CITATION: BNP Paribas (Canada) v. BCE Inc., 2007 ONCA 559

DATE: 20070807

DOCKET: C45855

COURT OF APPEAL FOR ONTARIO

ROSENBERG, GILLESE and LANG JJA

BETWEEN:

BNP PARIBAS (CANADA)

Plaintiff (Respondent)

and

BCE INC., RICHARD J. CURRIE, TERENCE J. JARMAN, THOMAS E. KIERANS, JEAN C. MONTY, and H. ARNOLD STEINBERG

Defendants (Appellants)

Thomas G. Heintzman, Q.C. and Darryl R. Ferguson, for the appellants

William J. Burden, John N. Birch and Linda I. Knol, for the respondent

Heard: May 23 & 24, 2007

On appeal from the order of Justice John D. Ground of the Superior Court of Justice dated August 16, 2006, dismissing the defendants’ motion to stay or dismiss the plaintiff’s action.

ROSENBERG J.A.:

[1] In this appeal the appellants/defendants argue that the motion judge, Ground J., erred in finding that Ontario was the convenient forum for trial of a multi-million dollar action arising out of the insolvency of Teleglobe Inc. (“Teleglobe”). The defendants are BCE Inc. (“BCE”), the former parent company of Teleglobe, and several of the former directors of Teleglobe itself. The action by the plaintiff/respondent BNP Paribas (Canada), one of the lenders to Teleglobe, is for damages for breach of contract and a remedy for oppression under the Canada Business Corporations Act, R.S.C. 1985, c. C‑44.

[2] While the appellants submit that the motion judge made several errors, their principle submission is that he misplaced the evidentiary burden by requiring them to show that Ontario was not the convenient forum for the trial of the action. They argue that the motion judge ought to have required the respondent to show why its action should be heard in Ontario given that a clause in the lending agreement between the parties granted exclusive jurisdiction over any disputes to courts in the State of New York or in the Province of Quebec. They submit that by failing to do so, the motion judge misapplied the decision of the Supreme Court of Canada in Z.I. Pompey Industrie v. Ecu-Line N.V. (2003), 2003 SCC 27, 224 D.L.R. (4th) 577.

[3] The appellants also submit that the motion judge erred in principle in placing unreasonable weight on the single factor that other actions arising out of the Teleglobe affair were being tried in Ontario on the Superior Court of Justice Commercial List. They submit that this action has little connection to the other Teleglobe litigation and moreover, that the real substance of this claim concerns a dispute between two Québec-based companies – the respondent BNP and the appellant BCE – over a contract that was made in Québec and is governed by Québec law.

[4] For the following reasons, I would dismiss the appeal. Decisions on the issue of convenient forum are discretionary. In my view, the motion judge properly exercised his discretion. He considered all relevant facts and took into account the proper legal principles. Moreover, it was open to him to place considerable weight on the existence of the related litigation in Ontario.

THE FACTS

[5] The action arises from the respondent’s participation in one of two loan facilities (Credit Facility A and B) that together advanced, by way of a lending syndicate (the “Syndicate”), $U.S. 1.25 billion to Teleglobe. The respondent was not one of the original members of the Syndicate, but in September 2000 took an assignment of a portion of Credit Facility A which had been established in July 2000 pursuant to a one-year Loan Agreement (Facility A Loan Agreement) with Teleglobe. The Agreement was extended for another year in July 2001. The respondent’s share of Facility A was $U.S. 50 million. The action against the appellant BCE turns on a letter from BCE to the Syndicate in which it agreed to provide financial assistance to its subsidiary, Teleglobe, in order to maintain a certain total-debt-to-total capitalization ratio. The respondent claims that BCE breached this agreement. In effect, it is alleged that the appellants caused Teleglobe to adopt a form of accounting that artificially enhanced the company’s value by vastly overstating Teleglobe’s goodwill. Had the proper accounting methods been used, the respondent argues, BCE would have been required to provide greater financial support in accordance with the letter.

[6] The oppression claim against BCE and the individual appellants, former members of the Teleglobe board of directors, focuses on the management and control of Teleglobe by BCE and the directors (three of whom were also directors of BCE) and involves similar issues to those in the breach of contract claim.

[7] This and the other actions pending in the Ontario courts were precipitated by Teleglobe’s insolvency in April 2002 following BCE’s announcement in Toronto on April 24, 2002 that it would no longer provide financial support to Teleglobe. Teleglobe filed for Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, protection in May 2002 in the Superior Court of Justice Commercial List in Ontario. This action was supported by BCE, which provided debtor-in-possession financing to Teleglobe through an affiliate. BCE has been actively involved in the CCAA proceedings.

[8] In July 2002, just months after the initiation of the CCAA proceedings, the Syndicate members, including the respondent, brought an action (the “Syndicate Action”) seeking, inter alia, a finding of oppression against BCE (not the individual directors) in relation to the way BCE caused Teleglobe to conduct its affairs. The respondent later withdrew from that action and launched the action that is the subject of this appeal. BCE brought a motion to stay the Syndicate Action on the basis that the Ontario courts lacked jurisdiction to try the case and on the basis of forum non conveniens. Farley J. dismissed that motion.[^1] The Syndicate Action raises issues that are similar to the issues raised by the action involved in this appeal, although the theory of liability is different. In this action, the respondent principally relies upon the BCE letter. In the Syndicate Action, the plaintiffs assert that BCE gave a commitment ensuring that the lenders would be repaid.

[9] In addition to the CCAA proceedings and the Syndicate Action, two other proceedings are pending on the Ontario Superior Court of Justice Commercial List. In February 2003, Teleglobe’s interim receiver commenced an action against the appellant directors (the “Redemption Action”). In that action, the interim receiver alleges that the directors permitted Teleglobe to redeem certain series of preferred shares notwithstanding that Teleglobe did not meet the required solvency tests under the CBCA. The appellants and the respondent have a different view of the relationship of the Redemption Action to the action involved in this appeal. The appellants say the Redemption Action has nothing to do with the issues in this action. The respondent submits that the actions raise similar issues in that both concern Teleglobe’s true financial state.

[10] The Plan Administrator appointed pursuant to the Teleglobe CCAA Plan commenced an action in November 2005 against the appellants and two other persons (the “Administrator Action”). That action alleges, among other things, that the defendants arranged BCE’s affairs to minimize BCE’s exposure in the event of Teleglobe’s insolvency, unilaterally withdrew BCE financial support to Teleglobe, and failed to honour a previous financial commitment, and seeks damages for breach of fiduciary duty and oppression. Again, the appellants submit that the issues in that action have nothing to do with the claims in the action involved in this appeal.

[11] There are two principal documents that frame the dispute in the action and the forum non conveniens issue. The first document is the Facility A Loan Agreement. That agreement contains several clauses concerning jurisdiction and choice of law. Article 12, upon which the appellants rely, provides that “Each party hereto … irrevocably submits to the jurisdiction of the courts of New York State … and the provincial and federal courts located in Québec” and “irrevocably agrees that any legal proceeding against any party hereto arising out of or in connection with the Facility A Loan Papers or the obligation shall be brought in one of the aforementioned courts”. There is no dispute that as a result of the assignment, the respondent is party to the Facility A Loan Papers. The individual appellants are not. Nor is BCE. BCE, however, submits that it is entitled to the benefit of Article 12. Article 12 also contains a choice of law clause providing that the governing law is that of the Province of Québec and of Canada.

[12] Article 10 of the Facility A Loan Agreement applies in the case of default by Teleglobe and provides, inter alia, that the Arranger (the Bank of Montreal) or the Determining Lenders may “exercise any and all other legal or equitable rights afforded by the Loan Papers, the Laws of the Province of Quebec and Canada applicable therein, or any other applicable jurisdiction as the Arranger shall deem appropriate”. The respondent relies upon this clause. It submits that this clause gives it the right to bring this action in the court of its choice, i.e. Ontario. “Determining Lenders” is a defined term and in short means those lenders who collectively hold 51 per cent of the debt.

[13] The other important document is the BCE letter. It does not contain a jurisdiction clause. The appellants submit, however, that it falls within the definition of “Loan Papers” in the Facility A Loan Agreement. The Agreement defines Loan Papers to mean, inter alia, “all agreements, documents, or instruments in favour of Arranger … or Lenders … ever delivered pursuant to this Facility A [Loan] Agreement … or otherwise delivered in connection with all or any part of the Obligation”.

[14] There is a dispute about whether this action is barred by the applicable limitation period. This action was commenced in December 2004. The appellants submit that under Québec law the applicable limitation period is three years and that for reasons that need not be set out here the cause of action arose before 2001. The respondent submits that even if the three-year limitation period applies, the action is not statute barred because the cause of action did not arise until April or May of 2002, upon the insolvency of Teleglobe and the discovery of BCE’s alleged failure to comply with its obligations. The respondent also relies on the civil law doctrine of “impossibility” to extend the limitation period. There is a dispute as the exact meaning of the concept of “impossibility” and its similarity to the common law principle of discoverability.

[15] During the course of argument of the motion the respondent commenced a protective action in Québec that is identical to this action. For the purpose of the motion, the appellants undertook to the motion judge that in the event that the action was stayed or dismissed, they would agree that any Québec action in respect of the same matters was deemed to have commenced on the date this action was commenced i.e. December 2004. There was conflicting expert evidence before the motion judge as to whether a Québec court would be bound to accept that undertaking.

REASONS OF THE MOTION JUDGE

[16] After accurately setting out the factors to be considered on a motion to stay an action on the basis of forum non conveniens, the motion judge dealt with the principal contentious issue: whether the exclusive jurisdiction clause (Article 12) applied. He rejected the respondent’s position that this issue had already been determined against the appellants by Farley J. in the Syndicate Action. He did not, however, clearly find that the clause applied. Rather, he took the clause as an indication of the reasonable expectations of the parties. As he said at para. 23:

Although it may be arguable, in view of the interlocking definitions and other provisions of the relevant Agreements, whether the exclusive jurisdiction provisions of the Agreements would apply to this action which is based upon a breach of the BCE Agreement and allegations of oppression, I accept the submission of the Defendants that the existence of those provisions indicates a reasonable expectation of the parties to the those Agreements that disputes arising under those Agreements would be determined by the Québec courts.

[17] The motion judge then moved on to the application of the remaining factors. Accordingly, he concluded that the choice of law and reasonable expectation of the parties as expressed in Article 12 strongly favoured Québec as the more convenient forum. Below is a brief summary of his conclusions regarding these factors:

• Location of parties: This is a neutral factor. Notwithstanding that the headquarters of BCE, BNP and Teleglobe are in Montreal, the companies also maintain offices in Ontario and three of the individual defendants reside in Toronto. In any event, the nature of their business requires these individuals to frequently travel throughout Canada.

• Location of witnesses: This factor slightly favours Québec. Although the contract negotiations were carried out in Quebec, the majority of meetings concerning Teleglobe’s accounting and finance statements took place in Montreal, and many of the parties’ professional advisers reside in Québec, much will depend upon witnesses from the United States about the application of the U.S. Generally Accepted Accounting Principles (GAAP). It would be equally convenient for those witnesses to travel to Québec or Ontario.

• Location of evidence: This factor slightly favours Ontario. Although many of the original documents required in this action are in Quebec, their electronic production has been ordered by the Ontario courts in the Syndicate and Redemption Actions. It would be counterproductive to have new, and possibly conflicting, orders made on production issues.

• Where the contract was negotiated and executed: This is a neutral factor. Although the contract was negotiated and executed in Montreal and to some extent in New York and Paris, the location is relevant only to accessibility of documents and availability of witnesses.

• Existence of other proceedings: This factor strongly militates in favour of Ontario given that the Ontario courts have four years of experience with the related Ontario proceedings, which raise a number of overlapping or common issues.

• Interest of justice; interest of the parties: These are neutral factors.

• Loss of juridical advantage: This factor strongly favours Québec because the law of Québec will determine the question of the limitation period. Moreover, it would be advantageous to have a Québec court decide the limitation period issue given the difference of opinion about the application of the Québec law.

[18] The motion judge held that the onus was on the moving parties to establish that “there is a clearly more appropriate forum than the forum chosen by the Plaintiff.” He concluded that the appellants failed to show that Québec was a clearly more convenient forum. The motion judge then appeared to revisit the issue of juridical advantage and held that he would be reluctant to stay the Ontario action on the basis of forum non conveniens given the ambiguity/uncertainty concerning the willingness of a Quebec court to accept the appellant’s undertaking as to a deemed commencement date of the Québec protection action. An Ontario court would be able to determine that issue with the assistance of expert opinion evidence on Québec law and submissions on the application of Quebec law to the facts of this case. Accordingly, the motion judge dismissed the motion.

ANALYSIS

The Exclusive Jurisdiction Clause

[19] The appellants submit that the exclusive jurisdiction clause applies to the claims against BCE. It is unclear whether the clause also applies to any action against the individual directors that arises out of the affairs of Teleglobe. For a variety of reasons, the respondent submits that the clause does not apply. Its principal submission is that since BCE was not a party to the Facility A Loan Agreement, it is not entitled to the benefit of the clause.

[20] I am prepared to assume for the purposes of these reasons that BCE, at least, is entitled to the benefit of the clause and that the principles from Z.I. Pompey, supra, apply. In that case, the Supreme Court of Canada approved the “strong cause test” laid down in The “Eleftheria”, [1969] 1 Lloyd’s Rep. 237 at 242 (PDAD). In short, a court is not bound to stay proceedings commenced in breach of a forum selection clause. However, as Bastarche J. said, at para. 20, the plaintiff has the burden of satisfying the court “that there is good reason it should not be bound by the forum selection clause.” A forum selection clause is not simply one of several factors that the judge must take into account in deciding a forum non conveniens case. Rather, the presence of such a clause reverses the ordinary burden of proof. In the ordinary forum non conveniens cases, the burden is on the defendant to show why the stay should be granted. Where a forum selection clause is present, “the starting point is that parties should be held to their bargain, and where the plaintiff has the burden of showing why a stay should not be granted”: Z.I. Pompey, supra, at para. 21.

[21] Finally, as Bastarche J. points out, at para. 20, forum selection clauses are to be encouraged “as they create certainty and security in transaction, derivatives of order and fairness, which are critical components of private international law … In the context of international commerce, order and fairness have been achieved at least in part by application of the ‘strong cause’ test.”

[22] On the assumption that the forum selection clause in Article 12 of the Facility A Loan Agreement applied, the motion judge erred in principle in failing to require the respondent to show that there was good cause why the action should not be stayed. In my view, however, if there was an error, it was of no consequence. The “guiding element in the determination of an appropriate forum must be principles of order and fairness”: Hunt v. T&N plc (1993), 1993 43 (SCC), 109 D.L.R. (4th) 16 at 33 (S.C.C.). The reasons of the trial judge show that order and fairness overwhelmingly favoured Ontario as the place for trial of this action because the other four proceedings were in the Ontario courts.

[23] That finding is consistent with the reasonable expectation of the parties. While Article 12 requires that all proceedings be taken in the courts of Québec or New York, the rules changed upon Teleglobe’s insolvency. In accordance with Article 10, the Arranger or the Determining Lenders are entitled to bring an action in any jurisdiction as the Arranger deems appropriate. The respondent does not on its own hold 51 per cent of the debt and is therefore not itself entitled to the benefit of Article 10. That said, it seems to me that the inclusion of this clause is a strong indication that the parties contemplated that a jurisdiction other than Québec or New York could be an appropriate forum for litigation in the case of insolvency. This view is bolstered by the fact that the event that has triggered the selection of forum for this action was the choice by the new Teleglobe directors to use the Ontario courts for their CCAA proceedings. At the time Teleglobe was a wholly owned subsidiary of BCE and as indicated BCE was actively engaged in the CCAA proceedings.

[24] The motion judge could rightly find that once this complex proceeding had been launched in Ontario, to be followed by the other pieces of related litigation, there was every reason to permit this action to also proceed in Ontario. Given the other proceedings, which have provided the Ontario courts with over four years of experience with the Teleglobe litigation, there was good cause to permit this action to proceed in Ontario. The appellants’ submission that the other proceedings have nothing to do with the claim asserted in this action does not bear close scrutiny. Either BCE or the individual respondents are involved in all of the actions. The documents ordered produced in the other actions will be required in this action. Many of the same witnesses will be involved. The essence of the claims in all of the proceedings concerns the management of Teleglobe by the defendant directors, several of whom were also directors of BCE, and the alleged failure of BCE to comply with its commitments to its subsidiary and the lenders. In particular, although the theories of liability in the Syndicate Action and this action are different, they are closely related and it would be advantageous for one court to deal with both of them. BCE and the directors are already in Ontario dealing with the litigation fallout from the insolvency of Teleglobe; they are not seriously disadvantaged by having all of the proceedings in the same court.

[25] As the motion judge found, there are some advantages to having a Québec court deal with this action especially because of the choice of law clause. But, these are sophisticated parties and have the means to provide the Ontario court with the necessary evidence: see Hunt v. T&N plc, supra, at p. 33. Also, I agree with the respondent that the importance of choice of law should not be exaggerated. At least as the action is presently framed, legal issues will be relatively less significant in comparison to the factual issues such as the application of U.S. GAAP.

[26] Much time was spent during oral argument about the impact of the limitation period issue and what the appellants submit were inconsistent findings by the motion judge. The limitation period factored into the motion judge’s analysis at several points. In finding that the factor of jurisdiction and proper law strongly favours Québec as the more convenient forum, he took into account the advantage of a Québec judge dealing with the limitation period because that issue would be dealt with in accordance with Québec law.

[27] The issue also surfaced in the motion judge’s consideration of loss of juridical advantage. He appears to have found that loss of juridical advantage favoured Québec because if the Ontario action was stayed, thereby forcing the respondent to commence an action in Québec, the respondent would be outside the three-year limitation period for commencement of a personal action. In considering loss of juridical advantage the motion judge again took into account the advisability of having a Québec judge deal with issues that would turn upon Québec law.

[28] Finally, the motion judge considered it significant that the action may be barred by the three year limitation period if the respondent had to commence a new action in Québec or rely upon the protective action. He said, at para. 51, that he would “be reluctant to stay the Ontario action” in those circumstances.

[29] I agree with the appellants that these various findings seem inconsistent. In my view, however, the apparent inconsistency does not assist the appellants. Juridical advantage, contrary to the finding by the motion judge, was at worst a neutral factor and should not have been counted as a separate factor favouring Québec. On the record before the motion judge, the applicable limitation period would be decided in accordance with the law of Québec whether the case proceeded in Ontario or Québec. The respondent gained no juridical advantage with respect to the limitation period by commencing the action in Ontario and likewise, the appellants did not lose any legitimate juridical advantage. There is no suggestion that this was a case of forum shopping where a party has sought out a jurisdiction simply to gain a juridical advantage rather than by reason of a real and substantial connection of the case to the jurisdiction: see Amchen Products Inc. v. British Columbia (Workers’ Compensation Board), 1993 124 (SCC), [1993] 1 S.C.R. 897 at 912.

[30] The motion judge’s comment that he would be reluctant to stay the Ontario action given the uncertainty about whether the protective action in Quebec was statute-barred was made after he had found, for good reason, that Ontario was the convenient forum. In these circumstances, I need not consider the application to this case of the line of authority holding that a plaintiff cannot rely upon a loss of juridical advantage that it has created for itself by suing in one jurisdiction and letting a limitation period run in the appropriate forum: see for example Cortese v. Nowsco Well Service Ltd. (2000), 2000 ABCA 124, 255 A.R. 381 at para. 7 (C.A.), leave to appeal dismissed, [2000] S.C.C.A. No. 286.

[31] The appellants submit that the motion judge failed to apply the governing principle in forum non conveniens cases: the real substance of the lis between the parties must be considered to determine the nature and appropriate forum for trial, that being the one with the closest connection with the action and the parties. They contend that rather than engaging in this form of analysis, the motion judge unreasonably allowed the existence of the other Ontario litigation to trump all other factors, whereas this is essentially a dispute between two Québec companies (BCE and BNP) about a contract made in Québec where the outcome will be determined in accordance with Québec law.

[32] In my view, the motion judge did not err in principle. Further, his determination of which factors were to be accorded the greatest weight is entitled to deference, provided that determination was not unreasonable. He made no such error.

[33] The motion judge’s allocation of weight among the relevant factors cannot be said to be unreasonable. It was not simply that the other actions were in Ontario. There was the fact that because of the choice made by Teleglobe to bring the CCAA proceedings in Ontario, the Superior Court of Justice Commercial List now had over four years experience with litigation arising out of the Teleglobe collapse. As he said at para. 38, “rulings have been made and orders issued with respect to matters such as production of documents which may well be relevant to issues in this action and it may be that orders could be made for common production of documents in this action and in related proceedings in this court and possibly, for common discoveries”. As well, he noted that this action and the related action could be case managed by the same case management judge. This factor is considerably more important than the physical location of BNP and BCE, especially given BCE’s substantial presence throughout Canada, and in particular, in the Province of Ontario. Choice of law to interpret a contract that was made in Québec, where there may be issues of an expired limitation period, was also an important consideration. Review of the motion judge’s reasons, however, indicates it was recognized as such and considered accordingly. It is not for this court to second guess his view of the relative weight to be assigned to the factors.

DISPOSITION

[34] Accordingly, I would dismiss the appeal with costs fixed in the amount of $30,000 inclusive of G.S.T. and disbursements.

Signed: “M. Rosenberg J.A.”

“I agree E.E. Gillese J.A.”

“I agree S. E. Lang J.A.”

RELEASED: “MR” AUGUST 7, 2007

[^1]: ABN Amro Bank N.V. v. BCE Inc., 2003 64276 (ON SC), [2003] O.J. No. 5418 (S.C.J.), leave to appeal dismissed, [2003] O.J. No. 2890 (Div. Crt.).