COURT OF APPEAL FOR ONTARIO

2016 ONCA 977

DATE: 20161223

DOCKET: C62235

Doherty, MacPherson and Lauwers JJ.A.

BETWEEN

Stuart Budd & Sons Limited, 290756 Alberta Ltd., Saab On The Queensway Ltd., 798983 Ontario Inc., 9216-0415 Quebec Inc., 6847781 Canada Ltd., Forbes Saab And Used Car Shop Inc., and Springman & Springman Limited

Plaintiffs (Respondents)

and

IFS Vehicle Distributors ULC, International Fleet Sales Inc., Michael Libasci and Peggy King

Defendants (Appellants)

Matthew J. Latella and Sarah Patricia Peterson, for the appellants

Andy Seretis, for the respondent

Heard: December 7, 2016

On appeal from the order of Associate Chief Justice Frank N. Marrocco of the Superior Court of Justice, dated May 3, 2016, with reasons reported at 2016 ONSC 2980 and from the costs order June 8, 2016, with reasons reported at 2016 ONSC 3798.

Lauwers J.A.:

[1] The respondents are eight Saab car dealerships in five provinces. Three of the dealerships carry on business in Ontario. The respondents brought an action in Ontario seeking a declaration that they validly rescinded their Saab Sales and Service Agreements pursuant to Ontario’s Arthur Wishart Act (Franchise Disclosure) 2000, S.O. 2000, c. 3. They also sought damages pursuant to s. 7(1) of the Act or for breach of contract.

[2] The defendants are companies and individuals associated with the revival of the Saab automobile brand and dealer network in North America. IFS Vehicle Distributors ULC was incorporated in British Columbia and carried on business as the franchisor and supplier of the Saab dealership network. International Fleet Sales Inc. was incorporated in California, and carried on the business of supplying parts and accessories to IFS Vehicle Distributors ULC. IFS Vehicle Distributors ULC and International Fleet Sales Inc. are affiliated companies. Michael Libasci was the President and sole director of IFS Vehicle Distributors ULC and the President and CEO of International Fleet Sales Inc., and resided in California. Peggy King, now retired, was the Secretary and Treasurer of IFS Vehicle Distributors ULC and the Chief Financial Officer of International Fleet Sales Inc., and resided in California.

[3] The appellants brought a motion challenging the Ontario court’s jurisdiction to hear the action in respect of the five out of the eight respondent dealerships that are located and do business outside Ontario. They also submit that Ontario should decline to hear the case on the basis of forum non conveniens. The appellants submit that either of California or Michigan would be a more appropriate forum.

[4] The motion judge dismissed the motion.

[5] The appellants contend that the motion judge made four errors: first, in his application of the law germane to jurisdiction simpliciter; second, in his forum non conveniens analysis; third, by relying on a case that neither party cited. Fourth, the appellants dispute the motion judge’s decision relating to costs of the motion before Corbett J.

[6] We address each issue in turn.

A. jurisdiction simpliciter

[7] The law on jurisdiction simpliciter of the Ontario Superior Court was set out by the Supreme Court of Canada in Van Breda v. Villages Resort Ltd., 2012 SCC 17. At para. 90 of Van Breda, LeBel J. established four presumptive connecting factors ("PCFs"), any one of which would, if present, entitle a provincial superior court to take jurisdiction over a legal dispute in tort law: (1) the defendant is domiciled or resident in the province; (2) the defendant carries on business in the province; (3) the tort was committed in the province; or (4) a contract connected with the dispute was made in the province.

[8] There is no doubt that the action was properly brought by the three Ontario plaintiffs in Ontario. The contracts between the Ontario plaintiffs and IFS Vehicle Distributors ULC were negotiated and signed in Ontario.

[9] The appellants argue that the out-of-province plaintiffs cannot be part of this action, and cannot sue an out-of-province defendant in Ontario. They are therefore not properly joined in this action. The appellants advise that if the individual out-of-province plaintiffs were to bring similar actions in their home provinces, the appellants will not contest the jurisdiction of the respective provincial superior courts. This would require four actions in addition to this action in Ontario.

[10] The motion judge focussed his analysis on the second PCF under Van Breda: “the defendant carries on business in the province”. He found that IFS Vehicles Distributors ULC carried on business in Ontario, at para. 38. He then set out the supporting evidence for this conclusion, at para. 39:

The following uncontested facts are helpful in reaching this conclusion:

• IFS Vehicle Distributors ULC obtained an extra-provincial license to permit it to carry on business in Ontario;

• IFS Vehicle Distributors ULC negotiated and sold three SAAB dealerships in Ontario;

• IFS Vehicle Distributors ULC sold vehicles and, through International Fleet Sales Inc., parts to dealers in Ontario;

• The bank to which all Dealers were directed to make payment was the Scotiabank Main Branch in Toronto, Ontario;

• IFS Vehicle Distributors ULC maintained a lockbox for collecting cheques in Toronto, Ontario;

• IFS Vehicle Distributors ULC maintained a presence in Ontario at Budd’s Saab, located at 2400 South Service Road West, Oakville, Ontario, in the following ways:

-This address appeared on invoices for vehicles and parts;

-IFS Vehicle Distributors ULC told the Ontario government when it obtained its extra-provincial license that this address was its “principal place of business” in Ontario;

-IFS Vehicle Distributors ULC, in a Disclosure Document provided to some but not all of the plaintiffs, indicated that this address was “its premises in Ontario”;

-This address was used on the manufacturer’s certification provided to each of the plaintiffs.

[11] Apart from these facts, the motion judge also referred to some admissions made by Jim Steinhagen, the CEO of IFS Vehicles Distributors ULC, as evidence of carrying on business in Ontario, at paras. 41-42. It appears that IFS Vehicles Distributors ULC had some presence at the Budd dealership address. There is some factual dispute about the degree of presence, but there is no dispute that an individual by the name of Serge St-Louis did attend from time to time on behalf of that appellant.

[12] In oral argument, counsel for the appellants agreed with these facts, and considered them to be “fair as far as they go” except for the second bullet. He took some umbrage at the motion judge’s expression in the second bullet that IFS Vehicles Distributors ULC “sold” three Saab dealerships in Ontario. These were dealers who had sold Saabs in the past. However, counsel agreed that the new dealership agreements were “negotiated” in Ontario. We do not think that omitting the words “and sold” from the second bullet takes away from the force of it as support for the finding that IFS Vehicle Distributors ULC carries on business in Ontario.

[13] The appellants dispute the sufficiency of these factors in establishing that IFS Vehicles Distributors ULC was carrying on business in Ontario, in light of the decisions of the courts in Arsenault v. Nunavut, 2015 ONSC 4302, affirmed 2016 ONCA 207, Essex Garments Canada Inc v. Cohen, [2005] O.J. No. 5716, and Chevron Corp. v. Yaiguaje, 2015 SCC 42. Each of these cases, they assert, required a more substantial physical connection than the motion judge found for IFS Vehicle Distributors ULC.

[14] In Arsenault the plaintiff sued the Government of Nunavut in Ontario for wrongful dismissal. Nunavut challenged the court’s jurisdiction. Polowin J. found, at para. 64: “that maintaining a small office in Ottawa for such a limited purpose cannot reasonably be said to be carrying on business in Ontario. The Liaison Office is not analogous to a division or branch of the corporation’s business in the province.” She found that the Ontario Superior Court lacked jurisdiction simpliciter, and also found Nunavut to be a more appropriate place to try the case, on the basis of forum non conveniens.

[15] In Essex Garments, the plaintiff sued Gendis Inc. for past due invoices rendered to an affiliated company. Spies J. found, at para. 19:

Although Gendis Inc. through a wholly owned subsidy area owns real property in Ontario, that does not give Gendis Inc. a physical presence in Ontario. Nor do the other factors relied upon by the plaintiffs. Gendis Inc. does not have any offices in Ontario and does not itself carry on business anywhere in Ontario. The fact that it is registered and therefore able to do so is not enough.

[16] Finally, in Chevron, the plaintiffs were seeking to have recognized and enforced a foreign judgment against Chevron by the Ontario Superior Court of Justice. Gascon J. noted, at para. 86: “Chevron Canada has a physical office in Mississauga, Ontario” based on the motion judge’s finding, which he quoted at para. 86:

Chevron Canada operates a business establishment in Mississauga, Ontario. It is not a mere "virtual" business. It runs a bricks and mortar office from which it carries out a non-transitory business with human means and its Ontario staff provides services to and solicits sales from its customers in this province.

[17] Each case invoking the fourth PCF of carrying on business in Ontario must be considered on its unique facts. While a more substantial presence, along the lines discussed in the cases, would have added weight to the motion judge’s determination, we do not accept the appellants’ submission that the factors taken into account by the trial judge in finding jurisdiction simpliciter were insufficient.

[18] At para. 61, the motion judge made the following observation: “The Supreme Court of Canada made it clear in the Van Breda decision that once the court determines that a presumptive connecting factor has been established and not rebutted it should assume jurisdiction over all aspects of the case” citing paras. 99-100.

[19] In our view, once the action is properly constituted from the perspective of jurisdiction simpliciter, then the issue of efficiency in the litigation becomes relevant with respect to the joinder of other parties, as this court noted in Trillium Motor World Ltd. v. General Motors of Canada Ltd., 2014 ONCA 497, at paras. 46-49. The Supreme Court affirmed this decision in Lapointe Rosenstein Marchand Melançon LLP v. Cassels Brock & Blackwell LLP, [2016] SCC 30, and noted, at paras. 32 and 44:

The fourth factor also promotes flexibility and commercial efficiency. As seen in Van Breda, all that is required is a connection between the claim and a contract that was made in the province where jurisdiction is sought to be assumed. A “connection” does not necessarily require that an alleged tortfeasor be a party to the contract. To so narrow the fourth presumptive factor would unduly narrow the scope of Van Breda, and undermines the flexibility required in private international law.

It is worth noting that nothing in Van Breda suggests that the fourth factor is unavailable when more than one contract is involved, or that a different inquiry applies in these circumstances. Nor does Van Breda limit this factor to situations where the defendant’s liability flows immediately from his or her contractual obligations, or require that the defendant be a party to the contract: Pixiu Solutions Inc. v. Canadian General-Tower Ltd., 2016 ONSC 906, at para. 28. It is sufficient that the dispute be “connected” to a contract made in the province or territory where jurisdiction is proposed to be assumed: Van Breda, at para. 117. This merely requires that a defendant’s conduct brings him or her within the scope of the contractual relationship and that the events that give rise to the claim flow from the relationship created by the contract: paras. 116-17.

[20] We observe that taking litigation efficiency into account does not convert it into another PCF, contrary to the appellants’ submission.

B. forum non conveniens

[21] The motion judge provided detailed reasons for concluding that the appellants failed to discharge the onus of establishing that there is a better and more appropriate forum than Ontario, at para. 57:

I am satisfied based on all the evidence that the defendants have failed to discharge their onus of establishing that there exists a better and more appropriate forum than Ontario to fairly and efficiently dispose of this litigation. Specifically, the following factors are helpful in reaching this conclusion:

• Three of the plaintiffs reside in Ontario;

• The remaining five plaintiffs reside in Canada and would be able to attend court in Toronto or elsewhere in Ontario;

• Two representatives of IFS Vehicle Distributors ULC, its CEO Mr. James Steinhagen and Mr. Jim Moreen, are in Southfield, Michigan, and their evidence can easily be taken in Windsor, Ontario, which borders Detroit;

• Although not necessary for my decision, I note that attending outside of California is not unduly onerous for the defendants because the defendants have offered to consent to jurisdiction if each of the plaintiffs sues in their home province. Had the plaintiffs been so inclined, the defendants would then have appeared and defended in British Columbia, Alberta, Ontario, Québec and Nova Scotia;

• All of the Dealership Agreements specify that they are governed by the law of Ontario, although it will be necessary to apply the Franchise Act of Alberta to the 290756 Alberta Ltd. agreement. It was not suggested during the course of argument that there is any provision in Alberta’s Franchises Act dealing with rescission, disclosure, franchisor associates or damages, which is materially different than the Arthur Wishart Act. In any event, any differences between the Arthur Wishart Act and the Franchises Act of Alberta would have to be proven by expert evidence if this matter were tried in California;

• The claim against Michael Libasci, Peggy King and International Fleet Sales Inc. is based on the theory of liability that each of them is a “franchisor’s associate” or an “associate of a franchisor” and therefore jointly and severally liable with IFS Vehicle Distributors ULC pursuant to sections 6(6) and 7(1) of the Arthur Wishart Act and, with respect to 290756 Alberta Ltd., section 1(2) of the Franchises Act of Alberta;

• Trying this claim in Ontario will avoid the expense of proving Ontario law in a foreign jurisdiction by expert evidence.

[22] The appellants did not devote any time in oral argument to this issue and addressed it only briefly in their factum. They complain that the respondents impeded cross-examination in this issue but brought no motion for relief before the motion was argued. This is a discretionary decision that took into account the relevant factors and we see no basis on which to interfere with it.

C. relying on new authorities

[23] The appellants contend that it was an error in principle for the motion judge to rely on a case that neither party cited. They criticize the motion judge for referring to Cannon v. Funds for Canada Foundation, 2010 ONSC 4517, aff’d 2011 ONCA 185 as the basis for distinguishing Lailey v. International Student Volunteers Inc., 2008 BCSC 1344, a decision on which the appellants relied.

[24] In Lailey, two of the plaintiffs were British Columbia residents and one was an Ontario resident. They contracted with the defendant, a non-profit corporation with its principal office in Orange County, California, which offered travel programs to students consisting of adventure travel with volunteer work and optional language lessons. An incident occurred in Ecuador and the plaintiff sued for damages for breach of contract in failing to provide them with safe and secure accommodation among other things. The motion judge found that the British Columbia Supreme Court had jurisdiction simpliciter over the action between the British Columbia plaintiffs and the California defendant, but that did not permit it to adjudicate the claim of the Ontario plaintiff against the California defendant. The court said, at para. 34: “this court has no territorial competence or relation to her claim. It cannot simply be bootstrapped onto the claims the two other plaintiffs about which the Court does have jurisdiction.”

[25] The motion judge in Lailey relied in part on the decision of Goodman J. (as he then was) in Tridon Ltd. v. Otto Bahlier KG (1978), 1973 CanLII 643 (ON SC), 1 O.R. (2d) 569 (H.C.)

[26] The motion judge distinguished Lailey based on comments by Strathy J. (as he then was) in Cannon Funds, at paras. 80-91. Strathy J. noted, at para. 90, that Tridon had been effectively overruled on the basis that order and fairness are not accomplished “by turning away jurisdiction where a fraction of the relief claimed may fall outside rule 17.02 and where in other respects there is a ‘real and substantial connection’ between the parties in the subject matter of the action in Ontario”; Strathy J. quoted Hockin J. in Overland Custom Couch Inc. v. Thor Industries Inc. (1999), 1999 CanLII 15116 (ON SC), 46 O.R. (3d) 788, at para. 19.

[27] We see nothing improper in the motion judge’s use of Cannon Funds to consider the application of Lailey. It was not a new case that arose after the argument on which the motion judge might have required further submissions. On the issue in question Cannon Funds is usefully analogous.

D. leave to appeal costs

[28] The motion judge ordered the defendants to pay the plaintiffs about $50,000 in costs, inclusive of fees, disbursements and HST. The appellants did not formally seek leave to appeal this costs award but challenge it nonetheless.

[29] The motion judge’s reasoning is set out at paras. 4 through 7 of the costs endorsement :

The Court of Appeal left the matter of the costs of the first jurisdictional motion to me at paragraph 92 of its decision. Clearly, the Court of Appeal thought that the costs of the first motion could follow the costs of the second.(Para.5)

I do not accept the defendants’ submission that the conduct of the judge who heard the first motion was such that the plaintiffs should be denied costs for the April 2014 proceeding. While the Court of Appeal set aside the decision on the first motion, it did not indicate that there were no costs on account of the first motion. Rather the Court of Appeal left the costs of the first motion to be decided by the judge who heard the second motion.(Para.6)

I do not accept the defendant’s argument that they should be awarded costs because they successfully raised the fact that the plaintiff’s affidavit evidence was deficient. (Para. 7)

[30] The appellants have not identified any error in principle in what is clearly a discretionary decision. Accordingly, if leave to appeal costs were sought, it would have been refused.

E. disposition

[31] For these reasons, the appeal is dismissed with costs payable by the appellants to the respondents in the amount of $13,000, all-inclusive.

“P. Lauwers J.A.”

“I agree Doherty J.A.”

“I agree J.C. MacPherson J.A.”

Released: December 23, 2016