Court File and Parties

Court: COURT OF APPEAL FOR ONTARIO Date: 2021-06-18 Docket: C67908

Between: Loan Away Inc. Applicant/Responding Party (Appellant)

And: Facebook Canada Ltd. and Facebook, Inc. Respondents/Moving Party (Respondent)

Before: Fairburn A.C.J.O., Harvison Young J.A., and Jamal J.A.

Counsel: Michael Crampton, for the appellant Miranda Spence, for the respondent Philip Underwood, for Facebook Canada Ltd., making no submissions

Heard: June 7, 2021 by video conference

On appeal from the order of Justice Andra Pollak of the Superior Court of Justice, dated December 16, 2019.

Jamal J.A.:

Introduction

[1] The appellant, Loan Away Inc. (“Loan Away”), appeals from the order of the motion judge dated December 16, 2019. In that order, the motion judge stayed Loan Away’s application before the Ontario Superior Court seeking injunctive relief and a damages reference as against the respondent, Facebook, Inc. (“Facebook”), for having suspended Loan Away’s advertising on Facebook’s online social network (“Facebook Service”). The motion judge stayed the application because a forum selection clause in Facebook’s “Terms of Service” provided that any disputes would be resolved exclusively before the California courts under California law. The motion judge also refused Loan Away’s request to adjourn the stay motion. Loan Away claims that the motion judge erred in refusing the adjournment and staying its application.

[2] For the reasons that follow, I would dismiss the appeal.

Background

[3] Loan Away is a commercial online lender doing business across Canada. A large part of its business came from advertising on the Facebook Service.

[4] Facebook is a global technology company incorporated in Delaware with its head office in Menlo Park, California. As a condition of signing up for a Facebook account, users of the Facebook Service must agree to Facebook’s “Terms of Service”. Section 4(4) of the Terms of Service, “Disputes”, contains forum selection and governing law clauses providing that any disputes with commercial (i.e., non‑consumer) users of the Facebook Service must be resolved exclusively before the U.S. District Court for the Northern District of California or a state court in San Mateo County and under California law:

We try to provide clear rules so that we can limit or hopefully avoid disputes between you and us. If a dispute does arise, however, it’s useful to know up front where it can be resolved and what laws will apply.

If you are a consumer, the laws of the country in which you reside will apply to any claim, cause of action, or dispute you have against us that arises out of or relates to these Terms or the Facebook Products (“claim”), and you may resolve your claim in any competent court in that country that has jurisdiction over the claim. In all other cases, you agree that the claim must be resolved exclusively in the U.S. District Court for the Northern District of California or a state court located in San Mateo County, that you submit to the personal jurisdiction of either of these courts for the purpose of litigating any such claim, and that the laws of the State of California will govern these Terms and any claim, without regard to conflict of law provisions. [Emphasis added.]

[5] Commercial users such as Loan Away must reaffirm that they accept Facebook’s Terms of Service each time they buy advertising from Facebook. Commercial users are also subject to “Commercial Terms” providing substantively the same forum selection and choice of law clauses.

[6] In October 2018, Facebook suspended Loan Away’s advertising on the Facebook Service. Loan Away tried, without success, to resolve the issue by writing to Facebook Canada Ltd. (“Facebook Canada”), a Canadian company related to Facebook. In late December 2018, Loan Away began an application before the Ontario Superior Court against Facebook Canada for injunctive relief requiring Facebook Canada to accept Loan Away’s advertising and for a damages reference.

[7] In late January 2019, Facebook Canada served its responding materials, claiming that Facebook alone operates the Facebook Service and that Facebook Canada could not grant the relief that Loan Away sought.

[8] In late April or May 2019, Loan Away amended its application to add Facebook as a respondent. Although Facebook Canada remains a named respondent, Loan Away now seeks no relief as against it.

[9] Around the same time, Facebook served its notice of motion asking the court to stay Loan Away’s application as against it based on the forum selection clause.

[10] On the stay motion, which was returnable on Monday, December 16, 2019, Loan Away filed affidavits of a law clerk employed by Loan Away’s counsel addressing the litigation history leading up to the stay motion. On the Friday before the return of the stay motion, Facebook suspended Loan Away’s Facebook business page.

[11] At the return of the motion, Loan Away asked for an adjournment to file new evidence about the suspension of its Facebook business page. Facebook opposed. The motion judge refused the adjournment, noting that while there had been “a related and perhaps very relevant event with respect to what ha[d] happened”, neither counsel was prepared to deal with the issue. She also noted that Loan Away’s application did not concern this issue.

[12] The motion judge then granted Facebook’s stay motion. She noted that Loan Away did not dispute the enforceability of the forum selection clause and that the law favours enforcement of such clauses in commercial contracts. She stated that a stay should be granted unless Loan Away could show “strong cause” not to enforce the clause. The motion judge determined that Loan Away did not meet its burden of showing “strong cause” because: (1) this was a commercial contract; (2) Loan Away filed no evidence addressing the convenience of the parties, fairness between the parties, or the interests of justice; and (3) the application sought no relief as against Facebook Canada. She therefore stayed the application as against Facebook.

Issues

[13] Loan Away claims that the motion judge erred by refusing to adjourn the stay motion and in granting the stay.

Discussion

Issue #1: Did the motion judge err in refusing to adjourn the stay motion?

[14] Loan Away’s first ground of appeal asserts that the motion judge erred in refusing to adjourn the stay motion despite finding that there was a very relevant event — the shutdown of Loan Away’s Facebook business page — that happened just before the motion. Loan Away says it should have been allowed to introduce new evidence about this event and the motion judge thus decided the stay motion on an incomplete record.

[15] I do not accept this submission.

[16] An appellate court can intervene with a motion judge’s discretionary decision on whether to grant an adjournment only if the discretion is not exercised judicially based on proper principles, after considering all relevant factors: Romanko v. Aviva Canada Inc., 2018 ONCA 663, at para. 4; Estrada v. Estrada, 2016 ONCA 697, at para. 2.

[17] No such error has been shown here. The motion judge was entitled to find that even though the shutdown of Loan Away’s Facebook business page related to the broader dispute raised in the application, she should proceed with the stay motion as scheduled. Loan Away’s application did not concern the shutdown of its business page and neither counsel was prepared to deal with this development. The motion judge was also entitled to find that the evidentiary record on the stay motion was complete and that no further evidence should be permitted at that late stage. In any event, evidence about the substantive legal issues underlying the dispute between the parties was not relevant to the motion to enforce the forum selection clause: Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27, [2003] 1 S.C.R. 450, at para. 31. I therefore see no basis for this court to intervene with the motion judge’s exercise of discretion to deny the adjournment.

Issue #2: Did the motion judge err in granting a stay based on the forum selection clause?

[18] Loan Away’s second ground of appeal asserts that the motion judge erred in enforcing the forum selection clause and staying Loan Away’s application.

[19] The following legal principles govern the enforcement of a forum selection clause in the commercial or non-consumer context.

[20] Forum selection clauses purport to oust the jurisdiction of otherwise competent courts in favour of a foreign jurisdiction. In commercial contexts, absent exceptional circumstances, forum selection clauses are generally enforced to hold sophisticated parties to their contractual bargain: Douez v. Facebook, Inc., 2017 SCC 33, [2017] 1 S.C.R. 751, at para. 1.

[21] Courts apply a two-step approach in determining whether to enforce a forum selection clause and stay an action brought contrary to it:

At the first step, the party seeking a stay must establish that the forum selection clause is valid, clear, and enforceable, and that it applies to the cause of action before the court. The court makes this determination based on the principles of contract law. The plaintiff may resist the enforcement of the forum selection clause by raising defences such as, for example, unconscionability, undue influence, or fraud. If the party seeking the stay establishes the validity of the forum selection clause, the onus shifts to the plaintiff: Douez, at paras. 28-29; Pompey, at para. 39.
At the second step, the plaintiff must establish “strong cause” not to enforce the forum selection clause. A court exercising its discretion at this step must consider all the circumstances, including the convenience of the parties, fairness between the parties, the interests of justice, and public policy. The list of “strong cause” factors is not closed and provides a court with some flexibility in exercising its discretion. In the commercial context, the “strong cause” factors have been interpreted and applied restrictively. Forum selection clauses are encouraged and generally enforced because they promote order and fairness by providing stability and foreseeability to international commercial relations: Douez, at paras. 29-31; Pompey, at paras. 19, 30-31; and GreCon Dimter inc. v. J.R. Normand inc., 2005 SCC 46, [2005] 2 S.C.R. 401, at para. 22.

[22] Both before the motion judge and this court, Loan Away accepted that the forum selection clause in Facebook’s Terms of Service is valid, clear, and enforceable. It thus accepted that the first step was met.

[23] Instead, Loan Away asserts that the motion judge made essentially three errors at the second step.

[24] First, Loan Away asserts that there is a prima facie injustice in allowing Facebook to rely on a forum selection clause when the relief Loan Away seeks is straightforward. Loan Away claims it should not have to sue in California just to learn why Facebook has a problem with its advertising. Loan Away says that if Facebook explains the problem, Loan Away can fix it.

[25] I do not accept this submission. Loan Away’s application does not simply seek to understand why Facebook has suspended its advertising. It also seeks injunctive relief as against Facebook and a damages reference. If Loan Away seeks such relief, it must sue in California, as agreed in the Terms of Service.

[26] Second, Loan Away asserts that the motion judge failed to consider that, as a result of her ruling, Loan Away must now sue Facebook in California and Facebook Canada in Ontario. This multiplicity of proceedings, it claims, highlights the inconvenience and unfairness in enforcing the forum selection clause.

[27] I disagree. The application seeks no relief as against Facebook Canada and at the hearing of the appeal Loan Away acknowledged that it has no contract with Facebook Canada. Loan Away cannot resist enforcement of the forum selection clause by invoking a multiplicity of proceedings arising because it has sued what appears to be an improper party.

[28] Third, Loan Away asserts that there was “strong cause” not to enforce the forum selection clause because of the inequality of bargaining power between it and Facebook. Loan Away’s factum submits that Facebook is “an online giant that sets its own terms without negotiation, forcing small players such as Loan Away to either ‘take it or leave it’.”

[29] I do not agree. Even in the consumer context, where gross inequality of bargaining power may be a relevant circumstance in the “strong cause” analysis, gross inequality of bargaining power is not in itself determinative: Douez, at para. 39. Here, the motion judge considered all the relevant circumstances of the case, including its commercial context, and concluded that Loan Away “ha[d] not led any evidence with respect to the inconvenience of the parties, fairness between the parties and the interests of justice.” She thus found that Loan Away had “not met its burden of proving to this court that there is ‘strong cause’ not to enforce the forum selection clause.” Those findings are unassailable on the record before the motion judge. I see no basis for this court to intervene.