In this rapidly evolving age of globalization, interjurisdictional collaboration on projects has never been easier. By the same token, there has never been more potential for interjurisdictional disputes regarding those projects. When a court’s intervention becomes necessary, litigants must first solve the dilemma: which court?
Three tests can be used to answer this question, and choosing the appropriate test plays a critical role in advancing one’s arguments in a motion regarding proper forum. A recent decision of the Ontario Court of Appeal (“ONCA”) has highlighted the importance of litigants framing their jurisdictional dispute arguments using the correct test based on the factual and contractual context of their matter. In overturning the lower court’s decision, the ONCA highlighted the need for both courts and counsel to be alive to the nuances in bringing different types of motions regarding jurisdiction.
The Facts
Black & McDonald Limited v Eiffage Innovative Canada Inc.[1] dealt with a construction project related to a bridge located in British Columbia. Eiffage Innovative Canada Inc. (“Eiffage”) was the general contractor for the project and worked for the Minister of Transportation and Infrastructure of British Columbia (the “Minister”). Eiffage and Minister entered into a prime contract for the contract (“the Prime Contract”). Black & McDonald Limited (“B&M”) was one of Eiffage’s subcontractors on the project under Eiffage. B&M and Eiffage were both based in Ontario, and they entered into the subcontract for B&M’s work in Ontario (the “Subcontract”).
B&M commenced an action in Ontario after that it had completed the work under its subcontract but had not been paid by Eiffage. B&M commenced an action in Ontario for unpaid invoices/breach of contract against Eiffage, as well as and breach of trust claims against individuals from Eiffage (the “Individual Respondents”) as B&M alleged that Eiffage had been paid by the Minister for B&M’s work despite not paying B&M for that same work.
Liberty Mutual Insurance Company (“Liberty”) had issued a Labour & Material Payment Bond (“the “Bond”) in respect of the construction project. The Bond, providing for indemnification for subcontractors should Eiffage fail to pay for work on the project. B&M also brought an action against Liberty for payment under the Bond.
All three parties had offices located in Ontario and it was these Ontario offices which were involved in the matter. Specifically, Eiffage’s head office (and trust account) was located in Ontario, and did not have offices in any other jurisdictions.
The Motions
In response to B&M’s action, Liberty brought a motion to stay or dismiss the action on the basis that the Ontario Superior Court lacked jurisdiction., Liberty argued the action against it should have been commenced in British Columbia based the terms of the Bond. The Bond stated that no action could be commenced “other than in a court of competent jurisdiction or in the province or territory of Canada in which the subject matter of the Contract, or any part thereof, is situated and not elsewhere, and the parties agree to submit to the jurisdiction of such Court”. Liberty argued that since the bridge was in BC, this required an action on the Bond to be commenced in BC.
Eiffage also brought a motion seeking similar relief and similarly arguing that British Columbia was the proper forum for the action. Eiffage challenged B&M’s action on the basis that BC was the more convenient forum for the dispute.
The Ontario Superior Court of Justice’s Decision
(1) The Real and Substantial Connection Test
When a plaintiff commences an action, they must select a forum they believe is appropriate. Typically, this is a non-controversial step as the parties and events in question most often are situate in a single country or province.
Where the parties and/or events are spread across multiple jurisdictions, a plaintiff must make a strategic decision about where to commence the litigation, and must have regard to any contractual challenges to their selected forum, as well as potentially non-contractual challenges that may exist on the facts of the case.
The most basic hurdle that a plaintiff must overcome is a challenge on the basis that the selected forum lacks jurisdiction at all to hear the dispute. In such cases, a party may argue that the selected forum lacks “jurisdictional simpliciter”. The test to determine whether a given court has jurisdictional simpliciter to hear a given dispute is based on the “real and substantial connection” test. Where there exists a real and substantial connection to the jurisdiction in which the action was brought, jurisdiction simpliciter is presumed and that court is entitled to assume jurisdiction unless there is a very good reason to deny jurisdiction.
Such a connection to a province can be established where:
(a) the defendant is domiciled or resident in the province;
(b) the defendant carries on business in the province;
(c) the tort was committed in the province; or
(d) a contract connected with the dispute was made in the province[2]
Not all four factors need to be made out. In fact, only a single factor is necessary to establish a real and substantial connection test between the action and the court.
The plaintiff bears the onus of establishing at least one factor applies, but once that has been achieved, the defendant has the onus of rebutting the presumption of jurisdiction by demonstrating that the connecting factor ought to be viewed as insufficient to ground jurisdiction.
Generally speaking, it is very difficult for a defendant to rebut the presumption of jurisdiction once a connecting factor has been established by a plaintiff.
During oral argument of the motion, Eiffage and the Individual Respondents conceded that the Ontario Superior Court of Justice had jurisdiction simpliciter over Eiffage and the Individual Respondents. As such, the motion judge did not consider this issue and moved on to analyze Eiffage’s argument that British Columbia was the most convenient forum for the action.
(2) Forum Selection Clauses and the Strong Cause Test
Another potential route for a defendant to challenge the plaintiff’s choice of forum is to rely on a forum selection clause in a contract between the parties and which applies to the dispute in question. Whichever jurisdiction is specified in a forum selection clause has contractual entitlement to be the jurisdiction in which the dispute is heard, unless there is a “strong cause” why it should not.
The test for whether a forum selection clause can oust the plaintiff’s chosen forum first begins with an analysis of whether the contract and clause in question in fact apply to the dispute in question. If so, the next step is to consider whether the contract and clause in question provide for a mandatory choice of forum clause such that the parties had agreed to one particular forum being the exclusive forum for any dispute. Non-exclusive jurisdiction clauses have been interpreted to have much less ability to constraint a plaintiff’s choice of forum.
Wordings within the Prime Contract, Subcontract, and Bond were raised and argued to be demonstrative of agreed upon attornment to the jurisdiction of British Columbia. However, the motion judge did not consider these arguments within the context of a forum selection clause legal analysis and instead considered them within the context of Eiffage’s forum non conveniens argument, which is a different test with different consideration.
The motion judge’s combination of two separate legal tests into a single test is discussed below, but it was also the subject of the appeal before the Court of Appeal.
(3) Forum Non Conveniens
Unlike jurisdiction simpliciter and forum selection clauses, forum non conveniens is a discretionary form of relief. While another legal basis may dictate that a plaintiff cannot sue in their chosen forum, forum non conveniens allows a court to use its discretion to stay the action in favour of the plaintiff re-commencing the litigation in another jurisdiction, but only where the other jurisdiction is “clearly more appropriate”. The Ontario Court of Appeal has found that seven non-exhaustive factors can be used to guide analysis of this issue in respect of breach of contract cases. These are:
(a) the location where the contract in dispute was signed;
(b) the applicable law of the contract;
(c) the location of witnesses, especially key witnesses;
(d) the location where the bulk of the evidence will come from;
(e) the jurisdiction in which the factual matters arose; and
(f) the residence or place of business of the parties
(g) the loss of a legitimate juridical advantage[3]
The weighing exercise of these seven factors is further informed by three principles:
(a) The party seeking to displace the plaintiff’s chosen jurisdiction is high and requires selection of a clearly more appropriate forum[4]
(b) The court should aim to achieve the goals of efficiency, convenience, fairness, and justice when balancing the seven factors[5]
(c) The court should accept the plaintiff’s version of the facts, so long as there is a reasonable basis for doing so[6]
The motions judge acknowledged each of the factors and went on to assess them, arriving at the conclusion that Eiffage had met its onus of establishing British Columbia as a more appropriate forum. In doing so, however, he incorporated forum selection clause arguments into his analysis and weighing process. In other words, rather than separately considering whether the contracts contained applicable exclusive jurisdiction clauses, the motions judge simply considered the presence of jurisdictional clauses as part of the forum non conveniens analysis. As discussed in the appeal, this was incorrect at law.
The motions judge ultimately found in favour of Eiffage’s forum non conveniens argument and stayed B & M’s Ontario action against it. The judge concluded that Liberty’s action should also result in the same relief, though he did not elaborate on why.
The Ontario Court of Appeal
B&M appealed and the ONCA granted the appeal and ordered the actions to continue in Ontario. The ONCA found that the motions judge erred by blending the forum non conveniens test with the test for whether an exclusive forum selection clause governed the parties.
On the issue of the contractual arguments, the ONCA found that the motions judge erred in failing to assess the contracts as a whole. Had he done so, he would have reached the conclusion that the governing contracts did not contain an exclusive jurisdiction clause
Eiffage’s argument had been that the Subcontract incorporated a provision from the Prime Contract that was said to be a jurisdiction clause. However, Eiffage’s argument rested on a provision of the Subcontract that was said to incorporate the provisions from the Prime Contract that applied to the Subcontract, without the provisions of the Prime Contract meeting that definition being specified. The ONCA held that the Prime Contract, while it had a jurisdiction clause, it was conceded by Eiffage not to be exclusive in nature, and further there was ambiguity about whether it was even intended to apply to the Subcontract, especially given that the Subcontract had its own dispute resolution language which did not specify any particular jurisdiction. There is a high standard to be met when arguing for jurisdiction to be ousted, and the vague language of the Subcontract fell short of that.
The ONCA held that the motions judge erred in not separating the analsys for whether there was an applicable exclusive jurisdiction clause from the analysis offorum non conveniens. After all, if there was an applicable exlucsive jurisdiction clause, it would not be necessary to further consider whether there is a more convenient forum for the dispute.
Once finding that there was no binding exclusive jurisdiction clause and finding that the forum non conveniens analysis had been completed incorrectly by the motions judge, the ONCA was required to consider forum non conveniens on a de novo basis, as forum non conveniens was the basis upon which Eiffage brought its motion. Assessing the seven factors itself (and removing any consideration of exclusion jurisdiction clauses), the ONCA arrived at the answer that the factors do not clearly favour one jurisdiction over the other and cannot, therefore, meet the high burden necessary to displace the Plaintiff’s chosen jurisdiction. Accordingly, the motion decision vis-à-vis Eiffage was set aside and Eiffage’s motion was dismissed.
The ONCA then considered the appeal of the Liberty motion. The motions judge had failed to provide any reasons in granting Liberty’s motion other than the reasons were “similar” to the reasons for Eiffage. Unlike Eiffage, Liberty had brought a motion only in respect of an exclusive jurisdictional clause and had not brought any motion pursuant to forum non conveniens. So it was difficult to ascertain how the reasons would be similar, in any event, the ONCA decided this aspect of the appeal as a de novo consideration of the underlying motion given the absence of reasons.
Liberty had rested its argument on the Payment Bond language “no suit or action shall be commenced by any claimant … (c) other than in a Court of competent jurisdiction or in a Province or Territory of Canada in which the subject matter of the Contract, or any part thereof, is situated and not elsewhere, and the parties agree to submit to the jurisdiction of such Court.”. Liberty argued that the “subject matter” was the bridge in BC, and therefore the only location for the action could be there. B&M argued that the provision contemplated multiple locations as it provided for actions in the location of the “subject matter” or “any part thereof”.
B&M relied on well-known principles of interpretation governing insurance contracts that generally favours claimants on policies rather than insurers. The ONCA agreed and held that there was ambiguity. As the Payment Bond was an insurance agreement which B&M did not negotiate, the ambiguity was resolved in its favour in accordance with the principle of contra proferentem. That is, the fair result is to resolve ambiguity against the party who prepared the contract, which in this case was Liberty.
Even if the Payment Bond clause could have been interpreted as making British Columbia the proper forum, the ONCA commented that allowing Liberty action in British Columbia and Eiffage action in Ontario would be contrary to the “clear and well-established public policy against allowing multiple proceedings that risk, the prospect of inconsistent findings”.[7]
Conclusion and Takeaways
While there exist three tests to resolve a question of jurisdiction, it must be remembered that those three tests ask three distinct questions. That is:
(a) Does the province have jurisdiction? (Real and Substantial Connection Test)
(b) Did the parties agree to give up the jurisdiction that otherwise be the proper forum? (Forum Selection Clause Test)
(c) Despite the answer to the above, is there a forum that is more convenient? (Forum Non Conveniens Test)
In this way, answering the questions posed by these three tests can be thought of as being done in a sequential or “waterfall” methodology. They are not to be blended, as was seen done by the motions judge. Specifically, the forum selection clause test is not an element of the forum non conveniens test nor can a forum selection clause be argued where the resolution of the jurisdiction simplicter issue means that the court does not have jurisdiction to be a possible forum.
Importantly also, where contract and subcontracting wording is raised to argue agreement on forum selection, a close reading of the entirety of the contracts is necessary. Relying on select and/or vague provisions without considering other potentially conflicting provisions effectively ignores the intent of the parties.
In a nutshell: courts cannot blend the jurisdiction tests and courts cannot ignore what the parties agreed to.
As a practical point, parties considering raising a question of jurisdiction should take thorough steps to look at the relevant contract and look at what the contract addresses regarding jurisdiction as the initial consideration in choosing what test to argue. It may be the case that all three tests can be argued, but counsel should be careful when making multiple arguments to differentiate the arguments and not mix any together.
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Stieber Berlach LLP is proud to have been successful at the Ontario Court of Appeal in the matter of Black & McDonald Limited v. Eiffage Innovative Canada Inc., 2023 ONCA 91.
To learn more about our practice and cases, please visit our website at: https://www.sblegal.ca/
[1] 2023 ONCA 91 [Black & McDonald].
[2] Club Resorts Ltd. v. Van Breda, 2012 SCC 17 at para 90.
[3] Young v. Tyco International of Canada Ltd., 2008 ONCA 709 at para 26.
[4] Ibid at para 28.
[5] Ibid at paras 29-30.
[6] Ibid at paras 33-34.
[7] Black & McDonald, supra note 1 at para 34.
