COURT FILE AND PARTIES

COURT FILE NO.: CV-11-434308
DATE: 20120629
SUPERIOR COURT OF JUSTICE – ONTARIO

RE: MACKIE RESEARCH CAPITAL CORPORATION & MACKIE REsearch financial corporation, Plaintiffs

AND:

JAMES F. mackie , JEFFREY MACKIE, RAHIM CHATUR, TRICIA LEADBEATER, BRINNA BRINKERHOFF, JULIE PAULSON, MATTHEW FINLAY, MACQUARIE PRIVATE WEALTH INC. and PETER BACSALMASI, Defendants

BEFORE: Low J.

COUNSEL:
Matthew P. Sammon and Paul-Erik Veel , for the Plaintiffs

David E. Lederman , for the Moving Parties, the defendants James F. Mackie, Jeffrey Mackie, Rahim Chatur, Tricia Leadbeater, Brinna Brinkerhoff, Julie Paulson and Mathew Finlay

J. Derek Bell, for the defendant Macquarie Private Wealth Inc. and Peter Bacsalmasi

HEARD: March 27, 2012

ENDORSEMENT

[ 1 ] The defendants James F. Mackie, Jeffrey Mackie, Rahim Chatur, Tricia Leadbeater, Brinna Brinkerhoff, Julie Paulson and Matthew Finlay (the Moving Parties), move for a stay of the action. It is said that the plaintiffs can and ought to bring the action by way of a counterclaim in Alberta. The remaining defendants are not moving parties but support the motion for a stay and will not object to the matters raised in this action being litigated in Alberta if this action is stayed.

[ 2 ] The moving parties take the position that Ontario has no jurisdiction over the subject matter of the action or that there is a proceeding pending in Alberta relating to the same subject matter, or that the action is frivolous or vexatious or an abuse of process.

[ 3 ] The litigation among these parties arises out of a failed commercial marriage, a corporate merger in April 2009. The parties are engaged in the investment industry. The moving parties were all involved directly or indirectly with one of the merging entities and became employed after the merger by the plaintiff Mackie Research Capital Corporation at its Calgary office.

[ 4 ] The merger was followed by dissatisfaction, unfulfilled expectations and mutual allegations of broken promises. All of the moving parties resigned and took positions with a competitor, the defendant Macquarie Private Wealth Inc.

[ 5 ] The central issue on the motion is whether a contractual provision as to forum has primacy over factors suggesting that a forum other than that stipulated in the contract is the forum conveniens .

[ 6 ] The plaintiffs are private Ontario corporations with head offices in Toronto. The defendant Macquarie has its head office in Toronto.

[ 7 ] On April 7, 2009, a corporate merger took place between Research Capital Corporation and J.F. Mackie & Company Ltd. (JFM), a Calgary brokerage. The defendant James F. Mackie was the chairman of J.F. Mackie & Company Ltd. and its most important producer. The defendants Jeffrey Mackie, Rahim Chatur and Tricia Leadbeater were also employees and shareholders of that company. The merger transaction was closed in Toronto.

[ 8 ] Under the merger agreement the said employees of JFM became employees of the plaintiff Mackie Research Capital Corporation.

[ 9 ] Article 10.15 of the merger agreement provides as follows:

Governing Law and Language . This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein and this Agreement shall in all respects be treated as an Ontario contract. The Parties irrevocably agree and consent to the jurisdiction of the courts of the Province of Ontario to resolve any dispute which may arise among them concerning this Agreement and the subject matters hereof. ...

[ 10 ] Following the merger, a unanimous shareholders agreement (USA) among Mackie Research Financial Corporation and its shareholders was entered into on April 7, 2009 followed by an updated agreement on June 21, 2010. The defendants James Mackie, Jeffrey Mackie, Chatur, Finlay and Leadbeater were signatories to the USA.

[ 11 ] The agreement provides, at Article 3.08, that upon the termination of any shareholder’s employment with Mackie Research Holding or any subsidiary or affiliate including Mackie Research Capital for any reason except death or incapacity, such outgoing shareholder would be deemed to have sold and transferred all of the securities owned beneficially by him or her at a price determined in accordance with other provisions of the USA.

[ 12 ] Article 8.05 of the USA provides:

This Agreement shall be construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein and this Agreement shall in all respects be treated as an Ontario contract. The parties hereto irrevocably attorn to the jurisdiction of the courts of the Province of Ontario to resolve any dispute which may arise among them concerning this Agreement and the subject matters hereof.

[ 13 ] The moving parties formerly worked at the Calgary office of the plaintiffs and are Alberta residents. They left the employ of the plaintiff Mackie Research Capital Corporation on April 29, 2011 and commenced to work in and for the Calgary office of the defendant Macquarie Private Wealth Inc.

[ 14 ] On June 16, 2011, the defendants James (Jamie) Mackie, Rahim Chatur, Jeffrey Mackie, Tricia Leadbeater, Brinna Brinkerhoff and Julie filed an action in the Alberta Court of Queen’s Bench against Mackie Research Capital Corporation claiming unpaid commissions and fees which were alleged to have come due on May 15, 2011. The claims asserted by the six plaintiffs in the Alberta action were for liquidated sums totaling $287,127 and further additional commissions and fees said to come due on June 15, 2011.

[ 15 ] The defendant Mackie Research Capital Corporation defended the action alleging a right of set-off and a counterclaim based on costs of defending and potential liability resulting from a claim referred to as the “Pashak Litigation” wherein an investor alleged loss and damage resulting from advice by James Mackie and Leadbeater. The counterclaim alleges a contractual obligation on the part of James Mackie and Leadbeater to pay such costs and damages that Mackie Research Capital Corporation may be found liable to pay to the plaintiff in the Pashak litigation.

[ 16 ] This action was commenced on September 2, 2011.

[ 17 ] The claim as against the moving parties is for damages for breach of contract, inducing breach of contract, breach of fiduciary duty, breach of confidence, conspiracy and knowing assistance therein and for an accounting and disgorgement of profits.

[ 18 ] The plaintiffs plead and rely, inter alia, on the USA to which the defendants James Mackie, Jeffrey Mackie, Chatur, Leadbeater and Finlay were parties and pursuant to which there was agreement that upon the termination of any shareholder’s employment with Mackie Research Capital such shareholder would be deemed to have sold and transferred all of his shares in a company, Mackie Research Holding Corporation to a company called MRF Box Inc. (“Boxco”), an Ontario corporation, at a price determined in accordance with provisions of the USA.

[ 19 ] The plaintiffs plead and rely on Article 4.05 of the USA in asserting that if a departing shareholder was indebted to the plaintiffs or if he or she had caused a loss, liability or expense to the plaintiffs, then the purchase price of the share would be paid to the plaintiffs by Boxco to the extent required to discharge the liability. The plaintiffs claim entitlement to payment of the price of the departing shareholder defendants’ securities.

[ 20 ] The plaintiffs also plead and rely on the merger agreement in which, at Article 6.17 the covenantors, among which James Mackie was one, agreed to refrain from soliciting plaintiffs’ customers, from enticing employees away from the plaintiffs and from being engaged in a competitive business without prior written approval.

[ 21 ] It is alleged that the defendant James Mackie breached the merger agreement and that the other moving parties knowingly assisted in the breach. It is alleged that they did so in concert by taking and using confidential information of the plaintiff Mackie Research Capital and using it to solicit clients of Mackie Research Capital to generate profits for the competing business of Macquarie Private Wealth Inc. The plaintiffs seek an order for an accounting and disgorgement of revenues so earned.

[ 22 ] It is agreed that it is permissible under the rules of the court of Queen’s Bench in Alberta for the plaintiffs’ claim to be asserted as a counterclaim in the Alberta action.

[ 23 ] It is conceded that if the two actions were to proceed separately in the two different provinces, there is no danger of inconsistent verdicts since the issue of unpaid commissions and the set-off and counterclaim by reason of the Pashak litigation is discrete from the plaintiffs’ claims for breaches of the merger agreement and the USA and for breaches of fiduciary duty and conspiracy.

[ 24 ] While it is common ground that only James Mackie is alleged to have been in breach of the merger agreement (he being the sole individual defendant who was a signatory), the acts in breach of the merger agreement are alleged to have constituted breach of fiduciary duty in which the other defendants are alleged to have assisted and from which they are alleged to have benefited.

[ 25 ] The subject matter of the action concerns the rights of the plaintiffs and the obligations of some of the defendants under a merger agreement and a unanimous shareholders agreement made in Ontario and breached in Alberta. It seeks a determination that defendants who are not parties to the merger agreement knowingly assisted in the breach of the agreement, the acts in furtherance of which are said to constitute breach of fiduciary obligation and breach of confidence with the plaintiffs suffering damage in Ontario.

[ 26 ] The moving parties were served pursuant to Rule 17.02(f), (h), (o) and/or (p) of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194.

[ 27 ] Ontario has jurisdiction over the matter of the action (see Club Resorts Ltd. v. Van Breda 2012 SCC 17 , [2012] S.C.J. No. 17 at para.88). The agreements relied on by the plaintiffs are the heart of the action. In my view, there is no cogent evidence to rebut the presumption of jurisdiction in this case (ibid, para 96) and I therefore reject the argument that there is no jurisdiction simpliciter.

[ 28 ] Should this court nevertheless decline to exercise its jurisdiction?

[ 29 ] The moving parties argue that Ontario is forum non conveniens . Their position is that the forum selection and attornment clauses in the merger and USA are but a factor to be considered among others in deciding whether Ontario is forum conveniens , in particular because the forum selection clauses are non-exclusive. The onus is on the moving party alleging forum non conveniens to show that the alternative jurisdiction proposed is clearly the more appropriate forum. The moving parties argue that the onus is met in that the majority of the defendants reside there, the conduct alleged to have been engaged in by the defendants took place in Alberta and there will be a significant number of witnesses to be called at trial who reside in Alberta.

[ 30 ] The moving parties rely on Old North State Brewing Co. v. Newlands Services Inc ., [1998] B.C.J. No. 2474 (B.C.C.A.) , Multiactive Software Inc. v. Advanced Service Solutions Inc ., [2003] B.C.J. No. 945 (B.C.S.C.) , and Hayes v. Peer 1 Network Inc . [ 2007] O.J. No. 2476 ; 2007 65614 (ON SCDC) , 86 O.R. (3d) 475; 228 O.A.C. 348 (Div. Ct.).

[ 31 ] In Old North v. Newlands, the issue was whether to enforce a foreign judgment obtained in North Carolina in the face of a forum and choice of law clause that provided for British Columbia law and attornment to the courts of British Columbia. The defendant did not attorn to the court of North Carolina when the plaintiff sued there. The issue before the B.C. Court of Appeal turned on whether the forum selection clause was exclusive. Having held that the clause was not exclusive, the court held the foreign judgment enforceable as North Carolina had jurisdiction over the subject matter. In my view, the decision does not address the issue before this court, which is whether the court should override a forum selection clause where the plaintiff has brought action in compliance with it. In Old North v. Newlands, the plaintiff did not comply.

[ 32 ] In Multiactive Software v. Advanced Service there was a choice of law and attornment clause selecting the law and the courts of British Columbia. The defendant sought a stay of the action brought in British Columbia. It had commenced an action in Florida in which the same issues were engaged. Florida also had jurisdiction to entertain the dispute and the Florida court had dismissed a motion challenging its jurisdiction.

[ 33 ] In particular, the moving parties rely on the following from that decision:

20 The same distinction was made by Madam Justice L. Smith in B.C. Rail Partnership v. Standard Car Truck Company et al., [2003] B.C.J. No. 194 .

Lessee irrevocably and unconditionally submits to the jurisdiction of and venue in, federal and provincial courts located in Nova Scotia, Canada for any proceeding arising under this Agreement.

21 She interpreted that clause to mean that the lessee submitted to the jurisdiction of the Nova Scotia courts for proceedings arising from the agreement and precluded the lessee from contesting the jurisdiction of the Nova Scotia courts if proceedings were commenced there.

22 As to the effect of attornment clauses, she concluded:

I conclude, then, in summary that an exclusive jurisdiction clause will be a very important factor such that a plaintiff will have to prove a strong case for overriding the agreement and bringing suit elsewhere. A non-exclusive attornment clause will also be a factor, but of lesser strength. ... the burden is on the plaintiff in any event. (para. 27)

23 The clause before me is a non-exclusive jurisdiction clause. While it is to be given weight in determining the forum it does not attract the more significant weight that an exclusive jurisdiction clause would.

24 The non-exclusive jurisdiction attornment clause favours British Columbia as the forum. In view of the wording of the clause it can be placed on no higher footing than evidence that the parties turned their mind to the issue of the location of proceedings if disputes should arise and agreed proceedings in British Columbia could not be defeated by an objection to jurisdiction and that British Columbia law would apply to the interpretation proceedings in Florida and British Columbia.

[ 34 ] The court in Multiactive stayed the British Columbia action although brought in compliance with the forum selection clause on the basis that if permitted to proceed, there would be parallel actions in many respects.

[ 35 ] I find that decision distinguishable from the facts at bar in that there is no danger of inconsistent verdicts by reason of this action proceeding in one jurisdiction while the moving parties’ claims for commissions is litigated in another. There would not be parallel proceedings litigating the same issues despite the fact that the issues among these parties have come to life as a result of their being engaged in business together at one time.

[ 36 ] Hayes v. Peer 1 Network Inc . was a Divisional Court decision setting aside a stay granted by the master. The plaintiff was a discharged employee. The employment agreement contained a clause in which the law of the state of Washington was chosen to govern the agreement and the parties irrevocably attorned to the courts of that state. Significantly, the plaintiff asserted that the employment contract infringed public policy and that it was the product of grossly uneven bargaining power.

[ 37 ] The master appeared to have misapplied the decision in Fairfield v. Low et al ., 1990 6955 (ON SC) , 71 O.R. (2d) 599 (H.C.J.). In Fairfield , the dispute was over a franchise, the parties to which chose the laws of British Columbia as the governing law and agreed to the Supreme Court of British Columbia or the Federal Court of Canada as having jurisdiction to entertain any proceedings in respect of the agreement. The defendant commenced an action in British Columbia. The plaintiff sued in Ontario and moved unsuccessfully for a stay of the B.C. action. The defendant sought a stay of the Ontario action.

[ 38 ] In granting a stay of the Ontario action, Doherty J. held that “where there is no suggestion that the agreement as it relates to jurisdiction offends public policy or was the product of grossly uneven bargaining positions, the court should give effect to the term of the agreement unless the party seeking to have the case heard in another jurisdiction can show that the interests of the parties and the interests of justice favour trial in that other jurisdiction.”

[ 39 ] The outcome in Hayes turns, in my view, on the public policy concern raised by the plaintiff's assertion that the forum selection clause was imposed on the plaintiff without notice, without fresh consideration, in circumstances of unequal bargaining power and where the forum chosen had no connection with the subject matter of the action.

[ 40 ] Accordingly, I am of the view that neither Fairfield v. Low nor Hayes v. Peer 1 Network assists the moving parties. There is no suggestion that the choice of law or choice of forum clauses in the merger agreement and USA offend public policy or that the agreements were the product of uneven bargaining positions. These were sophisticated business people, represented by solicitors, concluding a sophisticated series of transactions.

[ 41 ] I do not accept that for purposes of deciding this motion there is a significant distinction between an exclusive and a non-exclusive forum selection clause. If the forum selection clause were exclusive and it stipulated a forum other than Ontario, the party challenging this forum would have good cause for a stay on the basis that the agreement has been violated. If the forum selection clause is not exclusive, and the plaintiff brings suit in Ontario where the forum selected is another jurisdiction, then the agreement as to forum is a factor among others in determining whether a stay for forum non conveniens should be granted.

[ 42 ] Those are not the facts in this case. Here, the plaintiff has complied with the agreement. The moving parties ask the court to override the agreement.

[ 43 ] The English jurisprudence as to non-exclusive forum selection clauses as reflected in Ace Insurance SA-NV v. Zurich Insurance Company , [2001] 1 All E.R. (Comm.) 802 (C.A.) indicates that parties should be held to their bargain where the suing party complies with the clause and commences action in the jurisdiction agreed to.

[ 44 ] In my view, the governing law in this jurisdiction is found in Expedition Helicopters Inc. v. Honeywell Inc ., 2010 ONCA 351 , 100 O.R. (3d) 241 (C.A.) (and see also Loat v. Howarth , 2011 ONCA 509 (C.A.) at paras. 27 - 29 and Momentous.Ca Corp. v. Canadian American Assn. of Professional Baseball Ltd., 2012 SCC 9 , 2012 CarswellOnt. 2055, at para 9 , affirming 2010 ONCA 722 , 103 O.R. (3d) 467, 270 O.A.C. 36).

[ 45 ] Expedition Helicopters v. Honeywell was an appeal from a motions judge declining to enforce a forum selection clause and staying the action.

[ 46 ] The Court of Appeal stated, per Juriansz J.A. at para 11,

11 Thus, even though the literal wording of the test in The “ Eleftheria ” may imply a conventional forum non conveniens analysis, Pompey makes clear that such an analysis is not to be used. Rather, the forum selection clause pervades the analysis and must be given full weight in the consideration of other factors. It is not enough for the plaintiff to establish a "strong" case that Ontario is the more convenient forum. The plaintiff must show “strong cause” that the case is exceptional and the forum selection clause should not be enforced.

24 A forum selection clause in a commercial contract should be given effect. The factors that may justify departure from that general principle are few. The few factors that might be considered include the plaintiff was induced to agree to the clause by fraud or improper inducement or the contract is otherwise unenforceable, the court in the selected forum does not accept jurisdiction or otherwise is unable to deal with the claim, the claim or the circumstances that have arisen are outside of what was reasonably contemplated by the parties when they agreed to the clause, the plaintiff can no longer expect a fair trial in the selected forum due to subsequent events that could not have been reasonably anticipated, or enforcing the clause in the particular case would frustrate some clear public policy. Apart from circumstances such as these, a forum selection clause in a commercial contract should be enforced.”

[ 47 ] No strong cause is shown in the evidence on this motion for overriding the forum selection clause— none of circumstances contemplated in Expedition Helicopters is present and the moving parties advance no other set of facts that amount to strong cause. That the balance may favour of Alberta as the more convenient forum does not per se constitute strong cause.

[ 48 ] The moving parties who were not signatories to the merger or USA are represented by the same solicitors as the moving parties who were parties to those agreements. The causes against them are inextricable from the causes against the covenantors and I am satisfied that there is potential for mischief if there were severance of the actions as against them.

[ 49 ] Provisions can be made for the examinations of those individuals in Alberta in the counties where they reside, or, if their attendance is required at trial, the plaintiffs will bear the travel expenses of such attendances. On that basis, the motion for a stay is dismissed.

[ 50 ] The plaintiffs shall have their costs of the motion, fixed at $26,000, payable in 30 days.

Low J.

Date: June 29, 2012