COURT OF APPEAL FOR ONTARIO
CITATION: Eco-Tec Inc. v. Lu, 2015 ONCA 818
DATE: 20151127
DOCKET: C60540
Hoy A.C.J.O., Gillese and Lauwers JJ.A.
BETWEEN
Eco-Tec Inc.
Plaintiff (Respondent)
and
George Lu, Golden Maple Leaf (Hangzhou) Financial Consulting Co., Ltd. (formerly known as Golden Maple Leaf (Hangzhou) Technology Consulting Co. Ltd.), Golden Maple Leaf Technology Corporation, Everrise Group Holdings Ltd. and Zhejiang Highnew Environmental Technology Co. Ltd.
Defendants (Appellants)
Rebecca Huang, for the plaintiff (respondent)
D. Lynne Watt, for the defendants (appellants)
Heard: November 16, 2015
On appeal from the order of Justice Jane Ferguson of the Superior Court of Justice, dated April 29, 2015.
Hoy A.C.J.O.:
[1] The appellants – Dr. Lu, three Chinese corporations and a corporation incorporated in the British Virgin Islands (“BVI”) – unsuccessfully moved to stay the action commenced against them in the Superior Court of Justice of Ontario by the respondent, Eco-Tec Inc. They asserted that the Ontario court does not have jurisdiction over the matter or, if it does, it should decline to assume jurisdiction because Ontario is not the most convenient forum for the action.
[2] They appeal the dismissal of their motion to stay. For the reasons that follow, I would dismiss the appeal.
Background
[3] The respondent is an Ontario company that researched, developed and manufactured proprietary technology and products. For twelve years, Dr. Lu, who is a Canadian citizen, his BVI company, and three Chinese companies owned by Dr. Lu or his parents were the respondent’s consultant, agent or distributor in China. They signed a series of confidentiality agreements and business agreements with the respondent between 2000 and 2008. Confidentiality agreements signed in 2001 and 2003 contained provisions stating that the agreements would continue to be binding for a period of ten years after their termination.
[4] The respondent terminated its relationship with the appellants in 2012 when it says it discovered “clones” of its products made by the Chinese companies and a website promoting the “cloned” products in the global market.
[5] The respondent brought this action against the appellants in Ontario. It alleges that they unlawfully misappropriated its confidential and proprietary information for their own benefit and manufactured/supplied products to compete with the respondent in China and elsewhere. It sues for breach of confidence, breach of contract, breach of fiduciary duty, conspiracy, unjust enrichment and/or unlawful interference with its economic interests.
The Motion Judge’s Decision
[6] Based on forum selection clauses in certain of the agreements, the motion judge found that the Ontario court has consent-based jurisdiction over three of the five appellants. In coming to this conclusion, the motion judge determined that the respondent was not precluded from relying on those forum selection clauses by a “Whole Agreement” clause contained in a 2008 Distributor Agreement between the respondent and Dr. Lu’s BVI company. That clause provided that the 2008 Distributor Agreement superseded all previous agreements. The clause also stipulated that it applied to agreements between the respondent and one of Dr. Lu’s Chinese companies.
[7] The motion judge also found that the Ontario court has jurisdiction because the dispute has a real and substantial connection to Ontario. In particular, she found that two of the four presumptive connecting factors identified in Club Resorts Ltd. v. Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572, at paras. 90 and 100, as grounding a real and substantial connection in a tort case were present. First, all of the agreements between the parties were made in Ontario and, second, the alleged tort of misappropriation of the respondent’s proprietary information was committed in Ontario.
[8] In finding that all of the agreements between the parties were made in Ontario, the motion judge relied on this court’s decision in Trillium Motor World Ltd. v. General Motors of Canada Limited, 2014 ONCA 497, 120 O.R. (3d) 598. The court held in that case, at para. 66, that “[w]hen acceptance of a contract is transmitted electronically and instantaneously, the contract is usually considered to be made in the jurisdiction where the acceptance is received.” The motion judge adopted this approach, which she termed the “traditional approach”, and accordingly found that all of the agreements between the parties were made in Ontario: they were signed in Ontario by the respondent and sent to China where they were signed by Dr. Lu and emailed back to the respondent in Ontario.
[9] The motion judge then considered whether the appellants had met their evidentiary burden of establishing that, despite the Ontario court having jurisdiction simpliciter, China was a more appropriate forum. She considered the traditional list of factors considered by courts in Ontario in making this determination. She found that two were “neutral”, four favoured Ontario, and one “probably” favoured China. She concluded that the appellants failed to discharge the burden of demonstrating that China was a more appropriate forum than Ontario.
Issues on Appeal
[10] The appellants make several arguments relating to jurisdiction:
The motion judge erred in finding that the Whole Agreement clause in the 2008 Distributor Agreement did not preclude the respondent from relying on forum selection clauses in the earlier agreements. They say her finding of consent-based jurisdiction over three of the appellants rested on this and therefore cannot stand.
In finding that the “place of contract” presumptive connecting factor was established, the motion judge erred by relying on the “traditional approach” to determining the place of contract formation. This case called for the broader, more contextual approach to determining the place of contract adverted to by this court in Trillium. If that approach were applied, the motion judge would not have found that the place of contract was Ontario.
Only a relatively minor element of the tort of misappropriation of proprietary information may have been committed in Ontario and the motion judge therefore erred in finding that the presumptive connecting factor of a tort committed in Ontario was established.
[11] They also argue that the motion judge erred in placing the burden on the appellants in the forum non conveniens analysis. The appellants acknowledge that the burden usually falls on the defendant in an action to satisfy the court that another forum is more appropriate. However, they rely on this court’s decision in BNP Paribas (Canada) v. BCE Inc., 2007 ONCA 559, 227 O.A.C. 102, at paras. 20-21, to argue that, because some of the agreements provided for a forum other than Ontario, the burden in the forum non conveniens analysis in this case is reversed, such that the onus is on the respondent to establish that Ontario is the more convenient forum. In any event, they say, the relevant factors favour China.
Jurisdiction
[12] An Ontario court can assume jurisdiction if the defendant consents to its jurisdiction or is present in Ontario or if it is satisfied there is a “real and substantial connection” to Ontario. In turn, the real and substantial connection test is met in a case concerning a tort if any one of the four presumptive connecting factors established in Van Breda is present.
[13] I conclude below that the motion judge correctly found that the “place of contract” presumptive connecting factor was established. It is therefore unnecessary for me to consider the appellants’ other two arguments on the question of jurisdiction. Moreover, I am not to be taken as necessarily agreeing with the motion judge’s interpretation of the Whole Agreement clause in the 2008 Distributor Agreement. The interrelationship of the various agreements signed by the parties and the interpretation and effect of the Whole Agreement clause in the 2008 Distributor Agreement are complex issues that are ill-suited for resolution at this very preliminary stage of the proceeding.
[14] I turn, then, to the appellants’ argument regarding the place of the contract, arising out of Trillium. They argue that Trillium, properly understood, requires a broader, more contextual analysis in determining the place of the contract for purposes of determining whether the real and substantial connection test has been met. They say that the motion judge failed to conduct such an analysis and that, had she done so, she would not have concluded that the contracts were made in Ontario.
[15] I reject this argument. The issue in Trillium was whether the general rule that a contract transmitted instantaneously is made in the jurisdiction where the acceptance is received should apply. The court agreed with the motions judge that, in the circumstances of that case, it should not. The offer at issue provided that acceptance by the offeree would not be effective until further steps were taken by the offeror. The act of acceptance by the offeree did not constitute the last act essential to contract formation.
[16] In this case, the appellants point to nothing in the agreements indicating that acceptance would not be the last act essential to contract formation. The motion judge correctly applied the general rule that a contract transmitted instantaneously is made in the jurisdiction where the acceptance is received.
[17] Trillium does not require a broader, more contextual analysis when assessing the place of the contract for purposes of a jurisdictional determination. At para. 70, Lauwers J.A., writing for the court, questioned whether the traditional rules for determining the place of the contract should be determinative in applying the presumptive connecting factor at issue. However, he wrote that, “[t]his is perhaps an issue for another case”. As he explained, such an analysis “would inevitably engage the same considerations as the real and substantial connection test itself.” He observed that there were contextual factors present in that case that supported the motion judge’s conclusion that the contracts in question were Ontario contracts.
[18] While this court has not required a broader, more contextual analysis, here, too, there are contextual factors that support the conclusion that the contracts at issue are Ontario contracts. The contracts seek to protect Ontario-based trade secrets and other confidential information and authorized the appellants to distribute products incorporating that Ontario-based proprietary information.
[19] A presumptive connecting factor has been established and the appellants have not demonstrated the absence of a real and substantial connection. The motion judge correctly concluded that it was open to the Ontario court to assume jurisdiction.
Forum Non Conveniens
[20] As I explain below, I also reject the appellants’ argument that the burden was on the respondent to establish that Ontario is a more convenient and appropriate forum to hear the dispute than China. The motion judge did not err in proceeding on the basis that the onus was on the appellants and her decision is entitled to deference. However, even if the burden were on the respondent, I am satisfied that order and fairness favour trying this action in Ontario.
[21] In BNP Paribas, there was a dispute as to whether a clause in a lending agreement granting exclusive jurisdiction over any disputes to courts in the State of New York or in the Province of Quebec applied. Rosenberg J.A., writing for the court, accepted, at para. 20 that, if it did, the principle from Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27, [2003] 1 S.C.R. 450 would apply: where a forum selection clause is present, the starting point is that the parties should be held to their bargain and the plaintiff has the burden of showing why a stay should not be granted. But, he concluded, at para. 22, even if that principle applied and the trial judge erred by failing to require the plaintiff to establish that there was good cause that the action should not be stayed, the error was of no consequence. The trial judge’s reasons showed that “order and fairness overwhelmingly favoured Ontario as the place for the trial”.
[22] This case is different from BNP Paribas. Here, there are multiple agreements and multiple parties. Some agreements provide that Ontario is the forum for resolution of any disputes between the parties. As the appellants submit, the respondent and the BVI company attorned to the jurisdiction of the People’s Republic of China in the 2008 Distributor Agreement. However, more importantly, given the nature of the respondent’s claim, the respondent and the BVI company attorned to the jurisdiction of the BVI in the Joint Confidentiality Agreement signed in 2008. It is not at all clear that “holding the parties to their bargain” would result in the action being tried in China.
[23] In these circumstances, the motion judge did not err in principle in concluding that the normal rule as to onus should apply. Because jurisdiction was established, the burden rested on the appellants to demonstrate that the proposed court of alternative jurisdiction – China – was a more appropriate forum than Ontario: Van Breda, at paras. 103, 108-109.
[24] The appellants also argue that the motion judge made several errors in determining that they had not established that China is the more appropriate forum.
[25] Specifically, they say that the motion judge did not explain why she found one factor (the jurisdiction in which the factual matters arose or other geographical factors suggesting the natural forum) favoured Ontario. They argue that she should have characterized another factor (the applicable law and its weight in comparison to the factual questions to be decided) as “neutral” and not as favouring Ontario. Finally, they argue that the motion judge erred in concluding that declining jurisdiction would deprive the respondent of a legitimate juridical advantage available in an Ontario court.
[26] In my view, the appellants seek to re-argue the issue of forum non conveniens. In concluding that the appellants had not discharged their onus of establishing that China was a more appropriate forum for the resolution of this dispute, the motion judge applied the correct test and considered the relevant factors. She did not err in law or principle and the appellants identify no clear and serious factual error. Her allocation of weight among the relevant factors cannot be said to be unreasonable. Her decision is entitled to deference: 2249659 Ontario Ltd. v. Sparkasse Siegen, 2013 ONCA 354, 115 O.R. (3d) 241, at para. 49.
[27] However, given the argument that the appellants have made regarding onus, I add that I am satisfied that, if the respondent bore the onus of establishing that Ontario is the more appropriate forum, it has discharged that onus. The motion judge explained why she concluded that declining jurisdiction would deprive the respondent of a juridical advantage. There is an additional, significant advantage that she did not advert to. Breach of fiduciary duty is an important aspect of the respondent’s claim. The appellants’ own witness testified that China does not recognize breach of fiduciary duty as a cause of action. It is difficult to understand how China could be the more appropriate forum when it does not recognize a significant cause of action that has been pleaded. This court has recognized that, although a forum selection clause in a commercial contract should be given effect, there are circumstances that may justify a departure from that general principle, including where the forum selected is unable to deal with the claim: Momentous.ca Corp. v. Canadian American Association of Professional Baseball Ltd., 2010 ONCA 722, 103 O.R. (3d) 467, at para. 41.
Disposition and Costs
[28] I would dismiss the appeal. I would award the respondent its costs of the appeal, fixed in the amount of $15,000, inclusive of HST and disbursements.
Released: “AH” “NOV 27 2015”
“Alexandra Hoy A.C.J.O.”
“I agree E.E. Gillese J.A.”
“I agree P. Lauwers J.A.”