COURT OF APPEAL FOR ONTARIO

CITATION: Fraser v. 4358376 Canada Inc., 2014 ONCA 553

DATE: 20140722

DOCKET: C58321

Sharpe, Simmons and Benotto JJ.A.

BETWEEN

John Fraser

Plaintiff/Respondent

and

4358376 Canada Inc. Operating as Itravel 2000 and Travelzest PLC, The Cruise Professionals Limited, Jonathan Carroll and Adrian Cobbold

Defendants/Appellants

Jeffrey E. Goodman and Kathryn J. Bird, for the appellants

Nadine Cote, for the respondent

Heard: June 26, 2014

On appeal from the order of Justice James M. Spence of the Superior Court of Justice dated January 9, 2014.

By the Court:

[1] The central issue on this appeal is whether the appellants, the individual defendants, attorned to the jurisdiction by taking certain procedural steps in conjunction with their motion to stay or dismiss the action on the ground that the Ontario courts have no jurisdiction.

[2] The respondent plaintiff originally brought this action for wrongful dismissal against the corporate defendants. Those defendants moved for an order staying or dismissing the action on the ground that the respondent’s claim was governed by a jurisdiction clause in his employment contract that required any disputes to be litigated in England.

[3] In the face of the jurisdiction motion, but before it had been set down for hearing, the respondent moved for and obtained an order adding the appellants as parties. The respondent alleged intentional interference with his economic relations, inducement of breach of contract and related agreements and asserted statutory claims arising from the personal appellants’ positions as senior officers and directors of the corporate defendants. The appellants were served with that motion but they advised the respondent that given their position as to jurisdiction, they would not appear.

[4] After the appellants were added as defendants, the corporate defendants were placed into receivership pursuant to bankruptcy legislation in Ontario, in the case of itravel2000 and The Cruise Professionals Limited, and in the United Kingdom, in the case of Travelzest plc. As a result of the bankruptcy proceedings, the actions against the corporate defendants were stayed.

[5] Following the bankruptcy proceedings in Ontario and the United Kingdom, the individual defendants filed an amended notice of motion to bring the jurisdictional issue before the court. The amended notice of motion asked for a temporary stay of the actions against the personal defendants until the stay of the actions against the corporate defendants had been lifted or until the proceedings against those defendants had been dismissed or otherwise finally resolved. The amended notice of motion also asked for an order striking out or expunging the fresh as amended statement of claim on the ground that the court was required to deal with the issue of jurisdiction on the basis of the pleadings as they existed at the time the jurisdiction motion was first brought.

[6] The basis for the appellants’ request for a temporary stay pending resolution of the bankruptcy proceedings was that the claims against the individual defendants were inextricably tied to the claim of wrongful dismissal against the corporate defendants and that the jurisdictional issue was entirely predicated upon the terms of the respondent’s employment contract with the corporate entities. The appellants took the position that so long as the claims continued against the corporate defendants, the issue of jurisdiction could not be fairly resolved without their presence. The bankruptcy stays made that impossible.

[7] The motion judge ruled that by asking for the temporary stay pending the lifting of the bankruptcy stay or dismissal of the claims against the corporate defendants, the individual defendants had attorned to the jurisdiction of the court. He further ruled that as his ruling on attornment resolved the issue of jurisdiction the request for a temporary stay was rendered moot. He dismissed the request to strike the amended statement of claim and he awarded costs of the one day motion on a substantial indemnity basis in the amount of $83,163.

[8] The appellants appeal the declaration that they had attorned to the jurisdiction and seek leave to appeal the costs order. The respondent takes the position that the appellants have attorned but also argues that if they have not, the motion for a temporary stay should be dismissed.

[9] We agree with the appellants that the motion judge erred in law by concluding that the steps they took amounted to attornment. In our view, all the steps taken by the appellants are more properly characterized as procedural steps taken within the confines of the jurisdiction motion.

[10] By asking for a temporary stay, the appellants were asserting their position that proper resolution of their jurisdictional motion required that the corporate defendants be present before the court. The temporary stay they requested was for that specific and limited purpose.

[11] In our view, a party who challenges the jurisdiction of the court is entitled to insist upon a proper procedural foundation for the determination of the challenge. Provided that the party’s steps request no more than that, they do not amount to attornment.

[12] As the motion judge decided that the appellants had attorned by seeking a temporary stay, he did not deal with the argument that by asking the court to strike out the amended statement of claim the appellants had attorned. He dealt with that request on the merits and dismissed it.

[13] We find it difficult to understand how the appellants could ask the court to strike the amended statement of claim on the basis that the amendment had followed the original jurisdiction motion since it was only through the amendment that they became parties with an interest in proceeding with the motion. We agree with the motion judge’s reasons dismissing that motion on its merits. On the issue of attornment, however, we conclude that the motion to strike the statement of claim, although ill-founded, was entirely based and dependent upon the appellants’ contention that the courts of Ontario had no jurisdiction to entertain the claim. Like the motion for the temporary stay, the motion to strike the claim was nothing more than a request to have the jurisdictional motion proceed on a proper procedural foundation.

[14] We recognize that decisions of this and other courts have taken a broad view of the kind of steps taken in a proceeding that amount to attornment. See, for example: Wolfe v. Pickar, 2011 ONCA 347, 332 D.L.R. (4th) 157; Mid-Ohio Imported Car C. v. Tri-K Investments Ltd. (1995), 1995 2084 (BC CA), 129 D.L.R. (4th) 181 (B.C.C.A.). However, the test expressed in those cases is whether the party “…appears in court and goes beyond challenging the jurisdiction of the court based on jurisdiction simpliciter and forum non conveniens”: Wolfe v. Pickar, at para. 44 (emphasis added).

[15] We know of no authority for the proposition that procedural steps brought within the confines of a jurisdiction motion dealing solely with the mechanics of having that motion heard in a proper procedural setting amount to attornment. In our view that is all that occurred in this case. The appellants did not “go beyond challenging the jurisdiction” and the motion judge erred in law in concluding otherwise.

[16] This brings us to the respondent’s request that if we find there has been no attornment, we deal with motion for the temporary stay on its merits. It is entirely regrettable that this action has become mired in a dispute over jurisdiction involving parties that almost certainly will never be brought before the court. It is our view that the interests of justice would be served by dealing with the motion for a temporary stay pursuant to the power conferred by the Courts of Justice Act, R.S.O., c. C.43, s. 134(1).

[17] In our view, the appellants’ request for a temporary stay should be dismissed. As matters stand, the action against the corporate defendants is stayed by virtue of the bankruptcy proceedings. There is nothing in the record to suggest that there is any realistic prospect that the bankruptcy stay will be lifted or that the claims against the corporate defendants will ever proceed. We see no reason why what appears to be the purely theoretical possibility of the claims proceeding against the corporate defendants should preclude the respondent from proceeding with his claims against the appellants.

[18] We note that counsel for the appellants was also counsel for the corporate defendants before the bankruptcy and if so advised, it remains open to him to move to have the bankruptcy stays lifted.

[19] We express no view as to merits of the appellants’ position as to jurisdiction apart from holding that the procedural steps they have taken do not amount to attornment to the Ontario jurisdiction.

[20] Accordingly we allow the appeal and set aside the order of the motion judge. As the costs order necessarily must also fall as a consequence, it is not necessary for us to deal with the submission that this was not a case for substantial indemnity costs order or that the costs awarded were excessive.

[21] There has been divided success on this appeal. We note as well that the appellants have consistently taken the position that if the action does not proceed against the corporate defendants, they would not dispute jurisdiction. The respondent has not provided us with a satisfactory explanation for refusing to act on that offer. In these circumstances, neither party is entitled to costs of the motion or of this appeal.

“Robert J. Sharpe J.A.”

“Janet Simmons J.A.”

“M.L. Benotto J.A.”

Released: July 22, 2014