Proper Forum in Interjurisdictional Contract Disputes: Your Court or Mine?

February 15, 2023

By Franz Lopez

In Black & MacDonald Limited v Eiffage Innovative Canada Inc.,[1] the Ontario Court of Appeal addressed an appeal of a lower court’s decision to stay two proceedings related to the construction of the Alex Fraser Bridge crossing over the Fraser River in Delta, British Columbia (the “Project”) as a result of jurisdictional issues.[2]

At first instance, the Ontario Superior Court of Justice held that British Columbia was the more convenient forum to hear two separate proceedings commenced by Black & MacDonald Limited (“B&M”) against (1) Eiffage Innovative Canada Inc. (“EIC”) for non-payment of completed work and (2) Liberty Mutual Insurance Company (“Liberty Mutual”) for payment under a performance bond.[3]

THE UNDERLYING TRIAL

The owner of the Project, the Minister of Transportation and Infrastructure of British Columbia (the “Ministry”), entered into a Major Works Contract with EIC dated August 10, 2018 (the “Prime Contract”).[4] The details of the Prime Contract consisted of a payment in the sum of approximately $19.2M (plus applicable taxes) for the Project to be completed by June 28, 2019 (the “Deadline”) with monetary deductions if completed thereafter.[5]

EIC entered into an agreement with B&M for scope of work in the sum of approximately $4.7M by way of a stipulated price contract dated October 31, 2018 (the “Subcontract”).[6] The Subcontract stipulated the scope of work to be completed in a manner that would allow EIC to meet the Deadline.[7]

The Project continued beyond the Deadline.[8] As a result, the Ministry deducted late payment penalties from the sum of money otherwise owed to EIC under the Prime Contract.[9] EIC alleged that B&M’s work was not done properly or in a timely manner as required by the Subcontract.[10]

In July of 2020, B&M issued and served a Statement of Claim against EIC alleging that they were owed approximately $3.5M pursuant to the Subcontract.[11] Furthermore, B&M agued that Ontario was the proper forum for its action given that (1) EIC was incorporated in Ontario; (2) the Subcontract was signed and negotiated out of EIC’s Ontario offices; and (3) EIC payments originated from a bank branch located in Ontario.[12]

EIC moved to dismiss or stay the action on the basis that it was not commenced in the proper forum.[13] B&M brought a cross-motion to compel EIC to participate in arbitration as required under the Prime Contract and Subcontract.[14]

Two-Part Analysis to Determine the Proper Forum

In accordance with the ONCA’s guidance in Young v. Tyco International of Canada Ltd, the motion judge engaged in a two-part analysis:

  1. Whether an Ontario Court has jurisdiction over the action; and
  2. Whether an Ontario Court should entertain the action.[15]

With regards to the first part of the analysis, EIC conceded jurisdiction simpliciter given the residence of the multiple defendants and the dealings between parties in Ontario.[16]

In addressing the second part of the analysis, the motion judge was required to perform a forum non conveniens analysis in which several factors were considered to ascertain the connection of the action to each forum, including:

  • the location where the contract in dispute was signed;
  • the applicable law governing the contract;
  • the location of witnesses, especially key witnesses;
  • the location where the bulk of the evidence will come from;
  • the jurisdiction in which the factual matters arose;
  • the residence or place of business of the parties; and
  • the loss of a legitimate juridical advantage.[17]

While these factors are not exhaustive, nor the analysis mathematical, and the weight given to each factor assigned as appropriate, the motion judge considered three principles to guide the exercise:

  1. the standard to displace the chosen jurisdiction is high;
  2. the balancing of the relevant factors should attempt the goals of efficiency and justice; and
  3.  a “prudential” rather than “aggressive” approach to fact finding should be adopted because of the early stage of the proceedings.[18]

The motion judge, among other factors, attributed considerable weight to the Prime Contract’s provision that stated the law of British Columbia to be the applicable law and forum to resolve disputes, and found that this provision of the Prime Contract was applicable to and therefore incorporated into the Subcontract.[19] Moreover, the motion judge gave little weight to the locality of witnesses because of the “post COVID reality that converted court proceedings from in person to virtual.”[20]

In May 2022, the ONSC released its decision staying the action against B&M,  Liberty Mutual, and others, and dismissing B&M’s cross-motion. The Court wrote:

[24] As a result, although the standard to displace the plaintiff’s choice of jurisdiction is high, it must cede to the principle of efficiency and justice. The allegations of conduct by the individual defendants arose as a result of the contractual terms of the Prime Contract, the Subcontract and the Bond agreement. The terms contained in the Subcontract which incorporated the terms of the Prime Contract clearly anticipated and, I find, that the plaintiff knew or ought to have known its relationship was to be “governed by and interpreted” in accordance with the laws of British Columbia (GC80.01). Further, the parties accepted “the exclusive jurisdiction of the courts of the Province of British Columbia” (GC80.02).[21]

THE APPEAL

On appeal, the ONCA discussed various deficiencies in EIC’s position advanced before the lower court that were seemingly confusing and contradictory.[22]

Mainly, the Court was concerned with EIC’s argument that British Columbia had exclusive jurisdiction pursuant to the provisions of the Prime Contract and Subcontract, while simultaneously conceding that Ontario had jurisdiction simpliciter over the action.[23] Specifically, EIC relied on Article 2.1 of the Subcontract that provides:

“requirements, terms and conditions of the Prime Contract as far as they are applicable to the Sub-Contract, shall be binding upon the contractor and the sub-contractor”.[24]

The motion judge had interpreted the word “applicable” to mean “suitable” in context to the action.[25] In attempting to understand and reconcile EIC’s contradictory position, the ONCA mentioned that the second part of the Young analysis need not be engaged if an exclusive jurisdiction clause ousted the jurisdiction of Ontario courts.[26] Moreover, the Court of Appeal disagreed with the motion judge’s interpretation, writing:

[14] …If that were the proper meaning of the word “applicable” virtually every clause of the Prime Contract could be seen as being suitable for the subcontract.

[15] Rather, we find that the proper interpretation of the word “applicable” is that it requires that the subcontract has made, either expressly or by implication, a term of the Prime Contract relevant to the subcontract. There is nothing in the subcontract that purports to make the exclusive jurisdiction clause applicable to the subcontract…[27]

With regards to the  forum non conveniens analysis, B&M argued that the motion judge erred by considering the factors from Young as opposed to the statement of factors from Van Breda that are drawn from the Uniform Court Jurisdiction Proceedings Transfer Act (“CJPTA”) developed by the Uniform Conference of Canada.[28]

While the ONCA found no material difference between the Young and Van Breda factors, the Court erred on the side of caution in finding that the motion judge’s conclusion may have been different using the CJPTA factors.[29] As such, the ONCA held that the motion judge erred in staying the Ontario actions, writing:

[18] In his consideration of the Young factors, the motion judge found that the exclusive jurisdiction clause applied to the subcontract. He appears to have relied heavily on that finding for his conclusion that a stay of the Ontario action should be granted. For the reasons we have set out above, the motion judge erred in reaching that conclusion. Given that error, his forum non conveniens analysis is flawed and is not entitled to any deference from this court.[30]

Contrary to the little weight given by the motion judge, the ONCA held that the location where the contract was signed and negotiated favoured Ontario as the appropriate forum.[31] Further, the ONCA disagreed with the motion judge’s determination relating to the locality of witnesses having little weight given the advent of virtual hearings.[32] Specifically, the ONCA held that there was no way of determining whether the trial would proceed in person or virtually, and wrote:

[22] … the motion judge found that this factor was neutral because of “the post COVID reality that converted court proceedings from in person to virtual.” We do not agree that that reality renders this factor neutral. Virtual appearances by witnesses cannot be safely equated to appearances in person in terms of their impact on the fact-finding process. Further, there is no way of knowing, at this point in time, whether the trial of this action will proceed virtually or in person or a combination of both – the most likely result. We also do not know what witnesses might appear in person and which might appear virtually. All of that said, we do accept that this new reality will often lessen the weight to be given to this factor.[33]

Ultimately, the ONCA held that the motion judge erred in staying the action on basis that a proper analysis of the factors would not clearly favour one jurisdiction over another.[34] Moreover, the ONCA found the motion judge erred in staying the Liberty Mutual action on the basis that the motion judge failed to undertake any analysis of the interpreting pertinent sections of the Payment Bond agreement between the parties.[35]

The ONCA allowed B&M’s appeal and set aside the lower court’s orders to stay the two actions in Ontario.[36] The ONCA ordered costs of the appeals in the sum of $16,000 against EIC and $11,000 against Liberty Mutual  both inclusive of disbursements and HST.[37]

KEY TAKEAWAYS

  • The court may consider different factors in conducting the forum non conveniens analysis; and
  • The factor of witness locality is not, by default, neutralized by virtual hearings.

[1] Black & McDonald Limited v Eiffage Innovative Canada Inc., 2023 ONCA 91 [“B&M ONCA”] – Ontario Court Link: https://coadecisions.ontariocourts.ca/coa/coa/en/21208/1/document.do.

[2] Ibid, at para 1.

[3] Ibid, at paras 2 and 3.

[4] Black & McDonald Limited v Eiffage Innovative Canada Inc., 2022 ONSC 1855, at para 1 [“B&M ONSC”].

[5] Ibid.

[6] Ibid, at paras 1 and 2.

[7] Ibid.

[8] Ibid, at para 5.

[9] Surpa n1, B&M ONCA, at para 4.

[10] Ibid, at para 3.

[11] Supra n4, B&M ONSC, at para 5.

[12] Ibid, at paras 2 and 6.

[13] Ibid, at para 10.

[14] Ibid.

[15] Ibid, at paras 11 and 12.

[16] Ibid, at para 11 – NB: the jurisdiction simpliciter doctrine involves weighing the strength of the connection between the jurisdiction, the claim, and the parties involved.

[17] Ibid, at para 12.

[18] Ibid, at paras 13 and 14.

[19] Ibid, at para 17.

[20] Ibid, at para 18.

[21] Ibid, at para 24.

[22] Surpa n1, B&M ONCA, at paras 11 to 25.

[23] Ibid, at para 11.

[24] Ibid, at para 9.

[25] Ibid, at para 14.

[26] Ibid, at para 12.

[27] Ibid, at paras 14 and 15.

[28] Ibid, at para 17.

[29] Ibid.

[30] Ibid, at para 18.

[31] Ibid, at para 19.

[32] Ibid, at para 22.

[33] Ibid.

[34] Ibid, at para 27.

[35] Ibid, at paras 28 to 31.

[36] Ibid, at para 36.

[37] Ibid.