TORONTO COURT FILE NO.: 684/04

DATE: 2005/02/28

ONTARIO

SUPERIOR COURT OF JUSTICE

(DIVISIONAL COURT)

B E T W E E N:

HOLLINGER INTERNATIONAL INC.

Plaintiff

Robert W. Staley, and Eric R. Hoaken, for Plaintiff (Respondent)

• and -

HOLLINGER INC., THE RAVELSTON CORPORATION LIMITED and RAVELSTON MANAGEMENT INC.

Defendants

David R. Wingfield, and Paul D. Guy, for Ravelston Corporation Limited and Ravelston Management Inc. (Moving Parties)

AND BETWEEN

THE RAVELSTON CORPORATION LIMITED and RAVELSTON MANAGEMENT INC.

Plaintiffs by Counterclaim

• and –

HOLLINGER INTERNATIONAL INC., HOLLINGER INTERNATIONAL PUBLISHING INC. and HOLLINGER CANADIAN PUBLISHING HOLDINGS CO.

Defendants by Counterclaim

HEARD: February 18, 2005

REASONS FOR DECISION

POWER J.

1Despite the very capable submissions of Mr. Wingfield, this motion by The Ravelston Corporation Limited and Ravelston Management Inc. (“R”) for an Order granting leave to appeal to the Divisional Court from the Order of Farley J. dated August 11, 2004 is dismissed.

2The applicants have failed to satisfy me that there is good reason to doubt the correctness of the Order in question or that the appeal involves matters of such importance that leave to appeal should be granted.

3Pursuant to the usual practice on applications for leave to appeal, I set out below brief reasons for my decision:

The motions before Farley J.

4R applied for the following relief:

(a) An injunction restraining the plaintiff Hollinger International Inc. (“International”) from bringing any claims in any jurisdiction other than Ontario arising out of the management of the Hollinger group of companies and, in particular, the management of International by R; (i.e., an anti-suit injunction)

(b) An injunction restraining International from commencing, or continuing in any jurisdiction other than Ontario, any proceedings arising from the management Services Agreement referred to in the pleadings; and

(c) An injunction restraining International from continuing against R the proceedings it has commenced in the State of Illinois (there are also ongoing proceedings in Delaware).

5International, by way of cross-motion, also sought relief as follows:

(a) An Order staying the counterclaims commenced by R and by Hollinger Inc. (“Inc.”) in this Ontario action pending the final disposition of all appeals in the proceedings in Delaware commenced by International, and

(b) An order staying the counterclaims pending the final disposition of the action and all appeals in the Illinois proceedings.

Brief Description of the Pending Litigation

6International’s claim in the Ontario action is for interim and permanent recovery of possession of its property in the possession of the defendants at their Toronto offices. R counterclaimed for the sum of five million seven hundred and four thousand and seven hundred and twenty-two dollars in U.S. funds (U.S. $5,704,722) “for unpaid services rendered by R to International and others, or on the basis of unjust enrichment.” In addition, International and the other defendants by counterclaim were sued for the amount of six million five hundred and forty-eight thousand five hundred and twenty-two dollars in Canadian funds (CDN $6,548,522) “for unpaid services rendered by R or, again, on the basis of unjust enrichment.” R also claimed U.S. $12 million for wrongful termination of the Services Agreement and U.S. $150 million for “tortiously interfering with the economic relations of R.… by wrongfully refusing to pay the management fees.” The Ontario proceedings were commenced on February 10, 2004. The counterclaims of R were delivered in early March.

7On January 26, 2004, International commenced the Delaware Action seeking to enforce what is known as the Restructuring Proposal. In that proceeding, privies of R, including Conrad Black and others, counterclaimed against International and others, seeking recovery of the aforesaid management fees. On February 26, 2004, Vice-Chancellor Strine issued a 130 page written opinion finding for International on most of the issues involved in that proceeding and, as well, he dismissed several of the counterclaims of Black and Inc. On March 4th the Delaware Court confirmed these findings. Black and Inc. filed an appeal. The appeal was argued before the Delaware Supreme Court on December 15, 2004 and is currently under reserve. Subsequently, Vice-Chancellor Strine issued summary judgments on other matters involved in the Delaware litigation in favour of International. R’s privies joined issue in Delaware without relying on clause 15(b) of the agreement.

8The Illinois Action is the first commenced action – it was begun on January 16, 2004. Its claim is based on allegations of breach of fiduciary duties pursuant to Delaware law (International is a public holding company incorporated pursuant to the laws of Delaware; however, its principal place of business is in Chicago, Illinois). Here, as well, R’s privies joined in motions without objecting to that court’s jurisdiction.

The decision of Farley J.

9Farley J. dismissed R’s motion for an anti-suit injunction and ordered that the counterclaims in the Ontario action be stayed until the final disposition of all appeals relating to the Delaware and Illinois actions.

10Farley J. reasoned as follows: (this summary is not intended to set forth all of Farley J.’s reasoning).

(i) In the Illinois action, paragraph 15(b) of the “Services Agreement” between R and International which provides that: “this Agreement shall be subject to and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein and each of the Company (International) and the Manager (R) hereby irrevocably attorns to the jurisdiction of the courts thereof” was not applicable because “the Illinois claim does not appear to require any interpretation or application of the Services Agreement per se”;

(ii) “The tangled web of relationships involved in the Black/Group situation has led to a tangled web of litigation. The relationships would appear to make Black (Conrad Black) and the Group members, during periods of factual control, privies as discussed in…” (he then cites a number of authorities);

(iii) “It appears that temporary stays pending resolution of a foreign proceeding are typically granted when the foreign proceeding would ‘substantially reduce the issues to be determined’ or if success in the foreign proceeding could render the local proceeding ‘substantially moot’ or otherwise have a ‘material’ impact on the outstanding issues in the case”;

(iv) Farley J. concluded that R’s seven million dollar counterclaim in the Ontario Action “is subsumed in an overall two hundred million dollar excess fee complaint” of International in Illinois and that, as well, “the Illinois complaint is, in addition, about claims for other significant amounts as to other categories of stripping out, or diverting assets, money or other benefits from International”;

(v) He found that, with respect to the fees question, “there will be a sharing of the factual background” and that, therefore, “it would seem inappropriate to have the discovery process duplicated in Illinois and Ontario”;

(vi) He also held that R had not indicated any injustice to it or any loss of judicial advantage if the stay were granted on a temporary basis;

(vii) He found that only R was seeking relief – i.e., the other Illinois defendants, including Inc. and Conrad Black, had not done so. (The facts filed with the courts suggest that Mr. Black substantially controls R, R substantially controls Inc., and Inc. substantially controls International);

(viii) He said “curiously this would (if R were successful) carve out the middle player between Black and Inc. in relation to the control claim of International. To my mind such a carve out could, and likely would, do mischief with respect to the Illinois action”;

(ix) Farley J. held that the relief being sought was discretionary in nature and, therefore, “should be governed by the equities of the situation”;

(x) He held that the equities appear to clearly favour a temporary stay of the Ontario counterclaim and a dismissal of R’s motion for an anti-suit injunction;

(xi) He added “indeed, it would seem to me that inherent jurisdiction should be exercised to control the process of this litigation in a fair and equitable way.” He then listed several details for the aforesaid finding concerning the equities. In particular, he held that R’s counterclaim “appears to have come along somewhat after the fact and may be viewed with some suspicion as being ‘tactical’ as opposed to ‘strategic’…” He held that R delayed making its application to the Ontario Court and that the application was made shortly after a rather devastating judgment of the Delaware Court;

(xii) Farley J. noted that R made no request to the Illinois Court to have it stay the Illinois proceedings. He followed the decision in Amchem Products Inc. v. British Columbia (Workers’ Compensation Board), [1993] 1 S.C.R. 897, where the court noted that it was not mandatory to make such a request before applying for an anti-suit injunction, but merely preferable and that the court did observe that such a course of action would be consonant with the principles of comity. He found that R gave no explanation for not following the preferable course; and

(xiii) He noted that the Ontario application was brought notwithstanding R’s privies, Black and Inc., participated in those proceedings without objection to the jurisdiction of the courts. He said “there was no demonstration that it would have been inappropriate for the Illinois Court to have concluded that there was an alternative forum which was more clearly appropriate: see Amchem at p. 916”.

Decision

11It was argued by R (Canadian companies) that R had no presence in Illinois and, thus, the Illinois Courts’ claim to jurisdiction is tenuous. The facts do not bear out the statement that R has no presence in Illinois. Indeed, it had a significant presence through its senior officers. R also argues that International is attempting to resile from its attornment to the Ontario Court in favour of a foreign court that will not apply Canadian law to the dispute. I do not accept this as an accurate argument. First of all, the American proceedings were commenced prior to the Ontario proceedings. Secondly, the relief sought by International in the Canadian proceeding is limited in nature and is supplementary to the relief being sought in the U.S.

12While I have some difficulty with Farley J.’s finding that the Illinois claim does not appear to require any interpretation or application of the Services Agreement, I do agree with his conclusions that the Illinois forum is the favoured one. I also agree with Farley J. that because the claim for injunctive relief and the request for stays involve the exercise of the Court’s discretion and, therefore, the decisions should be governed by the equities of the situation (see Bell Canada v. Manitoba Telecom Services Inc., [2004] docket no. 04-CV-269292 CM 3 (Ont. S.C.J. – Cumming J.). In my opinion, Farley J. correctly exercised that discretion, particularly in view of his finding, with which I agree, that the Ontario counterclaim may be viewed with some suspicion as being tactical in substance.

13Paragraph 15(b) of the Services Agreement and the lost tactical advantages by R are but two of a myriad of factors requiring consideration in determining which court should exercise jurisdiction. In my opinion, the result reached by Farley J. is correct even if there might be some dispute with respect to the relevance or application of the Services Agreement and, therefore, s. 15(b).

14There is no doubt but that the litigation between the parties is of significance to the parties themselves and involves large sums of money; however, counsel for R has failed to satisfy me that the proposed appeal involves matters of such importance that the two appeals should be granted. Counsel submits that “the proposed appeal will be the first instance in which an Appellate Court will be faced with the issue of whether an anti-suit injunction can be granted under Canadian conflicts of law rules on “contractual” (as opposed to forum non conveniens) grounds, and whether a foreign court’s assumed jurisdiction over parties to a dispute can trump a Canadian court’s consent and presence based jurisdiction over these parties”. It is clear to me, on the authorities, that s. 15(b) is not an exclusive jurisdiction provision. Therefore, it is but one factor to be considered.

15In my opinion, Farley J. was correct to rely on the Supreme Court of Canada’s decision in Amchem, supra. Indeed, he was bound to follow the tests set out in that decision. While I agree with counsel for R’s submission that Canadian conflicts of law rules are under frequent review by courts of this country, I am satisfied that, as they now stand, they were properly interpreted by Farley J. I do not accept counsel’s argument that Canadian conflicts of law rules need to be clarified so that these rules do not discriminate against Canadians. I do not agree with counsel that the American courts have assumed jurisdiction in these matters by invoking “long-arm” jurisdiction. There can be no doubt whatsoever that the American courts have a real and substantial connection with the issues in dispute. Therefore, the U.S. forums are clearly more appropriate than is the domestic forum.

16While it is preferable to avoid parallel legal proceedings in different jurisdictions concerning some or all of the same issues, there is no absolute prohibition against parallel proceedings. In this case and, as aforesaid, the Ontario litigation appears to be somewhat supplementary to the U.S. or foreign litigation. In my opinion, it makes sense for International to have sought a replevin remedy in Ontario since the properties, which it seeks, are situated here in Ontario. Therefore, the existence of parallel proceedings is not determinative especially in view of the fact that the Delaware Court has already made several findings of fact that will be binding on the parties – i.e., are res judicata.

17Counsel for R argues that the jurisdiction/attornment clause (s.15(b)), even if not an exclusive one, must be given predominance. He relies on a number of English authorities to support this position. However, there is a Canadian Court of Appeal decision to support International’s position – Old North State Brewing Co. v. Newlands Services Inc. (1998), 23 C.P.C. (4th) 217 (B.C. C.A.). In that case, the parties entered into a contract which contained a governing law provisions as follows: “this Agreement will be governed by and interpreted in accordance with the laws of the Province of British Columbia, Canada and the parties will attorn to the jurisdiction of the courts of the Province of British Columbia, Canada”. The plaintiff brewing company brought an action against the defendant’s supplier in North Carolina. The supplier did not defend and the brewing company was awarded triple damages. The brewing company then brought action in British Columbia to enforce the North Carolina judgment. The Court of Appeal upheld a judgment in favour of the brewing company. It held that the courts of North Carolina had jurisdiction to hear and decide the claim and found that the clause in question conferred concurrent jurisdiction, not exclusive jurisdiction, to the British Columbia courts. The Court of Appeal considered the decisions in Morguard Investments Limited v. De Savoye, [1990] 3 S.C.R. 1077 and, as well, the Amchem decision where the Morguard principles were applied to foreign judgments and anti-suit injunctions. The Court quoted from Sopinka J. as follows: “the choice of the appropriate forum is still to be made on the basis of factors designed to ensure, if possible, that the action is tried in the jurisdiction that has the closest connection with the action and the parties and not to secure a juridical advantage to one of the litigants at the expense of others in a jurisdiction that is otherwise inappropriate. The Court of Appeal expressly rejected the argument that the aforementioned jurisdiction clause ousted any jurisdiction which the North Carolina courts might otherwise have had. It ruled that clear and express language is required to confer exclusive jurisdiction and found that the clause in question did not purport to confer excusive jurisdiction. It said “it would have been a simple matter for the draftsmen to have used the word ‘exclusive’ if that was what the parties had intended”. This case is particularly apt to the case at bar.

Result

18Based on the foregoing and, as aforesaid, the motion for leave to appeal to the Divisional Court is dismissed.

Costs

19In the event that the parties are not able, within 30 days, to conclude an agreement with respect to costs, they may make brief written submissions to me.

Power J.