Court File and Parties

COURT FILE NO.: CV-17-570066 DATE: 2018 0829 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Forbes Energy Group Inc. Plaintiff – and – Parsian Energy Rad Gas, Pergas Oil & Gas DMCC and Frontier Corporate Holdings Ltd. Defendant

Counsel: Robert Staley and Jessica Starck, for the Plaintiff Martin Mendelzon and Kevin Richard, for the Defendants

HEARD: May 31, 2018

Reasons for Decision

NISHIKAWA J.

[1] The Defendants bring this motion to stay the proceeding on the basis that the Ontario courts lack jurisdiction over the parties’ dispute. In the alternative, the Defendants submit that this court should give effect to the forum selection clause in the parties’ agreement and decline to exercise jurisdiction because Ontario is forum non conveniens.

[2] For the reasons that follow, the Plaintiff’s action is stayed on the basis of forum non conveniens.

Factual Background

The Parties

[3] The Plaintiff, Forbes Energy Group Inc. (“Forbes”), is a corporation incorporated in Alberta, with a head office located in Calgary, Alberta. Forbes also has a registered office in Toronto, Ontario. Forbes is a wholly-owned subsidiary of Forbes & Manhattan Inc., a corporation incorporated in Ontario with a head office located in Toronto.

[4] The Defendant, Parsian Energy Rad Gas (“Pergas”), is a corporation incorporated in Iran and headquartered in Kish Island, Iran. The Defendant, Pergas Oil & Gas DMCC (“DMCC”) is a corporation incorporated in Dubai, United Arab Emirates, with a registered office located in Dubai. DMCC has offices in London and Edinburgh, United Kingdom, and Durban, South Africa. The Defendant, Frontier Corporate Holdings Ltd. (“Frontier”), is a corporation incorporated in the British Virgin Islands, with an office in Bermuda.

[5] The Defendants, DMCC and Frontier (together, the “Defendants”) bring this motion. Pergas did not appear on the motion, although it has been served with the Statement of Claim in Iran.

[6] The dispute relates to an agreement regarding upstream oil and gas rights in Iran. In the action, Forbes seeks a declaration that the relevant contract has been amended, or in the alternative, damages for breach of contract.

The Agreement

[7] From April to July 2016 Ahmad Said and Stan Bharti of Forbes, Colin Rowley of DMCC, and David Thompson and Naeem Tyab of Frontier participated in negotiations for the evaluation, negotiation, and acquisition of rights to potential upstream oil and gas contracts in Iran. The parties agree that the negotiations culminated in a binding term sheet that was executed on September 8, 2016 (the “Agreement”). As will be discussed further below, the parties disagree about where the negotiations took place, and where the Agreement was concluded.

[8] The Agreement provided for the incorporation of a corporation in Ontario (“Parentco”), with a wholly-owned subsidiary in Barbados (“Holdco”). Under the Agreement, DMCC and Pergas’ shareholders would transfer DMCC’s rights to all future upstream oil and gas activities in Iran; all their rights and interests in Pergas to Parentco or Holdco; and 50 percent of all their shares, rights, and interests in DMCC to Forbes and Frontier.

[9] The Agreement contains a governing law and forum selection clause which states as follows:

This term sheet shall be governed by and construed in accordance with the laws of England and the Parties agree to attorn to the courts of England.

The Side Letter and Amendment

[10] On the same day as the Agreement, Forbes and Frontier entered into a separate agreement (the “Side Letter”) relating to the funding they were to provide under the Agreement. The Side Letter contains a forum selection clause that gives the Ontario courts “exclusive jurisdiction.”

[11] Forbes alleges that in October 2016 the parties agreed to amend certain terms of the Agreement relating to transferring interests, among other things (the “Amendment”). There is no executed copy of the Amendment in the record. The Amendment contains the same governing law and forum selection clause as the Agreement.

[12] Pursuant to both the Agreement and the Amendment, Pergas and DMCC were expected to enter into a Memorandum of Understanding (“MOU”) with the National Iranian South Oil Company (“NISOC”) that was satisfactory to all parties. Forbes alleges that it was not provided with the signed MOU, and that the draft that was provided was not satisfactory.

The Dispute

[13] On December 6, 2016 Pergas sent an email to Forbes demanding that Forbes pay $200,000 CAD to the Defendants within seven days and that Forbes immediately deposit $2,000,000 CAD into a bank account nominated by Pergas. Pergas further stated that failure to make the payments would void the Agreement.

[14] On December 8, 2016 Forbes’ counsel wrote to DMCC and Frontier advising that they believed the Agreement was amended by the parties’ email correspondence. Forbes disputed that the amounts Pergas demanded were payable.

[15] On February 21, 2017 Forbes issued a Statement of Claim in Toronto.

Issues

[16] The motion to stay the proceeding raises the following issues:

(i) Does the Ontario court have jurisdiction simpliciter over the dispute? (ii) Can the Defendants rebut the presumption of jurisdiction? (iii) Is Ontario forum non conveniens?

Analysis

(i) Does the Ontario Court Have Jurisdiction Simpliciter Over the Dispute?

[17] Pursuant to Courts of Justice Act, R.S.O. 1990, c. C.43, s. 106, this court may stay a proceeding on such terms as are considered just. Rule 21.01(3)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, provides that a Defendant may move before a judge to have an action stayed or dismissed on grounds that the court has no jurisdiction over the subject matter of the action.

[18] This Court has jurisdiction simpliciter over a dispute where there is a “real and substantial connection” between the dispute and the jurisdiction where the claim is brought. In Van Breda v. Village Resorts Ltd., 2012 SCC 17, [2012] 1 S.C.R. 572, at paras. 80-81, 94-95, the Supreme Court of Canada outlined a two-step approach for determining whether a domestic court should assume jurisdiction over a foreign Defendant:

(i) First, the Plaintiff must demonstrate that a “presumptive connecting factor” connects the litigation to the jurisdiction. (ii) Second, if the Plaintiff succeeds in establishing a presumptive connecting factor, the Defendant may rebut the presumption of jurisdiction by showing that, on the facts of the particular case, the connecting factor is insufficient to establish a real and substantial connection.

Is there a Presumptive Connecting Factor?

[19] In Van Breda, the Supreme Court outlined a non-exhaustive list of presumptive connecting factors that would enable a court to assume jurisdiction simpliciter over a dispute. The parties agree that the only Van Breda factor that could apply to the circumstances of this case is the fourth: a contract connected to the dispute that was made in the province: Van Breda, at para. 90.

[20] To establish jurisdiction simpliciter, a Plaintiff need only demonstrate “a good, arguable case”, which means no more than a serious question to be tried or a genuine issue: Inukshuk Wireless Partnership v. 425311 Canada Inc., 2013 ONSC 5631, 117 O.R. (2d) 206, at para. 19, citing Ontario v. Rothmans Inc., 2013 ONCA 353, 115 O.R. (3d) 561, at paras. 54, 110, 118-19.

[21] In Lapointe Rosenstein Marchand Melancon LLP v. Cassels Brock & Blackwell LLP, 2016 SCC 30, [2016] 1 S.C.R. 851, at para. 28, Abella J. for the majority states that the objective of all presumptive connecting factors is to “pacify the tension between predictability and flexibility” when applying jurisdiction tests. With respect to the fourth connecting factor, Abella J. finds that certainty is enhanced by premising the test on the known contract formation principles, which would provide “reasonable confidence” as to when jurisdiction will or will not be assumed (at para. 29). Notably, Abella J. finds that “[f]lexibility in applying the fourth factor does not amount to jurisdictional overreach.” (at para. 33).

[22] A court applying the fourth presumptive connecting factor must first identify the dispute, and then determine whether the dispute is connected to a contract made in Ontario: Lapointe Rosenstein, at para. 36.

[23] In this case, the dispute relates to whether the payment obligations arose under the Agreement, and whether the Agreement was amended. The dispute is clearly connected to the Agreement. The question is whether the Agreement was made in Ontario.

[24] According to common law principles of contract law, a contract is formed where the acceptance is received by the offeror. This principle applies when acceptance is communicated instantaneously by facsimile or email: Eco-Tec Inc. v. Lu, 2015 ONCA 818, 343 O.A.C. 140, at para. 16. In Inukshuk Wireless, Newbould J. held that a contract can be formed in more than one place, particularly in this age of instantaneous communications. In that case, the acceptance was received by one party to the contract in Montreal and by another party in Toronto. Newbould J. held that a presumptive connecting factor with Ontario had been demonstrated because the contract was concluded in both Ontario and Quebec (at para. 32).

[25] On September 8, 2016 Ahmad Said, then President of Forbes, sent an email attaching the Agreement to David Thompson, a Director of Frontier, and Naeem Tyab. The email was copied to Neil Said, Forbes’ in-house counsel. The email requested that the signed Agreement be returned to “us.” The parties do not dispute that the last party to accept was Mr. Thompson, who was in Bermuda at acceptance time. Mr. Thompson sent an email attaching the signed Agreement to Ahmad Said, with a copy to Neil Said. Ahmad Said was in Calgary and Neil Said was in Toronto when they received Mr. Thompson’s email. Neil Said later sent an email to all of the parties attaching the fully executed Agreement.

[26] DMCC and Frontier argue that the relevant acceptance was that received by Ahmad Said, as principal of Forbes, and discount Neil Said’s role as Forbes’ lawyer. According to common law contract principles, contract acceptance can be received by an agent with ostensible authority to receive the communication. Moreover, Neil Said’s role was not solely administrative: it is uncontested that he and Ahmad Said drafted the binding term sheet that contained the parties’ Agreement.

[27] Given the flexibility that drives the fourth presumptive factor’s application and the low threshold for demonstrating jurisdiction simpliciter, I find that it is not necessary to determine that the Agreement was made in either Calgary or Toronto. Based on Forbes’ receipt of the acceptance in both locations, the Agreement was made both in Calgary and Toronto. Forbes has thus demonstrated a presumptive connecting factor to Ontario.

[28] While the Defendants argue that it is necessary to consider broader, contextual factors in determining whether the Plaintiff has demonstrated a presumptive connecting factor, this applies where the acceptance does not constitute the last act essential to contract formation: Eco-Tec, at paras. 15-16. In this case, since acceptance was the last step, it is not necessary to consider broader, contextual factors.

(ii) Have the Defendants Rebutted the Presumption of Jurisdiction?

[29] Once the Plaintiff has established a presumptive connecting factor for jurisdiction simpliciter, the burden shifts to the Defendant to rebut the presumption of jurisdiction. The presumption is rebutted where the Defendants can demonstrate that the presumptive connecting factor does not point to any real relationship, or only a very weak relationship, between the subject matter of the litigation and Ontario: Inukshuk Wireless, at para. 53. The presumption can also be rebutted if the contract has little or nothing to do with the dispute: Van Breda, at para. 95.

[30] In this case, the Agreement contemplated the incorporation of an entity in Ontario, Parentco, for the parties’ venture, which Neil Said in fact incorporated shortly after the Agreement was executed. Under the Agreement, the parties would become shareholders in Parentco, which would obtain the rights to all future upstream oil and gas activities in Iran. The dispute relates to payments demanded by Pergas and turns both on the Agreement’s interpretation and the Amendment’s enforceability. Since a contract made in Ontario lies at the heart of the parties’ dispute and the Defendants have not demonstrated a weak connection to Ontario, they cannot rebut the presumption of jurisdiction.

(iii) Is Ontario Forum Non Conveniens?

What is the Effect of the Forum Selection Clause?

[31] Once the test for jurisdiction simpliciter is met, the court must consider whether to exercise its discretion to decline jurisdiction on the basis of forum non conveniens.

[32] The parties disagree on the burden and test to be applied at this stage because they have differing views on the effect of the forum selection clause in the Agreement. Generally, at this stage of the analysis, the party moving for the stay must “identify another forum that has an appropriate connection under the conflicts rules and that should be allowed to dispose of the action.” Van Breda, at para. 103. The burden is on the moving party to show that the alternative forum is “clearly more appropriate.” Van Breda, at para. 108.

[33] However, where the parties’ agreement contains a forum selection clause, and the Plaintiff has commenced the proceeding in a different jurisdiction, the Plaintiff bears the burden of establishing why a stay should not be granted: Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27, [2003] 1 S.C.R. 450, at para. 21.

[34] The Plaintiff relies upon Old North State Brewing Co. v. Newlands Services Inc. (1998), 58 B.C.L.R. (3d) 144 (C.A.), at para. 36, to argue that because the parties simply “attorn” to the courts of England, the Agreement’s forum selection clause does not grant exclusive jurisdiction. They point to the Side Letter executed by the same parties at the same time, which states that “the courts of Ontario have exclusive jurisdiction”, as demonstrating that the parties knew what language to employ if they intended the Agreement to oust the Ontario court’s jurisdiction.

[35] In Ontario, the courts have consistently upheld the principle, enunciated by the Supreme Court in Z.I. Pompey, that parties to a commercial contract who agree to a forum selection clause should be held to their bargain, and the clause should be given effect: Z.I. Pompey, at para. 24; Expedition Helicopters Inc. v. Honeywell Inc., 2010 ONCA 351, 100 O.R. (3d) 241, at paras. 9-11. This principle is not limited to forum selection clauses granting exclusive jurisdiction: Loat v. Howarth, 2011 ONCA 509, 282 OA.C. 264, at para. 31; Mackie Research Capital Corp. v. Mackie, 2012 ONSC 3890, 2012 CarswellOnt 8457, at paras. 43-47; Terracap Investments Inc. v. Credit Capital Immobilliari, S.A., 2016 ONSC 4618, 2016 CarswellOnt 11203, at paras. 44-46. Contrary to the Plaintiff’s position, a forum selection clause need not employ the term “exclusive jurisdiction” to be given effect: CP Ships Ltd. v. Icecorp Logistics Inc., 2015 ONSC 6243, 2015 CarswellOnt 15691, at paras. 18-19.

[36] Applying these principles, I find that the forum selection clause identifies jurisdiction in England’s courts. England is the only jurisdiction that the parties selected in the Agreement. While Ahmad Said deposes that he would not have agreed to the clause if he knew it gave English courts exclusive jurisdiction, the binding term sheet was drafted by himself and his lawyer, Neil Said, with no negotiation about the term. The Amendment contains the same clause. Forbes could have selected a different forum, or could have included language limiting the English courts’ jurisdiction, if that was their intent.

[37] As for Frontier and DMCC, Mr. Thompson and Mr. Rowley state that they relied upon this term and would not have entered into the Agreement if it could result in litigation in another jurisdiction. They were satisfied with the forum selection clause because of their familiarity with English law.

[38] Where a forum selection clause governs, a stay should be granted unless the Plaintiff can show “strong cause” that the case is exceptional and the forum selection clause should not be enforced: Novatrax International Inc. v. Hagele Landtechnik GmbH, 2016 ONCA 771, 132 O.R. (3d) 481, at para. 5. Recently, in Douez v. Facebook, Inc., 2017 SCC 33, [2017] 1 S.C.R. 751, at paras. 28-29, the Supreme Court articulated a two-part test for determining whether to enforce a forum selection clause. First, the Defendants must demonstrate that the forum selection clause is valid, clear, and enforceable, and that it applies to the cause of action before the court. The onus then shifts to the Plaintiff to show strong reasons why the court should not enforce the forum selection clause and stay the action. The court must consider all the circumstances, including the convenience of the parties, fairness between the parties, and the interests of justice.

[39] In Expedition Helicopters, the Court of Appeal held that few factors would justify a departure from the general principle that such clauses should be given effect. These strong cause factors include the following:

(i) the plaintiff was induced into agreeing to the clause by fraud; (ii) the contract is unenforceable; (iii) the selected forum does not accept jurisdiction or cannot deal with the claim; (iv) the circumstances are outside of what the parties reasonably contemplated; (v) the plaintiff cannot expect a fair trial due to subsequent events; or (vi) the clause would frustrate public policy.

Expedition Helicopters, at para. 24.

[40] In Douez, at para. 31, the Supreme Court stated that the “strong cause factors have been interpreted and applied restrictively in the commercial context.”

[41] Forbes has not advanced any of the factors identified by the Court of Appeal that would demonstrate a strong cause for not enforcing the forum selection clause, perhaps because Forbes’ position is that the Defendants bear the burden of demonstrating that another jurisdiction is clearly more appropriate. Similarly, Forbes has not argued that fairness or the interests of justice warrant a refusal to stay the Ontario proceeding in favour of the forum selection clause. The Plaintiff has failed to demonstrate “strong cause” that the forum selection clause should not be enforced.

Application of the Forum Non Conveniens Factors

[42] When an agreement contains a clear forum selection clause, the clause “pervades the forum non conveniens analysis and must be given full weight in the consideration of other factors.” Novatrax International, at para. 5. The court should consider the following factors when determining whether jurisdiction should be declined for forum non conveniens in relation to a contractual claim:

(a) The location where the contract in dispute was signed; (b) The applicable law of the contract; (c) The location of the witnesses, especially key witnesses; (d) The location where the bulk of the evidence will come from; (e) The jurisdiction where the factual matters arose; (f) The residence or place of business of the parties; and (g) The loss of a legitimate juridical advantage.

Young v. Tyco International of Canada Ltd., 2008 ONCA 709, 92 O.R. (3d) 161, at para. 26.

[43] DMCC and Frontier submit that the action should be stayed in favour of England or Iran. Given that the forum selection clause chooses the courts of England, I limit my analysis to whether Ontario is forum non conveniens, and do not consider it necessary to determine whether Iran would be a clearly more appropriate forum.

[44] The parties’ evidence conflicts as to where the Agreement was negotiated. According to the DMCC and Frontier, the negotiations took place in Iran, Dubai, and the U.K, and no negotiations took place in Ontario. According to Forbes, some of the negotiations took place in Toronto, either in person or over the telephone. It is difficult to reconcile these differing accounts, especially since few details were provided and neither party sought to cross-examine the other on their affidavits.

[45] The Agreement’s signatories were located in various places when they signed the Agreement. DMCC’s representative, Robert Jamieson, was in Glasgow, Scotland. Mr. Thompson of DMCC was in Bermuda. The representative of Pergas, Mr. Besherati, resides in Iran, but it is not known where he was when he signed the Agreement. Ahmad Said did not state where he was when he signed the Agreement. Neil Said was in Ontario but did not sign the Agreement. While no one was in England, Mr. Jamieson was in Scotland. Given that the only person in Ontario did not sign the Agreement, the first factor favours England over Ontario.

[46] The applicable law is the law of England. This was confirmed in a letter from Plaintiff’s counsel on December 8, 2016. While a court in Ontario would be able to apply English law, it would be more logical for the English courts to apply English law. The Side Letter states that the Ontario courts have exclusive jurisdiction over disputes arising under it. However, Forbes does not allege that the dispute arises from the Side Letter. This factor weighs in favour of the courts of England.

[47] At this stage, it is not clear who the witnesses will be since very few details were provided as to the various individuals’ roles. The directors of DMCC, Mr. Rowley and Mr. Jamieson, are located in Scotland. Mr. Thompson of Frontier is in Bermuda. Mr. Tyab of Frontier is apparently a Canadian citizen residing in the United States. The Pergas representatives are located in Iran. Ahmad Said resides in Dubai. Neil Said and Stan Bharti of Forbes reside in Ontario. The witnesses are located in Dubai, Iran, Bermuda, Scotland, and Ontario. Since the witnesses are scattered around the world, there is no one location that would be more convenient for all of the witnesses.

[48] As previously noted above, the dispute relates to the interpretation of the Agreement and the Amendment’s enforceability. The subject matter of the Agreement is upstream oil and gas rights in Iran. Pergas and DMCC were to enter into an MOU with NISOC. The Agreement provided for the incorporation of an entity in Ontario, through which shares would be owned. It is unclear where and how payments were to be made. There does not appear to be a strong connection between the subject matter of the Agreement and England, other than a DMCC office and DMCC directors located in the U.K. It cannot be said, however, that the connection to Ontario is much stronger. I would consider this factor neutral.

[49] The parties would not appear to lose a juridical advantage if a stay is granted and the parties are required to proceed in England. Indeed, Plaintiff’s counsel admitted at the hearing that they could not argue that England was less advantageous.

[50] The final consideration is whether there is any overarching unfairness if the dispute were to be litigated in England. I can find none.

[51] Based on my analysis of the factors, and the parties’ forum selection clause, England is a more appropriate forum than Ontario.

Conclusion

[52] For the foregoing reasons, while I find that this court has jurisdiction simpliciter, I exercise my discretion to decline jurisdiction and grant a stay of this action. The parties’ choice of forum should be given effect, and Ontario is forum non conveniens.

Costs

[53] Counsel for the parties submitted their costs outlines at the hearing. Counsel for Frontier and DMCC seeks costs on a partial indemnity basis in the amount of $13,140.53, including HST and disbursements. The Plaintiff’s costs were significantly higher.

[54] Pursuant to the Courts of Justice Act, s. 131(1), the court has broad discretion when determining the issue of costs. The overall objective of fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the circumstances, rather than an amount fixed by actual costs incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.). Rule 57.01(1) of the Rules of Civil Procedure sets out the factors to be considered by the court when determining the costs issue.

[55] I have considered these factors, as well as the proportionality principle in r. 1.01(1.1) of the Rules of Civil Procedure, while keeping in mind that the court should seek to balance the indemnity principle with the fundamental objective of access to justice. The issues on the motion were not particularly complex. The amount at issue is significant, as the Plaintiff seeks declaratory relief or $50,000,000 in damages in the alternative. The Defendants brought the motion for a stay promptly. The amount of time Plaintiff’s counsel spent on the motion is reasonable.

[56] Given the foregoing, I fix costs at $13,140.53, inclusive of disbursements and HST, payable by the Plaintiff to the Defendants within 30 days of the date of this order.

NISHIKAWA J.

Date: August 29, 2018