

·

misrepresentations to the House Of Commons, Standing Committee on
    Health, Welfare and Social Affairs, that there was no causal connection between
    smoking and disease;

·

ongoing lobbying and dissemination of misinformation by CTMC.

[70]

The
    statement of claim also includes allegations that the multinational tobacco
    Groups entered into the international and Canadian conspiracies and that the
    Lead Companies were involved in directing and coordinating the smoking and
    health policies of their respective Groups.

(b)

The motion judges
    reasons

[71]

The motion
    judge dealt with the good arguable case issue in three parts.

[72]

First, she
    reviewed the law in relation to the assumption of jurisdiction in Ontario,
    including the good arguable case standard.

[73]

Concerning
    this issue, she noted, at para. 36, that the starting point on a jurisdiction
    motion is the pleading, as it contains the material facts from which the cause
    of action arose.

[74]

She said:
    Any allegation of fact that is not put into issue by the defendant is presumed
    to be true for the purposes of the motion and [t]he plaintiff is under no
    obligation to call evidence for any allegation that has not been challenged by
    the defendant.
[3]
However, [i]f a foreign defendant files affidavit evidence challenging the
    allegations in the statement of claim that are essential to jurisdiction, the
    threshold for the plaintiff to meet is that it has a good arguable case on
    those allegations.

[75]

The motion
    judge observed that the threshold test of a good arguable case is a low
    standard. It has been compared to a serious issue to be tried or a genuine
    issue or as having some chance of success.

[76]

Second,
    the motion judge addressed the appellants preliminary objection that the
    Ontarios pleading was deficient in that it failed to properly plead the
    allegations of conspiracy and therefore could not be relied upon to establish a
    good arguable case or to support a connection to Ontario. At paras. 51 and 52
    of her reasons, she found that the statement of claim was sufficient for
    jurisdictional purposes. She said, at para. 51:

In this case, and for the purposes of these motions only, I am
    satisfied that the Claim pleads the essential elements of the Crowns cause of
    action under s. 2(1). It connects the dots between the [appellants] and the
    Province of Ontario through the allegations that the appellants, either
    directly or by conspiring or acting in concert with others, breached duties to
    persons in Ontario. The Claim describes the acts that constitute the alleged
    breaches of duty and the means by which the JCDs allegedly conspired and acted
    in concert with others. The Claim itemises the Groups, the Lead Companies and
    the Canadian members of each Group, and the acts alleged to have been taken by
    each of the JCDs as a Lead company within its corporate Group.

The pleading is sufficient for jurisdictional purposes. If
    there are any other pleading issues with the Claim, they can be addressed at
    subsequent motions
.
[Emphasis added.]

[77]

Third, the
    motion judge dealt with whether Ontario had established a good arguable case in
    relation to each appellant. The motion judge briefly reviewed the evidence
    filed by each of the appellants, and the responding evidence, if any, filed by
    Ontario.

[78]

With
    respect to each appellant, the motion judge concluded that the evidence filed
    on the motion failed to put into issue many of the key allegations in the
    statement of claim connecting the appellant to Ontario. Specifically, she noted
    that the various appellants had not denied the allegations of conspiracy. To
    the extent that other important allegations had been denied, the motion judge
    found that Ontarios evidence established a good arguable case in support of
    the allegation. In relation to each appellant, the motion judge summarized the
    good arguable case established by Ontario.

[79]

In
    particular, in relation to each appellant, the motion judge found a good
    arguable case that the specific appellant is or was a manufacturer as defined
    in the Tobacco Act.

[80]

Further,
    she found a good arguable case that each appellant had knowledge of the
    addictive quality of cigarettes and the health risks of smoking and exposure to
    second hand smoke.

[81]

Finally,
    in relation to each appellant, the motion judge found a good arguable case that
    the particular appellant conspired with members of its international tobacco
    Group in committing tobacco related wrongs. Further, in relation to one of the
    RJR defendants, R.J. Reynolds Tobacco Company, she found a good arguable case,
    in effect, that that company committed tobacco related wrongs through cigarette
    sales in Ontario. We set out below the specific examples the motion judge
    provided to support these findings in relation to each appellant:

Investments

by, for example, developing policies on smoking and health for
    the Group; conducting advisory conferences attended by Group members dealing
    with smoking and health issues; preparing guidelines and directives on smoking
    to be followed by Group members; distributing pamphlets and materials to group
    members about smoking and health issues; meeting with research scientists in
    Ontario; and visiting tobacco farms in Ontario. [Footnotes omitted.]

Industries

by, for example, developing objective/strategies and policies
    for key areas of the Group, including smoking and health; maintaining a Group
    position on smoking and health; and through its involvement with Imasco on
    proposed research projects. [Footnotes omitted.]

PLC

by, for example, setting global strategies to be implemented
    by Group members; developing Group policies on advertising of tobacco products
    and public smoking bans; and setting marketing standards for the Group. [Footnotes
    omitted.]

Carreras

Mr. Corsdeschi does not deny the allegations that Carreras
    participated in a conspiracy in the pre-1984 period. He does not deny the
    allegations that Carreras  directed and coordinated common policies on smoking
    and health for the Rothmans Group, including Rothmans Ltd. and Rothmans, Benson
    & Hedges Inc.; and  influenced or advised how the Canadian companies in
    the Group should vote at CTMC meetings on smoking and health issues  Given
    that the pre-1984 allegations have not been put into issue  the jurisdiction
    analysis for Carreras can therefore be conducted on the basis of [those
    allegations].

RJR Defendants

by, for example, directing or coordinating the RJR Groups
    common policies on smoking and health; providing strategic direction to RJR
    Group members; and communicating with RJR Group members on CTMC grant requests.

In addition, Mr Adams evidence is that [R.J. Reynolds Tobacco
    Company] sold US blend cigarettes in Canada between 1974 and 1999 through RJR
    MacDonald Inc. While there is no evidence as to the exact amount of sales into
    Ontario, Mr Adamss evidence is that some of those US blend cigarettes were
    sold into the province of Ontario. [R.J. Reynolds Tobacco Company] argues that
    the Canadian market share of the RJR brand cigarettes was at most only 0.6% between
    1977 and 1999 and that this is insufficient to ground a connection. I disagree
    - according to the evidence, 0.6% represents millions of dollars of sales and
    millions of cigarettes sold. [Footnotes omitted.]

(c)

Analysis

(i)

Did
    the motion judge err in hold that Ontarios pleading is sufficient for
    jurisdictional purposes?

[82]

We turn
    now to the appellants first argument. The appellants claim that, as a
    precondition to determining whether the plaintiff can benefit from a
    presumptive connecting factor, the good arguable case standard requires an
    assessment of whether the plaintiffs statement of claim asserts a viable cause
    of action. They submit that this assessment requires a determination of whether
    the statement of claim meets the standard of a pleading required on a motion
    brought under rule 21.01(1)(b) of the
Rules of Civil Procedure
. In
    support of their position, they rely primarily on
Tucows.Com Co. v. Lojas
    Renner S.A.
;
Schreiber v. Mulroney
; and
Wall Estate v.
    Glaxosmithkline Inc.
, 2010 SKQB 351; 367 Sask.R. 21.

[83]

Under rule
    21.01(1)(b), the court may strike out a statement of claim where it fails to
    disclose a reasonable cause of action. This may occur where the allegations do
    not fall within a cause of action known to law, or because the statement of claim
    fails to plead all the essential elements of a recognized cause of action:
Dawson
    v. Rexcraft Storage and Warehouse Inc.
(1998), 164 D.L.R. (4th) 257
    (C.A.), at para. 10.

[84]

In this
    case, the appellants say that Ontarios statement of claim fails to meet the
    rule 21.01(1)(b) standard because, in relation to the tobacco related wrongs,
    Ontario lumped the defendants and the alleged breaches of duty together, and
    failed to specify what particular breaches of duty it alleges as against each
    defendant  and at what particular point in time. As a result, the appellants
    say that Ontario failed to adequately plead the material facts that support the
    alleged cause of action.

[85]

Particularly
    on a jurisdiction motion, where a finding of jurisdiction depends on principles
    of comity, order and fairness  and particularly in the context of a statutory
    cause of action that permits Ontario to claim aggregate damages for a myriad of
    breaches in relation to events that occurred during a period spanning over 50
    years  the appellants assert that a proper pleading is essential.

[86]

A proper
    and fully particularized pleading is necessary not only to enable the foreign
    defendants to know who Ontario alleges did what and when, but also to ensure
    that jurisdiction is assumed only if Ontario has established that it has a
    viable cause of action against each appellant.

[87]

Concerning
    the tobacco related wrongs alleged, the appellants say the statement of claim
    fails to specify, for example: on what particular basis Ontario alleges any of
    the appellants is a manufacturer; in what particular respect Ontario alleges
    that any warnings that were given by tobacco manufacturers to the public were
    deficient; and what specific misrepresentations Ontario alleges were made when
    and by whom

[88]

In
    addition, the appellants rely on the fact that, in oral submissions before the
    motion judge, Ontario acknowledged that it is not advancing a direct cause of
    action for tobacco related wrongs against Carreras, BAT plc, and Industries.
    Rather, its cause of action against those appellants rests solely on its claim
    under s. 4 of the Tobacco Act that those appellants conspired with domestic
    defendants who committed tobacco related wrongs. In the result, the appellants
    claim that the statement of claim, which advances claims for tobacco related
    wrongs against all defendants, is hopelessly confusing.

[89]

As for
    Ontarios conspiracy claims under s. 4 of the Tobacco Act, the appellants say the
    statement of claim fails to plead with the particularity and precision required
    the specific overt acts alleged to have been taken by each appellant in
    furtherance of any of the three conspiracies. In addition, the statement of
    claim improperly lumps appellants together as defendants, alleging in many
    instances that some or all of them committed various acts.

[90]

The
    appellants say that similar pleadings have been held not to meet the standard
    of a pleading required to assert a viable cause of action under rule
    21.01(1)(b) and accordingly have been struck on those grounds. They point to
    such cases as:

Martin v. Astrazeneca Pharmaceuticals PLC
,

2012
    ONSC 2744; 27 C.P.C. (7th) 32, at paras. 167-170;

Normart Management
    Ltd. v. West Hill Redevelopment Co.
(1998), 37 O.R. (3d) 97 (C.A.), at
    para. 25;
D.G.
Jewelry Inc. v. Cyberdiam Canada Ltd.
(2002), 21
    C.P.C. (5th) 174 (Ont. S.C.), at para. 33;

and
J.G. Young & Son
    Ltd. v. Tec Park Ltd.
(1999), 48 C.P.C. (4th) 67 (Ont. S.C.), at para. 6.

[91]

The
    appellants rely in particular on the fact that, in her reasons, the motion
    judge rejected the appellants preliminary objection concerning the adequacy of
    Ontarios statement of claim by holding that it was sufficient for
    jurisdictional purposes. According to the appellants, in doing so, and in
    failing to apply the rule 21.01(1)(b) standard to the pleadings to make a
    preliminary assessment of whether Ontario pled a viable cause of action, the
    motion judge erred in law.

[92]

We do not
    accept these submissions. As a starting point, we are not satisfied that
Tucows
,
    or any of the other cases relied upon by the appellants, stand for the
    proposition that, on a jurisdiction motion, the motion judge must first assess
    whether the statement of claim meets the rule 21.01(1)(b) standard for
    pleadings.

[93]

In
Tucows
,
    the plaintiff applied for a declaration that it was not using the domain name
    renner.com in bad faith and that the defendant was not entitled to a transfer
    of the domain name. The issue was whether the claim could properly be served
    outside of the jurisdiction under rule 17.02(a) as a claim in respect of 
    personal property in Ontario.

[94]

In holding
    that the claim fell within rule 17.02(a), this Court rejected an argument that
    a claim for declaratory relief could not meet the good arguable case standard
    because a claim for a declaration does not constitute a cause of action. In
    doing so, this Court relied on decisions made under rule 21.01(1)(b) declining
    to strike claims for declarations as failing to disclose a reasonable cause of
    action. Further, Weiler J.A., speaking for this Court, said the following at
    para. 33:

Regard must be had to the
Rules of Civil Procedure
in
    deciding whether the originating process used by Tucows to invoke the
    jurisdiction of the Ontario Superior Court asserts a cause of action.

[95]

The
    appellants point to this Courts reliance in
Tucows
on rule
    21.01(1)(b) cases and the above quotation in support of their position that, on
    a jurisdiction motion, the motion judge must make a preliminary determination
    of whether the pleadings meet the rule 21.01(1)(b) standard.

[96]

In our
    view, the decision in
Tucows
does not go that far. In
Tucows
,
    the motion judge had determined, in effect, that the plaintiffs claim for a
    declaration did not assert a cause of action known to law. This Courts
    statement, as quoted above, was made in direct response to that finding. The
    balance of this Courts reasons were focused on determining whether a claim for
    a declaration can constitute a cause of action, and if so, whether the claim
    related to personal property in Ontario.

[97]

In
Tucows
,
    there was no issue as to the adequacy of the pleadings. Rather, the issue was
    whether the claim for a declaration in that case constituted a cause of action.
    And while this Court in
Tucows
confirmed that the good arguable case
    standard continues to be accepted, it said nothing intended to expand upon or
    modify that standard.

[98]

Similarly,
    in our view, neither
Schreiber nor Wall Estate

stand for the
    proposition that, on a jurisdiction motion, the motion judge must first assess
    whether the statement of claim meets the rule 21.01(1)(b) standard for
    pleadings.

[99]

In
Schreiber
,
    the issue addressed was whether sufficient connecting factors had been
    established under the
Muscutt
test
[4]
to support an assumption of jurisdiction. At para. 31 of his reasons, the
    motion judge specifically noted that he had not been asked to decline
    jurisdiction on the basis that the evidence did not establish a good arguable
    case. Nor is there any indication that he was asked to determine, as a
    preliminary matter, that the cause of action had not been sufficiently pled.

[100]

In
Wall Estate
, the
    statement of claim failed to particularize
any
specific acts
    connecting the foreign defendants to Saskatchewan. Importantly, the evidence
    filed by the foreign defendants established there was no such connection.

[101]

As we will discuss below,
    while the good arguable case standard can apply solely to the pleadings, where
    a defendant adduces evidence to challenge the allegations in the statement of
    claim, the good arguable case standard applies to the combination of the
    pleadings and the evidence adduced by the parties.

[102]

In this case, the motion
    judges reasons did not begin and end with her findings on the appellants
    preliminary objection. Rather, in relation to each appellant, the motion judge
    examined whether the combination of the pleadings and evidence, if any,
    established a good arguable case for assuming jurisdiction.

[103]

After doing so, the motion
    judge concluded that Ontario had established a good arguable case for assuming
    jurisdiction in relation to each appellant based on the conspiracy allegations
    (and, in relation to RJR Company, based on the allegations of sales of
    cigarettes/carrying on business in Ontario). For each appellant, the motion
    judge gave examples of how that appellant had participated in the conspiracy.
    In the case of Carreras Rothmans Limited, the examples were drawn from undenied
    allegations in the pleadings. In the case of all other appellants, the examples
    were drawn from a combination of undenied allegations in the pleadings and
    evidence adduced on the motion.

[104]

Whether Ontarios pleading
    is technically deficient because of lumping defendants or failing to fully
    particularize the allegations of misconduct against each defendant, the
    examples given by the motion judge were sufficient to persuade her that the
    conspiracy claim against each appellant has some prospect of success, and that,
    because of the nature of the conspiracy alleged, Ontario has established a good
    arguable case for assuming jurisdiction.

[105]

Even if Ontarios statement
    of claim is deficient, clearly the motion judge was of the view that it is
    capable of amendment. We see no error in the motion judges conclusion in this
    respect. And, for the purposes of a jurisdiction motion, in our view, that is
    all that was required.

[106]

In our opinion, on a
    jurisdiction motion, the motion judge is not required to subject the pleadings
    to the scrutiny applicable on a rule 21 motion. So long as a statement of claim
    advances the core elements of a cause of action known to law and appears
    capable of being amended to cure any pleadings deficiencies such that the claim
    will have at least some prospect of success, the issue for the motion judge is
    whether the claimant has established a good arguable case that the cause of
    action is sufficiently connected to Ontario to permit an Ontario court to
    assume jurisdiction. If an Ontario court can assume jurisdiction, the issue of
    the adequacy of the pleadings is properly dealt with on a motion brought under
    rule 21.01(1)(b).

[107]

This approach ensures that a
    foreign defendant will not be required to come to Ontario to respond to what
    are nothing more than frivolous allegations but, at the same time, affords
    persons in Ontario advancing claims against foreign defendants the same
    opportunity to amend a technically deficient claim as is provided to domestic
    defendants.

(ii)

Did the motion
    judge err in applying the good arguable case standard?

[108]

Turning to the second issue,
    the appellants argue that, in holding that Ontario established a good arguable
    case for assuming jurisdiction, the motion judge erred by treating undenied
    allegations in the statement of claim as true. In addition, some of the
    appellants argue that the motion judge made palpable and overriding errors in
    her assessment of the evidence that was before her.

[109]

We did not call on Ontario
    to respond to either of these arguments.

[110]

In its factum, Ontario
    argues that the motion judge was entitled to rely on allegations in the
    statement of claim as true if those allegations have not been rebutted by
    affidavit evidence. Ontario submits that allegations on a jurisdiction motion
    should be assessed as follows:

·

The facts pleaded in the statement of claim are taken as true,
    and if they are sufficient to establish a good arguable case, the pleadings
    alone can satisfy the court that it has jurisdiction over the claim:
British
    Columbia v. Imperial Tobacco Canada Ltd.
, 2005 BCSC 946; 44 B.C.L.R. (4th)
    125, at paras. 132-134.

·

The foreign defendants may put forward affidavit evidence for the
    purpose of challenging the factual allegations in the statement of claim, but
    any allegations in the statement of claim that remain unchallenged by the
    defendants may be taken as true for the purpose of the jurisdiction motion:
Ontario
    New Home Warranty Program v. General Electric Co.
(1998), 36 O.R. (3d) 787
    (Gen. Div.), at pp. 797-799.

·

The plaintiff may respond to any evidence put forward by the
    foreign defendant in order to satisfy the court that there is a good arguable
    case:
Vitapharm Canada Ltd. v. F. Hoffman-La Roche Ltd.
(2002), 20 C.P.C. (5th) 351
(Ont. S.C.),
    at para. 64.

[111]

The appellants contend that
    Ontarios position, which the motion judge adopted, takes the authorities too
    far. In particular, they say that two decisions stand for the proposition that
    where facts relevant to jurisdiction are not sufficiently particularised, it is
    incumbent on the claimant to lead evidence to support those facts:

Furlan
    v. Shell Oil Co.
, 2000 BCCA 404; 77 B.C.L.R. (3d) 35, at para. 16; and
Schreiber
, at paras. 27 and 32.

[112]

Further, even if the general
    principles adopted by the motion judge are correct, the appellants say that the
    breadth of the statutory cause of action makes this case different and required
    that Ontario call evidence to establish a good arguable case for assuming
    jurisdiction. They point to the fact that the allegations upon which Ontario
    relies are broadly framed and span a period of over 60 years. They claim that,
    in these circumstances, it is unfair to require them to assert in an affidavit
    what would be nothing more than a bald denial made in response to general
    allegations that are completely lacking in particulars.

[113]

On our review of the two
    decisions relied upon by the appellants, at their highest, they stand for the
    proposition that a claimant may be required to call evidence to support
    undenied allegations in a statement of claim or other originating process
    either where the cause of action as pleaded appears to be devoid of merit or
    where the pleadings fail to demonstrate any air of reality concerning the
    possible existence of a presumptive connecting factor.

[114]

As we have said, in this
    case, it is apparent that the motion judge was satisfied that, even if
    deficient from a pleadings perspective, Ontarios statement of claim can at
    least be amended to advance causes of action against the appellants that will
    have some prospect of success, and which, if they do succeed, clearly have a
    real and substantial connection to Ontario. We have found no error in her
    conclusions in this respect. Moreover, we are not persuaded that the motion
    judges reliance on the fact that the appellants failed to deny the conspiracy
    allegations created any unfairness to the appellants in the circumstances of
    this case.

[115]

The core allegations against
    the appellants are that they participated in three levels of conspiracy to
    breach duties to persons in Ontario: an international conspiracy, a Canadian
    conspiracy and intra-Group conspiracies.

[116]

The duties at issue are
    clear cut: the duty to design and manufacture a reasonably safe product; the
    duty to warn the public about the risks of smoking; the duty not to
    misrepresent to the public the risks of smoking; and the duty to prevent
    children and adolescents from starting or continuing to smoke.

[117]

The manner in which Ontario
    alleges the appellants breached these duties is equally clear cut. In essence,
    it is alleged that they conspired with Canadian members of their respective
    Groups, and with members of other Groups, to mislead Ontario and persons in
    Ontario about the health risks of smoking and to suppress information about the
    dangers of smoking. In relation to each appellant, the motion judge gave
    examples derived from the pleadings, or from the pleadings and the evidence
    adduced on the motion, concerning how Ontario alleges this was done.

[118]

In short, this is not a case
    where the statement of claim contains nothing more than a series of bald
    allegations devoid of any factual foundation. We are satisfied that the
    pleadings, in combination with the affidavit evidence filed by the parties,
    adequately establish a cause of action known to law with a sufficient
    connection to Ontario. While the appellants take issue with the
    particularization of some of the plaintiffs allegations in its statement of
    claim, that issue may be addressed on a motion under rule 21.01(1)(b). A
    jurisdiction motion is not the appropriate proceeding for scrutinizing in
    detail the adequacy of the pleadings, nor is it the proper place for engaging
    in a rigorous assessment of whether the plaintiffs claim will ultimately
    succeed.

[119]

As for the argument that the
    motion judge made palpable and overriding errors in holding that Ontario
    established a good arguable case for assuming jurisdiction against each
    appellant, we are not persuaded that any of the appellants have demonstrated
    any such error. The motion judge referred to evidence and undenied allegations
    that were capable of supporting her findings and drew inferences that were
    available on the record that was before her. We see no basis on which to interfere
    with her conclusions.

(5)

Costs Award

[120]

The motion judge
    awarded costs of the jurisdiction motion to Ontario in the amount of $425,000
    for fees and $152,520 for disbursements.
[5]
Of these amounts, she ruled that the BAT Group appellants (Investments,
    Industries and BAT plc) and Carreras would be jointly and severally liable for
    $340,000 in fees and roughly one-half of the disbursements.  The RJR appellants
    would be jointly and severally liable for $85,000 in fees and the other half of
    the disbursements.  She made this award in spite of the appellants arguments
    that:

a)

costs should be
    calculated on a distributive basis (i.e., they should reflect that the
    appellants and Ontario had each been successful, or partly successful on some,
    but not all of the motions leading up to the actual jurisdiction hearing);

b)

Ontarios costs should
    be reduced because Ontario did not produce evidence of the actual hourly rates
    of Crown counsel involved in the proceedings;

c)

Ontario ought not to
    be entitled to its costs relating to the cross-examinations of the appellants
    affiants, per rule 39.02(4)(b); and,

d)

the appellants ought
    not to be held to be jointly and severally liable for costs.

[121]

The appellants
    seek leave to appeal, and if leave is granted, appeal the costs award, raising essentially
    the same objections. While we would grant leave, we would dismiss the appeal.

[122]

Awarding costs
    of a proceeding is a discretionary remedy.  The motion judge is the case
    management judge of these proceedings and was very familiar with all of the motions
    leading up to the ultimate jurisdictional hearing. She was aware of the factors
    in play in those procedural skirmishes, including the results and partial
    results.  We see no error in principle or law in her exercise of discretion and
    therefore no basis for interfering with the conclusion to which it led.

(a)

Costs Award on a Global Basis as Opposed to a
    Distributive Basis

[123]

Prior to the
    actual jurisdiction hearing there were four proceedings within that proceeding that
    are relevant for the purposes of the costs debate:

i)

Ontario cross-examined the appellants fact and expert witnesses (in the
    United Kingdom with respect to the BAT Group and Carreras appellants for seven days;
    and in the United States with respect to the RJR appellants for one day).

ii)

Ontario brought a refusals motion arising out of some of these
    cross-examinations, which, although initially successful before the Master, was
    ultimately unsuccessful before a Superior Court judge and before the Divisional
    Court.

iii)

The parties argued a seven-day evidentiary motion before the motion
    judge concerning the admissibility of certain evidence on the jurisdiction
    motion itself.  In the result, portions of the affidavit of Ontarios affiant 
    but not all, as requested by the appellants  were struck out. Some of the many
    documents attached to that affidavit were ruled inadmissible, some were ruled
    authentic and admissible, and still others were ruled both authentic and
    admissible for the truth of their contents.

iv)

Finally, Industries and Investments brought a partially successful
    motion to strike out certain paragraphs in Ontarios revised factum.

[124]

In her costs
    reasons, the motion judge noted that counsel had agreed to defer the issue of
    costs for the steps leading up to the substantive hearing on the jurisdiction
    motion until the end of that hearing.

[125]

The substantive
    hearing of the jurisdiction motion itself lasted eight days.

[126]

The appellants
    recognize that courts generally resist making distributive costs awards based
    on issues in a particular proceeding: see
Armak Chemicals Ltd. v. Canadian
    National Railway Co.

(1991), 5 O.R. (3d) 1 (C.A.), at paras. 17-19.
    They submit, however, that the foregoing steps were substantially discrete and
    separate proceedings, and, in some cases, were proceedings in which costs would
    generally have been awarded had it not been for the agreement of counsel to
    treat them otherwise.

[127]

Given the
    agreement of counsel, it seems to us however that the parties must have
    contemplated that the motion judge would deal with costs on a global basis, as
    she in fact did.  She was aware that she had to consider all of the steps in
    determining costs, and her reasons show that she factored in the varying levels
    of success throughout the proceedings in arriving at her ultimate conclusion as
    to quantum.  We see no error in that approach, or in her finding that all of
    those steps were part of, and integrally related to, the jurisdictional
    challenge.

[128]

We also agree
    with the motion judges observations on the irony of the appellants position
    in this regard, had they been successful.  The effect of their submissions 
    which would have seen them recover costs for the bulk of the seven-day
    evidentiary hearing  was that they would receive almost $1 million in costs on
    a jurisdiction motion that they ultimately lost (and, incidentally, for which
    the successful party only received approximately $577,000 in total).  The
    motion judge correctly viewed this as unreasonable, in our opinion.

(b)

Principle of Indemnity: Hourly Rates

[129]

Although the
    hourly rates sought by counsel for Ontario were approximately one-half of those
    being claimed by the appellants for counsel with comparable years of
    experience, the appellants contend that the provinces hourly rates were unjustified,
    excessive and beyond the reasonable expectations of the parties.
[6]
They further submit that the province is only entitled to partial indemnity for
    the costs incurred and that it was therefore required to supply proof of its
    actual costs for lawyers time  in effect, the salaries of Crown counsel  in
    order to establish a basis for the motion judge to determine a correct partial
    indemnity rate for the province.

[130]

We do not agree.

[131]

The appellants
    rely on rule 57.01(1)(0.a), rule 57.01(6) and Form 57B for their argument that
    the province was required to file information establishing its hourly rates.

[132]

Rule
    57.01(1)(O.a) reflects the indemnity principle underlying much of the rationale
    for the recovery of costs.  It states:

(1) In exercising its discretion under section 131 of
    the
Courts of Justice Act
to award costs, the court may consider, in
    addition to the result in the proceeding and any offer to settle or to
    contribute made in writing,

(O.a) the principle of indemnity, including, where
    applicable, the experience of the lawyer for the party entitled to the costs as
    well as the rates charged and the hours spent by that lawyer.

[133]

Rule 57.01(6)
    requires the parties to exchange a Form 57B costs outline, and Form 57B
    contains a column for the hours spent, the rates sought for costs and the rate
    actually charged by the partys lawyer.

[134]

There is no
    issue that actual rates charged may be a relevant consideration in determining
    costs: see
Stellarbridge Management Inc. v. Magna International (Canada)
    Inc.
(2004), 71 O.R. (3d) 263 (C.A.), at paras. 94-99. However, hourly
    rates and the notion of indemnification, while clearly important, are not the
only
relevant considerations: see
1465778 Ontario Inc. v. 1122077 Ontario Ltd.

(2006), 82 O.R. (3d) 757 (C.A.); and
Chiefs of Ontario v. Ontario
,
    [2007] O.J. No. 4068 (S.C.), paras. 12-14 and 17. The courts authority under
    rule 57.01(1) remains discretionary, and it is significant that under rule
    57.01(1)(0.a), information regarding rates charged and hours spent is called
    for in applying the principle of indemnity only 
where applicable
.  Rates
    and hours spent are not particularly applicable in situations where counsel
    are salaried employees of their employer litigant.  In those circumstances, the
    salaried lawyer does not generally send a bill to his or her employer for
    services rendered, with or without hourly rates.

[135]

Section 131(2)
    of the
Courts of Justice Act
, R.S.O 1990, c. C.43, and s. 36 of the
Solicitors
    Act
, R.S.O. 1990, c. S.15 both affirm the Crowns right to recover its
    partial indemnity costs in proceedings in which it has been successful, even
    though it is represented by salaried counsel.  They provide:

Courts of Justice Act

131(2) In a proceeding to which Her Majesty is a party, costs
    awarded to Her Majesty shall not be disallowed or reduced on assessment merely
    because they relate to a lawyer who is a salaried officer of the Crown

Solicitors Act

36. Costs awarded to a party in a proceeding shall not be
    disallowed or reduced on assessment merely because they relate to a solicitor
    or counsel who is a salaried employee of the party.

[136]

As Ontario
    acknowledges, these provisions do not deprive the court of its discretion in
    fixing costs.  However, the courts in many jurisdictions have adopted the
    principle that, where a successful party is represented by a salaried lawyer,
    the proper method of fixing costs is to deal with them as though they were the
    costs of an independent outside counsel.  The theory behind this approach is
    that it will roughly and fairly approximate the actual amount of expenses
    incurred: see
Re Eastwood (deceased)
, [1974] 3 All E.R. 603, at p. 608
    (where the English Rule appears to have been first articulated);
City of
    Edmonton and Public Utilities Board
(1985),
    16 D.L.R. (4th) 459 (Alta. C.A.), at p. 464
;
872245 N.W.T. Ltd.
    v. Dowdall
, [1989] N.W.T.J. No. 114 (S.C.);
Grand & Toy Ltd. v.
    Aviva Canada Inc.
, 2010 ONSC 372, at paras. 3-5.

[137]

The motion judge
    followed this approach.  She was entitled to do so.

[138]

In the end, the
    motion judge simply followed the test signalled by Armstrong J.A. in
Boucher
    v. Public Accountants Council for the Province of Ontario
(2004), 71 O.R.
    (3d) 291 (C.A.), at para. 26: the objective is to fix an amount that is fair
    and reasonable for the unsuccessful party to pay in the particular proceeding,
rather
    than an amount fixed by the actual costs incurred by the successful litigant

    (emphasis added).

(c) Cross-Examinations

[139]

Rule 39.02(4)(b)
    provides that a party who cross-examines on an affidavit (other than on a
    motion for summary judgment) is liable for the partial indemnity costs of every
    adverse party with respect to the cross-examination, regardless of the outcome
    of the proceeding,
unless the court orders otherwise
.


[140]

The motion judge
    recognized her discretion to order otherwise.  She exercised it in favour of Ontario
    in the circumstances, and gave unassailable reasons for doing so.  These
    reasons included: (i) that the appellants did not contest jurisdiction solely
    on the basis of the allegations in the pleadings, but relied heavily on the
    evidence of their affiants; (ii) that she herself relied on the cross-examination
    evidence, including the answers to undertakings, in arriving at her decision;
    and (iii) that it was reasonable and necessary for Ontario to cross-examine the
    BAT Group appellants U.K. expert, because the BAT Group appellants had decided
    to do the same with Ontarios expert.

[141]

There is no
    basis for interfering with that decision.

[142]

We note that
    once again, the motion judge was not oblivious to what appears to us to be an
    irony in the appellants position with respect to costs of the
    cross-examinations. She observed that the appellants themselves were seeking to
    recover the costs of
their
cross-examinations of Ontarios affiants.

(d)

Joint and Several Liability

[143]

Nor do we see any
    error in the decision to make costs payable on the basis of joint and several
    liability.

[144]

The motion judge
    appropriately distinguished between the RJR moving parties on the one hand, and
    the BAT Group and Carreras moving parties on the other hand.  Although there
    was some overlap between the respective positions of these Groups, she
    concluded that there were sufficient differences to militate against making all
    moving parties jointly and severally responsible for costs.  No one contests
    this decision.

[145]

Industries,
    Investments, BAT plc, and Carreras attack the decision to hold them jointly and
    severally liable for their portion of the costs, however.  They argue that a
    joint and several award of costs is unusual and was unwarranted in this case. 
    They say the motion judge unfairly penalized them for doing exactly what she as
    the case management judge had asked them to do: namely to cooperate in their filings
    and submissions in order to expedite and simplify the proceedings.

[146]

The motion judges
    decision was based on more than administrative efficiency, however.  Her
    decision to make the BAT Group appellants and Carreras jointly and severally
    liable for their portion of the costs was based on the overlap in factual and
    legal issues among them, their inter-corporate relationships, and their
    adoption of common arguments.  In addition, we note that this was a case of
    multiple parties launching a proceeding in which they sought like remedies
    against the same responding party.

[147]

The authorities
    relied upon by the appellants are distinguishable.

[148]

In
Society
    of Lloyds v. Saunders
, [2001] O.J. No. 5144 (C.A.), the key to this Courts
    decision not to allow costs on a joint and several basis was the fact that the
    parties against whom the award was sought were defending the proceedings, not
    bringing them, and were therefore required to defend.  The Court felt that a
    joint and several award in those circumstances would be onerous and
    potentially unfair and would penalize the parties for having to defend.  Here,
    that rationale does not apply.

[149]

Bossé v.
    Mastercraft Group Inc.

(1995), 123 D.L.R. (4th) 161 (Ont. C.A.) was
    an action in which a number of financial institutions sought to recover from
    approximately 170 investors on loans that were in default as a result of a
    failed tax-driven arrangement concerning the purchases of condominiums.  The
    issue on appeal was whether those investors were required to pay costs on a
    solicitor/client basis.  The fact that the award had been made on a joint and
    several basis was not contested.  While the Court did observe, at para. 66,
    that the joint and several award was admittedly a highly unusual one, the
    comment was based on the fact that the award could cause an onerous unfairness
    on various investors, who had no business relationship between them but who
    could be called upon to pay an award that exceeded their mortgage debt to the
    institution.  Again, that is not the case here.

[150]

While joint and
    several costs awards may be unusual, it was open to the motion judge, in our
    view, to exercise her overall discretion with respect to costs by making them payable in the joint and several
    fashion that she did, for the reasons she did.

Released:

MAY 30 2013                                   Janet
    Simmons J.A.

DD                                                  R.A.
    Blair J.A.

I
    agree Doherty J.A.





[1]

Ontario v. Rothmans
, 2011 ONSC 5356.



[2]

Moran v. Pyle National (Canada) Ltd
.
, [1975] 1 S.C.R. 393.



[3]
The motion judge cited the following decisions in support of these principles:
British
    Columbia v. Imperial Tobacco Canada Ltd
.
, 2005 BCSC 946; 44
    B.C.L.R. (4th) 125, at paras. 132-134;
British Columbia v. Imperial Tobacco
    Canada Ltd.
, 2006 BCCA 398; 56 B.C.L.R. (4th) 263, at para. 25;
Ontario
    New Home Warranty Program v. General Electric Co.
(1998), 36 O.R. (3d) 787
    (Gen. Div.);
AG Armeno Mines and Minerals Inc. v. PT Pukuafu Indah
,
    2000 BCCA 405; 77 B.C.L.R. (3d) 1, at para. 26;
Stanway v. Wyeth Pharmaceuticals
    Inc.
, 2009 BCCA 592; 314 D.L.R. (4th) 618, at para. 70;
Furlan v.
    Shell Oil Co
.
, 2000 BCCA 404; 77 B.C.L.R. (3d) 35, at paras. 13-14.



[4]

Muscutt v. Courcelles
(2002), 60 O.R. (3d) 20 (C.A.)



[5]

Ontario v. Rothmans et al.,
2012 ONSC 1804; 28 C.P.C. (7th) 103.



[6]
Joint factum of the BAT appellants and Carreras regarding costs, para. 7.


