COURT FILE NO.: CV-21-657612 DATE: 20220419

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Jeremy Kessler Canadian Mustard Inc. o/a Kozlik’s Mustard Plaintiff – and – Acasi Machinery Inc. Defendant

COUNSEL: J. Bal and J. Singh, for the Plaintiff N. Chiesa and N. Sidlar, for the Defendant

HEARD: November 16, 2021

REASONS FOR JUDGMENT

SUGUNASIRI, J.:

Overview

[1] When Kozlik’s Mustard needed an industrial condiment bottler for its mustard products, it decided to contract with Acasi Machinery Inc., a Florida company. Acasi provided Kozlik with a quote for a Trupiston Automated Piston Filler Machine (“Trupiston”). Acasi conducts business by way of quotes and invoices that purport to set out the terms of the contracts it makes with its customers. One clause selects Florida as the forum for any dispute resolution (“Forum Selection Clause”).

[2] Kozlik commenced this action in Ontario suing Acasi for breach of contract, negligence, negligent misrepresentation, and intentional interference with economic relations. It claims that the Trupiston is defective. Acasi moves to stay the action to honour its forum selection clause. This motion addresses whether a forum selection clause found at the bottom of a price quotation for the sale of equipment is sufficient to bind a customer to the supplier’s preferred jurisdiction. It also reflects on the impact of the availability of Zoom on the factors that determine the convenient forum for an action.

[3] I dismiss the motion. There are strong reasons to avoid Acasi’s forum selection clause that was neither negotiated nor pointed out to Kozlik. Manufacturers should expect to defend claims in the location of the users of the equipment unless they negotiate a forum selection clause or bring such a clause to the customer’s attention prior to finalizing the sales contract. In this case, the defect and alleged misrepresentations and decision to act were experienced in Ontario. Ontario has a real and substantial connection to the dispute and is the convenient forum, especially considering the ability of parties to present out of jurisdiction witnesses via zoom.

Analysis

Background Facts

[4] Acasi is a Florida corporation who manufactures filling machines used to fill bottles with a liquids of various consistencies. Its head office and factory are located in Miami with some metalwork, assembly, testing and repair done in Colombia. Most of its customers are in the United States. Kozlik’s is family owned Ontario company who manufactures and sells condiments. It sells its product in Canada and the U.S.

[5] Mr. Kessler is an employee of Kozlik. The company is his family’s business. In 2018 Kozlik was looking for a filling machine that could fill warm liquid and increase the company’s productivity. After researching Canadian options, Mr. Kessler reached out to Acasi via email after being introduced to its existence by an Ontario packaging equipment company.

The June 22, 2018 Quote

[6] The sale of the Trupiston from Acasi to Kozlik was negotiated between Mr. Juergensen and Mr. Kessler. Mr. Juergensen did not provide evidence in this motion. On June 22, 2018, Mr. Juergensen emailed Mr. Kessler “a revised budgetary quote” for the Trupiston that Acasi recommended based on discussions between the parties (“June 22 quote”). Within the quote were the recommended sizes for the various components of the Trupiston and the available upgrades to the base machine. It was not, as Kozlik characterizes it, a “price list” which suggests that Acasi simply provided a catalogue of available filling machines. A plain review of the June 22 quote clearly shows otherwise. It was a quote tailored to Kozlik’s needs with some options for Kozlik to decide upon.

[7] It is Acasi’s practice to set out the terms and conditions of its sales contract within the quote on the assumption that the contract will be created when the purchaser makes its down payment. In this case, the Terms and Conditions required payment of 50% of the purchase price at the time of finalizing the order, with the balance due prior to shipping. Acasi undertook to test the machine using Kozlik’s sample bottles prior to shipping. Acasi also provided a product warranty on all parts from the date of shipping. Kozlik was responsible for installation. If it required training from Acasi, Kozlik had the option to go to Acasi’s Miami facility for free training. Finally, the quote indicated that any disputes were to be resolved in Florida.

The June 26, 2018 Quote

[8] After receiving the June 22 quote, Kozlik requested some adjustments to the specifications and Mr. Juergensen provided a second quote on June 26, 2018 with the same Terms, Conditions and Warranty (“June 26 quote”). Mr. Kessler accepted this quote. On July 5, 2018 Acasi invoiced Kozlik for the Trupiston order that Mr. Kessler agreed to. In or around July 13, 2018, Kozlik paid the first deposit equalling 50% of the total cost. This was in accordance with the payment terms set out in the June 22 and June 26 quotes and noted on the July 5, 2018 invoice. Both parties agree that a binding contract to purchase the Turpiston crystallized when Acasi received payment of the 50% deposit in or around July 18, 2018, with modifications to price and technical specifications occurring in November after a site visit to the Florida plant.

[9] Mr. Kessler attested that throughout this negotiation process, neither Mr. Juergensen nor anyone else at Acasi pointed out the forum selection clause. Mr. Kessler confirmed this in cross-examination in the face of hearsay evidence from Acasi’s affiant that Mr. Kessler had tried to change the forum after Kozlik paid the 50% deposit. I accept Mr. Kessler’s direct evidence over Mr. Possin’s hearsay evidence of what Mr. Juergensen advised him.

There is an enforceable forum selection clause but there is strong cause to avoid it

[10] Section 106 of the Courts of Justice Act states: “A court, on its own initiative or on motion by any person, whether or not a party, may stay any proceeding in the court on such terms as are considered just.” Acasi moves to stay the action on the force if its forum selection clause.

[11] Forum selection clauses were first recognized in England, largely in the context of bill of lading commercial disputes. In such cases, in the absence of “strong cause”, a clear forum selection clause negotiated between sophisticated commercial parties was upheld on the premise that contracting parties should be held to their bargain as to where and under what law a dispute should be resolved.

[12] The importance of forum selection clauses and the strong cause test has since been accepted in Canada in Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27 (“Pompey”) (a bill of lading case) and by other appellate Courts including the Ontario Court of Appeal in 2249659 Ontario Ltd. V. Sparkasse Siegen, 2013 ONCA 354 who stated: “Forum selection clauses in an agreement between parties, particularly sophisticated commercial parties, will normally be enforced in Ontario.”

[13] Most recently the Supreme Court of Canada has elaborated on the test to be met by parties seeking to enforce a forum selection clause in Douez v. Facebook, 2017 SCC 33 in cases that involve consumers. In that case, the plaintiff sued Facebook for using her name and profile picture to advertise companies to other members on the site. Facebook brought a preliminary motion to stay her action on the basis that any claim is to be disputed in California. Ms. Douez purportedly agreed to the clause by clicking “accept” in the mandatory registration process.

[14] Ultimately a bare majority agreed with the chambers judge who refused Facebook’s stay request. In doing so, the Supreme Court of Canada examined whether the test it had established in 2003 in Pompey applied to consumer contracts. The court concluded that it did but added some additional considerations to recognize the inequality of bargaining power that exists when consumers contract with companies like Facebook.

[15] The applicable test in all scenarios remains the two-step inquiry set out by the Court in 2003:

At the first step, the party seeking a stay based on the forum selection clause must establish that the clause is “valid, clear, and enforceable and that it applies to the cause of action before the court.” At this step of the analysis, the court applies the principles of contract law to determine the validity of the forum selection clause.

Once the party seeking the stay establishes the validity of the forum selection clause, the onus shifts to the plaintiff. At this second step of the test, the plaintiff must show strong reasons why the court should not enforce the forum selection clause and stay the action.

[16] The Court goes on to enunciate the following principles in applying this two-part test:

i. A court must consider all the circumstances of the case including the convenience of the parties, fairness between the parties and the interests of justice;

ii. Other factors to consider are: a) In what country the evidence on the issues of fact is situated or more readily available; b) whether the law of the foreign court applies and whether it differs from the domestic laws; c) what country are the parties connected to; d) whether the defendant is seeking a procedural advantage; e) whether the plaintiffs would be prejudiced by having to sue in a foreign court because they would be deprived of security for the claim, unable to enforce a judgment, be time-barred in the foreign jurisdiction or for political, racial or other reasons would be unlikely to get a fair trial;

iii. The strong cause factors were meant to provide some flexibility;

iv. The test applies differently in different contractual contexts;

v. Not all forum selection clauses are created equally depending on factors such as the relative bargaining power of the parties; and

vi. The strong cause test must ensure that the court’s plenary jurisdiction only yields to private contracts where appropriate.

[17] Having taken these principles into consideration, the Court concluded that the strong cause factors ought to be different in a consumer context. In such cases, the court should also take into consideration public policy considerations relating to the gross inequality of bargaining power between the parties and the nature of the rights at stake.

There is a valid, clear and enforceable forum selection clause

[18] I accept that Acasi does not rely on formal, signed contracts to conduct its business. Its practice is to provide quotes with terms which if accepted, forms the contract between it and its customers. In this case Kozlik paid the 50% deposit required under the terms set out in the June 26 quote. This is when the contract formed. Mr. Kessler admits as much in his affidavit. He states that when he paid the 50% deposit, “the contract between Kozlik’s and Acasi was formed on that day.” Mr. Kessler describes the November adjustments as “changes to my agreement” and states that it was due to the “new verbal amendment to my contract with Acasi” about the alleged defects had been fixed, that Kozlik made final payment on November 13, 2018. Even by his own evidence, Mr. Kessler recognizes that before he went to Miami in November, he believed there to be a contract.

[19] The forum selection clause under the terms and conditions of the contract reads:

All matters arising out of or relating to this agreement shall be governed by the laws o the State of Florida (exclusive of conflict of laws principles) and shall be deemed to have been executed in Miami, Florida. Any legal action of proceeding relating to this agreement shall be instituted solely in a state or federal court in Miami-Dade County, Florida. ACASI Machinery and Buyer agree to submit to the jurisdiction of, and agree that venue shall only be proper in, these courts in any such legal action or proceeding.

[20] The June 26 quote is clearly the agreement that Acasi is speaking to in this clause; the very same agreement that Kozlik’s is relying on to sue and import implied terms into based on Acasi’s alleged representations. The forum selection clause applies to the within action and is valid, clear and enforceable. The more controversial issue is whether Kozlik can show strong cause why it should not be enforced. In my view it can. I explain below.

There is strong cause to allow the action to continue in Ontario

Pompey reminds us that equal parties who have negotiated a contract which includes a forum selection clause should be held to their bargain. Douez instructs us however that this principle has elasticity when the circumstances of the negotiations change – for example if, like in Douez, there was no opportunity to bargain, and the consumer was in a ‘take or leave it’ situation. The onus is on Kozlik to persuade the Court that the otherwise valid forum selection clause should not be enforced in this case. I am persuaded that there is strong cause not to enforce the forum selection clause; or strong reasons to retain jurisdiction in Ontario.

The forum selection clause was not “negotiated”

[21] The agreement between Acasi and Kozlik falls closer to a contract of adhesion than to a fully negotiated contract between sophisticated commercial parties. While I agree that both Acasi and Kozlik are seasoned businesses, they only negotiated price and machine specifications. The terms and conditions which contains the forum selection clause were not negotiated. Kozlik was certainly aware of some of the terms of the contract – namely the timing of the payment and the testing. However, these were terms that the parties discussed during their interactions. The payment terms were set out in the July 5, 2018 invoice. The invoice did not contain the terms and conditions attached to the quotes but referenced the June 26 quote. Mr. Kessler did not review those terms, nor did Mr. Juergensen bring any of them, including the forum selection clause, to his attention.

[22] Though not argued, it may be said that the June 26 quote and July 5 invoice evidencing the sale of the Trupiston to Kozlik is like a bill of lading which is often a pro forma document with terms that are unilaterally provided to the entity seeking the transport of goods (see paras. 28, 29 of Pompey). The Supreme Court of Canada in Pompey rejected the notion that its use of pre-printed forms makes bills of lading contracts of adhesion. If bills of lading are not contracts of adhesion than nor should be pro forma sales contracts such as the June 26 quote. However, unlike in this case, the Supreme Court noted that bills of lading are typically entered into by sophisticated parties familiar with the negotiation of shipping transactions. In Pompey the party seeking to excuse itself from the forum selection clause was found to be aware of industry practices and would have expected that the bill of lading would contain a forum selection clause. The court also held that the clause could have been negotiated and therefore there was no evidence of grossly uneven bargaining power.

[23] The Supreme Court of Canada’s comments highlight the stark contrast to the sales contract in issue here. There was no evidence of industry practice in purchasing machines like the Trupiston, nor extensive experience of Kozlik or Mr. Kessler in purchasing machinery. There was evidence that Kozlik had a condiment filler prior to purchasing the Trupiston and that it purchased a replacement machine from a New York company with no other particulars. In these circumstances, I find that the parties were not of equal bargaining power and that the June 26 invoice is closer to a contract of adhesion. Acasi drafted the terms and simply attached multiple pages of terms to the quote. Even if Mr. Kessler should have read all twelve pages attached to the June 26 quote, he had no opportunity to negotiate it. A similar comparison between bills of lading and a consumer contract was used in Douez to conclude that Facebook’s forum selection clause should not be enforced. While Facebook and Acasi are not similar companies in scope or size, I find that sales contracts like the June 26 quote are closer to the Facebook type contract of adhesion than to the negotiable bills of lading. There was no evidence that Kozlik ought to have expected a forum selection clause when contracting with Acasi.

[24] While the inability to negotiate weighs heavily against enforcing the clause, the Supreme Court of Canada noted in Pompey that the court is to look at “all of the circumstances” including the “convenience of the parties, fairness between the parties and the interests of justice.” This does not mean applying the enumerated factors forensically. In this case Acasi argues why several of the factors support Florida. I agree that Kozlik has not argued that limitation periods, the inability to enforce a judgment or the inapplicability of Florida laws to the dispute favour litigating in Ontario in order to discharge its burden.

The availability of zoom removes the location of witnesses as a meaningful factor

[25] Another factor to consider is in what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the Courts. In my view, the significance of this factor is greatly reduced with the introduction of zoom trials as a result of the Covid-19 pandemic. The formation of the contract, alleged misrepresentations by Acasi representatives, and the alleged defects of the Trupiston are the primary issues in the action. The parties have identified the witnesses who can speak to these issues; they reside in their respective jurisdictions. However, the need for witnesses to travel between or within countries is eliminated by the availability of zoom testimony in Ontario proceedings. While in person trials remain the default, zoom trials or hybrid trials are available in cases such as this where witnesses reside in other countries. I have no evidence on its availability in the Florida courts. Depending on Florida’s capabilities, Ontario’s ability to accommodate remote witnesses could make it the more favourable jurisdiction to adjudicate this action where each party’s witnesses reside in their home countries. At the very least, the location of witnesses becomes a less meaningful consideration in the zoom era and in considering the interests of justice and fairness to Acasi.

A foreign manufacturer advertising and selling to customers in Ontario should expect to be sued for negligence in Ontario unless there is a negotiated forum selection clause

[26] It is a long-established principle that a manufacturer selling outside of its jurisdiction should expect to defend negligent manufacture claims in the place where the allegedly defective product was used (Moran principle). While the principle originally arose in a case that did not have a forum selection clause to consider, it nevertheless can apply here where a party has not negotiated a forum selection clause nor was directed to its existence. As noted by the British Columbia Court of Appeal in Stanway, the principle recognizes the important interest a state has in injuries suffered by persons within its territory. In this case, it is appropriate for Kozlik to receive the benefit of this principle. In addition to breach of contract, Kozlik alleges that the Trupiston’s defects were the result of faulty design, electrical work or manufacturing methods. It is clearly alleging manufacturing defects. If Acasi wanted to deviate from the Moran principle, it should have brought the forum selection clause to Kozlik’s attention.

[27] The inability of Kozlik to negotiate the forum selection clause, Acasi’s failure to point it out having pointed out other parts of its Terms and Conditions, the availability of Zoom in Ontario to eliminate concerns about witness travel and the operation of the Moran principle are strong reasons for Ontario to maintain jurisdiction in this action.

Ontario has jurisdiction “simpliciter”

[28] Having found that Kozlik has established a strong cause to avoid Acasi’s forum selection clause, the action can only proceed in Ontario if it has a real and substantial connection to Ontario. In Van Breda v. Village Resorts Ltd., 2012 SCC 17, the Supreme Court of Canada established presumptive factors that establish a province’s jurisdiction over an action. A contract connected with the dispute and created in Ontario connects the action to Ontario. A tort committed in Ontario also connects the action to Ontario. Where there is one presumptive connecting factor, the Ontario Superior Court has jurisdiction.

[29] In this case Kozlik sues for breach of contract and for various torts. Leaving aside the issue of where the contract was formed, the alleged negligent manufacture and misrepresentation were committed in Ontario based on the application of the Moran principles. Post-Van Breda, Moran has been applied to conclude in the manufacturing context that a tort occurs in the jurisdiction substantially affected by the defendant's activities or its consequences or where the important elements of the tort occurred. In this case, it is where the harm occurred that is relevant. Like in Moran, Kozlik is suing Acasi because Kozlik suffered harm (a fundamental element of negligence), not because some employee of Acasi was careless. Similarly, the courts have held that negligent misrepresentation occurs where the misinformation is received or acted upon. This places both the negligent manufacturing claim and the negligence misrepresentation claim in Ontario.

Ontario is the convenient forum

[30] Based on the factors I have already discussed, Acasi has not persuaded me that Ontario is an inconvenient forum to adjudicate this case, or that Florida is clearly the better forum. In Tisi v. Cornell Trading Inc., Justice Perell explains the factors for determining convenient forum as they have evolved since AmChem. The factors are: (a) the location of the majority of the parties; (b) the location of key witnesses; (c) contractual provisions that specify applicable law or accord jurisdiction; (d) the avoidance of multiplicity of proceedings; (e) the applicable law and its weight in comparison to the factual questions to be decided; (f) geographical factors; and (g) whether declining jurisdiction would deprive the plaintiff of a legitimate juridical advantage in the domestic court. Not all are relevant here.

[31] It is for Acasi to persuade me that Ontario should decline jurisdiction. It has not done so. I have already noted that the impact of the location of parties and witnesses has less impact in the Zoom era of Ontario proceedings. Acasi argues that Florida law can resolve the dispute but with no evidence from a person with knowledge of Florida law. I find no hardship to Acasi that would override the Moran principle that manufacturers should expect to defend their products and conduct in the places where their products are used. In light of the Moran principle, Acasi has to take additional steps to notify its customers that doing business with it involves resolving disputes in Florida.

Disposition

[32] I dismiss Acasi’s motion to stay the action. Kozlik is presumptively entitled to costs. If the parties cannot resolve costs, they can advise my assistant and I will provide further direction. I wish to thank all counsel for their exceptional advocacy and professionalism.

P.T. Sugunasiri J.

Released: 2022-04-19