CITATION: Pesorama Inc. v. Borden Ladner Gervais LLP., 2024 ONSC 2397
DIVISIONAL COURT FILE NO.: 432/23 DATE: 20240424
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
BETWEEN:
PESORAMA INC. Plaintiff/Appellant
– and –
BORDEN LADNER GERVAIS LLP and ROBB MCNAUGHTON Defendants/Respondents
Dillon Collett, for the Appellant Gavin J. Tighe and Allison Farley, for the Respondent
HEARD by videoconference: April 22, 2024
Leiper, J.
Introduction
[1] This is an appeal from a decision of Associate Justice Josefo staying these proceedings pursuant to s. 106 of the Courts of Justice Act R.S.O. 1990, c. C.43. The action alleges solicitor-client negligence, breach of fiduciary duty and other wrongs arising from a former solicitor-client relationship between the parties.
[2] The Associate Justice found that the Respondents had established that the action (the “Ontario action”) should be stayed based on the equitable doctrine of forum non conveniens. He gave effect to a forum selection clause in the retainer agreement which provided that any disputes between the parties were to be governed by the laws of the Province of Alberta and determined exclusively by the courts of Alberta.
[3] The Respondents had initiated an action in Alberta, prior to these proceedings, for non-payment of fees by the Appellant. That action is ongoing. There are other related proceedings in Alberta including a defamation action and a directors’ compensation action which were initiated after the Ontario action.
[4] The Appellant seeks to set aside the decision of the Associate Justice on the basis that he lacked jurisdiction to give effect to the forum selection clause and made other errors in deciding that the Ontario action should be stayed.
[5] The Respondents submit that the Associate Justice had jurisdiction to adjudicate the motion under s. 106 of the CJA and applied the correct legal test to the facts before him. They ask that this appeal be dismissed.
[6] I find that the Associate Justice did not err in his application of the law to the record before him. I dismiss the appeal. These are my reasons for that finding.
Standard of Review
[7] Appellate standards of review apply. On questions of fact and mixed fact and law, the standard of review is palpable and overriding error. On questions of law, or questions of mixed fact and law involving an extricable error, the standard of review is correctness: Housen v. Nikolaisen 2002 SCC 33, [2002] 2 SCR 235 at paras. 26-31.
Issues on Appeal
[8] The Appellant raises five issues on appeal:
a. The Associate Justice did not have jurisdiction to apply the forum selection clause/strong cause test on a s. 106 CJA motion;
b. The Associate Justice erred in finding that the retainer agreement applies to Ontario action;
c. The Associate Justice erred in mischaracterizing the relationship between the parties in finding that the forum selection clause was enforceable;
d. The Associate Justice erred in applying the doctrines of res judicata and abuse of process as an alternative basis for staying the Ontario action;
e. The Associate Justice erred in applying the forum non conviens analysis by failing to demonstrate in his reasons that he had considered the entire record.
Analysis of the Issues
Did the Associate Justice have jurisdiction to apply the forum selection clause/strong cause test on a s. 106 CJA motion?
[9] The Appellant submits that the Associate Justice made a legal error by relying on the principles discussed in cases that originated in r. 21.01(3)(a) relief and led to dismissals of proceedings where a forum selection clause was involved. This submission hinges on the novel submission that the forum selection clause/strong cause test can only be applied in a Rule 21 motion and not at a motion to stay under s. 106 of the CJA, and only a judge, and not an associate judge, may stay or dismiss proceedings pursuant to Rule 21 of the Rules of Civil Procedure RRO 1990, Reg 194. There is no authority for this proposition.
[10] Section 106 of the CJA reads:
Stay of proceedings
106 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. R.S.O. 1990, c. C.43, s. 106.
[11] There is no limit on the law or circumstances that can support a stay of proceedings under s 106 of the CJA. In Momentous.ca Corp. v. Canadian American Association of Professional Baseball Ltd., 2010 ONCA 722 at para. 45, Laskin J.A. refers to the fact that parties may move to challenge the jurisdiction of Ontario courts under “s. 106 of the Courts of Justice Act R.S.O. 1990, c. C. 43, rules 17.06 and 21.01(3)(a) of the Rules of Civil Procedure.”
[12] That is what the Respondents did in their motion. They moved to challenge the jurisdiction of the Ontario courts on the basis of forum non conviens and relied on the forum selection clause in the retainer agreement.
[13] In his June 20, 2023 reasons staying the Ontario action, the Associate Justice cited Novatrax International Inc. v. Hagele Landtechnik GmbH, 2016 ONCA 771, which in turn referred to the Supreme Court of Canada decision in Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27. He cited these principles from Novatrax International:
• The law favours the enforcement of forum selection clauses in commercial contracts;
• Where a forum selection clause exists, that is the starting point for the forum non conviens analysis;
• A stay of an action should be granted unless there is “strong cause” the case is exceptional, and the forum selection clause should not be enforced;
• A forum selection clause pervades the forum non conviens analysis and must be given full weight in consideration of other factors.
[14] The Appellant argues that because Novatrax was a motion brought pursuant to r. 21.01(3) and this motion was brought under s. 106 of the CJA, these principles do not apply to the latter motion.[^1] In relying on such a case, therefore, the Appellant submits the Associate Justice was acting beyond his jurisdiction and essentially deciding the motion under the mistaken authority of Rule 21.
[15] The Appellant relies on Real Crowd Capital Inc. v. 1034179 BC Ltd. 2019 ONSC 2908, and Keselman v. Marktech Services Inc., 2019 ONSC 2934 in which Associate Justice Sugunasiri (as she then was) concluded that an Associate Justice has jurisdiction to stay a proceeding if Ontario is forum non conviens. In both decisions, Associate Justice Sugunasiri accepted the Applicant’s submissions that r. 21.01(3)(a) allows a judge to stay or dismiss an action where the defendant submits that the court has “no jurisdiction over the subject matter” but that this power does not oust the jurisdiction of an Associate Judge to consider matters of territorial jurisdiction. Associate Justice Sugunasiri found that she had jurisdiction to determine questions of forum non conviens under s. 106 of the CJA, as a question of territorial jurisdiction rather than subject matter jurisdiction.
[16] Neither Real Crowd Capital, nor Keselman involved forum selection clauses. Neither decision defined the issue as a “subject matter jurisdiction” argument. And, neither decision purported to limit the jurisdiction of an Associate Justice under s. 106 of the CJA where there was an exclusive forum selection clause.[^2] I conclude that neither decision supports the logic of the Appellant’s submission.
[17] In the case at bar, the Associate Justice defined the issue as “not whether the plaintiff can sue [the] defendants,” but as “where the plaintiff can sue these defendants.” He grounded his analysis in the issue defined by the parties, that is, by applying the doctrine of forum non conviens. He correctly identified the leading authorities applied the two-step test, including Douez v. Facebook Inc. 2017 SCC 33, [2017] 1 SCR 751. This two-step test applies to instances of valid forum selection clauses, as differentiated from the “ordinary” cases which apply the forum non conviens doctrine in the absence of such a clause: see Pompey at para. 21.
[18] Under the test for forum selection clauses, at step one, the party seeking a stay of proceedings must establish that there was a valid, clear, and enforceable forum selection clause in the contract that applies to the cause of action before the court: Douez at para. 28; Pompey at para. 30. The enforceability of the contract at this first stage is limited to defences of undue influence, fraud, or unconscionability: Douez at para. 28; Pompey at para. 31.
[19] At step two of the test, once the party seeking to stay the proceedings establishes there is a valid forum selection clause, the onus shifts to the plaintiff. The plaintiff must then show “strong cause” why the parties should not be held to their agreement: Douez at para. 29; Pompey at para. 19, 30-31. At this stage, the court is to exercise its discretion by considering all the circumstances, including fairness, convenience, public policy, and the interests of justice: Douez at para. 29; Pompey at para. 19 and 30-31.
[20] The Associate Justice applied the correct test as articulated in Douez and Pompey. He found:
In my view, the conclusions of the Supreme Court support the forum and law selection clause in this within case being upheld. The agreement, and the clause, is “valid, clear and enforceable” and I find that it applies to the cause of action which the plaintiff brings. The parties in this matter are, moreover, sophisticated. Mr. Bhaloo was not a vulnerable individual retaining a lawyer for the first time on, for example, a family law matter or to make a simple will. Again the evidence is clear he was a business-person consulting counsel for high level business purposes, including to eventually have his company “go public”.
[21] The Appellants have provided no authority for their submission that a stay under s. 106 is not available where the issue involves the specialized subset of a forum non conviens analysis involving a forum selection clause, and the two-step test with its shifting onus. The agreement of the parties to a forum for the resolution of disputes does not affect the jurisdiction of the courts over the subject matter of a dispute simply by virtue of their private agreement: see Douez at para 27.
[22] In its brief endorsement upholding the Ontario Court of Appeal in Momentous.ca the Supreme Court of Canada agreed that applying a forum selection clause is discretionary, writing:
In Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27, [2003] 1 S.C.R. 450, this Court confirmed that, in the absence of specific legislation, the proper test in determining whether to enforce a forum selection clause is discretionary in nature. It provides that unless there is a “strong cause” as to why a domestic court should exercise jurisdiction, order and fairness are better achieved when parties are held to their bargains.
See Momentous.ca 2012 SCC 9, [2012] 1 SCR 359 at para. 9.
[23] The Associate Judge exercised his discretion under s. 106 of the CJA to determine whether a stay of proceedings should be entered based on the applicable jurisprudence relative to a specific subset of the forum non conviens equitable doctrine where forum selection clauses are in play. He did not purport to exercise jurisdiction under Rule 21 of the Rules. The fact that such a clause might form the basis of a motion under Rule 21 (or Rule 17 for that matter) does not mean that it cannot or does not apply to a motion to stay a proceeding under s. 106 of the CJA.
[24] I conclude that the Associate Justice did not err in either citing the principles in Novatrax or in adjudicating the question of whether Ontario was a forum non conviens based on the applicable test where the retainer agreement signed by the parties included a forum selection clause.
Did the Associate Justice err in in finding that the retainer agreement applies to the Ontario action?
[25] At the first step of the test, as discussed above, the court must find that the clause with the forum selection agreement applies to the cause of action.
[26] The Appellant argues that the Associate Justice erred by failing to accept the its pleaded assertion that there was no valid retainer between the Respondents and the Appellant for the work done. If there is no valid retainer, then the agreement does not relate to the cause of action as required by the first step of the test.
[27] I disagree. The Associate Justice found that the Ontario action sought significant damages from the Respondents for negligence in its legal representation of the Appellant and asserts conflicts of interest arising from the Respondents professional obligations to its client. The Associate Justice also referred to the Respondents’ statement of defence which pleaded that the Appellant owes approximately $702,000 in legal fees and the Alberta taxation proceedings. He noted the Respondents’ position that the Ontario action was a “wholly tactical attempt to seek to avoid payment of accounts due and owing to the Defendants by the Plaintiff.”
[28] The subject matter of the Ontario action arises from the solicitor-client relationship which in turn arises from the retainer containing the forum selection clause. The Associate Justice found that the nature of this case, is “a dispute, with different sub-issues, between the lawyer, law firm and the former client.” There were no issues of fraud, unconscionability or undue influence pleaded in the motion or put before the Associate Justice. On its face, this was the retainer agreement that governed the solicitor-client relationship, with scope in the retainer for the work on behalf of the Appellant to expand or change.
[29] These findings of fact were available on the record before the Associate Justice. Further, the Associate Justice took into account the July 19, 2021 endorsement of the Taxation officer which referred the issue of the disputed retainer in the taxation proceedings to a judge of the Alberta court.
[30] The Associate Justice did not err in finding that the retainer agreement and the forum selection clause applied to the cause of action. The issue of the scope of the retainer and instructions is a disputed fact which must await trial, and which is in issue in the taxation proceedings which pre-dated the issuing of the Ontario action.
Did the Associate Justice err in mischaracterizing the relationship between the parties in finding that the forum selection clause was enforceable?
[31] The Appellants submit that the Associate Justice erred by failing to accord adequate weight to the fiduciary nature of the solicitor-client relationship.
[32] The Associate Justice considered the contents of the retainer letter, the nature of the engagement and the sophistication of the client, Mr. Bhaloo. He found that the retainer was for a “sophisticated commercial purpose.” He found that Mr. Bhaloo had the retainer agreement in hand for some time before signing and retuning it. The Associate Justice further found that the document stressed the need for communication and that if Mr. Bhaloo had questions or concerns about the terms, he could have communicated with counsel prior to signing the retainer. The Associate Justice concluded, reasonably, that the fact that Mr. Bhaloo did not do so “undermines the submission in that regard made by his counsel, and Bhaloo’s subsequent, after-the-fact evidence, that he had doubts or concerns about this document.
[33] Given these features of the evidence, it was open to the Associate Justice to assess the fairness between the parties at the second step of the analysis, and to conclude that they should be held to their agreement.
[34] The Associate Justice did not make a palpable and overriding error in the question of mixed fact and law involved in his assessment of the relationship between the parties and in applying those findings to the strong cause test, which was the correct test.
The Associate Justice erred in applying the doctrines of res judicata and abuse of process as an alternative basis for staying the Ontario action;
[35] In a paragraph toward the end of the reasons which the Appellant in argument described as “obiter”, the Associate Justice noted that in the Alberta taxation case, the Taxation Officer had referred the question of the retainer to a judge. This was a final decision that was not appealed. To permit the Ontario action to proceed on a similar basis could constitute an abuse of process, or as the Associate Justice characterized it, “to try an end-run around it”. This was an alternative basis to the primary focus of the reasons which were to grant the stay based on the forum non conviens argument.
[36] The Appellant submits that this basis for staying the proceedings was not requested in the Respondents’ notice of motion and that it was an error for the Associate Justice to make any findings as to the potential for abuse of process.
[37] I disagree. This point was raised in evidence before the Associate Justice and was argued. The Respondents raised concerns about the abuse of the decision-making process in their factum on the stay motion as well as the misuse of judicial resources. Although the doctrines of res judicata and abuse of process were not in the Notice of Motion, the Appellant included arguments in its responding factum on these issues. The Appellant knew the case it had to meet on the motion and had an opportunity to respond.
[38] Thus, having heard argument on this alternative issue there was no prejudice or error in the Associate Justice considering abuse of process. It was open to the Associate Justice to make this finding, although it was not the focus of his decision or the primary reason for staying the proceeding. In doing so, he did not err.
The Associate Justice erred in applying the forum non conviens analysis by failing to demonstrate that he had considered the entire record.
[39] There was a complete record before the Associate Justice on the genesis of the retainer, the history of corporate dealings with the parties, and the related litigation in Alberta initiated before and after the Ontario action. The Associate Justice demonstrated that he grasped the facts before him throughout his reasons and he touched on many of the factors which are relevant to the second step of the forum non conviens test where there is a forum selection clause. He noted the parties’ comprehensive arguments, the material filed on the motion and he confirmed in his reasons that while he had not addressed every argument in writing, he had considered all the relevant material and the arguments made on the motion.
[40] The Associate Justice discussed the desirability of avoiding a multiplicity of proceedings, or conflicting decisions. He considered that Alberta law applies to the resolution of disputes as a matter of contractual interpretation, and that there was a clear connection to Alberta, including via the incorporation of Pesorama with a head office shown as Calgary, Alberta. He noted that the evidence was that from time to time, the Ontario branch of the law firm had hosted board meetings for the Appellant, but that this did not establish a genuine connection to Ontario as it was not equivalent to the Appellant owning or leasings corporate premises in Ontario.
[41] Accordingly, the Associate Justice found that Ontario was not the convenient forum for this action and he stayed the action based on the doctrine of forum non conviens.
[42] I find that in doing so, the Associate Justice did not err nor did his discussion of the facts in support of this conclusion reveal any palpable or overriding error.
Conclusion
[43] The appeal is dismissed. By agreement of the parties, costs are payable to the successful party, the Respondents in the amount of $18,638.84, all inclusive.
___________________________ Leiper, J.
Date: April 24, 2024
CITATION: Pesorama Inc. v. Borden Ladner Gervais LLP., 2024 ONSC 2397
DIVISIONAL COURT FILE NO.: 432/23 DATE: 20240424
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
BETWEEN:
PESORAMA INC. Plaintiff/Appellant
– and –
BORDEN LADNER GERVAIS LLP and ROBB MCNAUGHTON Defendants/Respondents
REASONS FOR DECISION
Leiper, J.
Released: April 24, 2024
[^1]: The Respondents initially cited both r. 21.01(1)(3)(a) and s. 106 CJA in their motion materials, but after oral argument they clarified that they relied only on s. 106 CJA. The Associate Justice’s reasons reflect this choice.
[^2]: In contrast, Kozlik’s Mustard v. Acasi Machinery Inc., 2022 ONSC 2356 is an example of an adjudication of a forum selection clause by a judge under s. 106 CJA.