Nagra v. Malhotra

111 O.R. (3d) 446
2012 ONSC 4497

Ontario Superior Court of Justice,
K.L. Campbell J.

July 31, 2012

Conflict of laws -- Forum conveniens -- Plaintiff and defendant residing in Ontario and defendant carrying on business in Ontario -- Parties investing in companies and properties in Vermont -- Plaintiff suing defendant in Ontario on allegedly unpaid promissory note -- Defendant having no assets in Vermont so plaintiff would have to bring enforcement action in Ontario if he sued successfully in Vermont -- Plaintiff barred from entering United States as result of criminal convictions -- Ontario forum conveniens.

Conflict of laws -- Jurisdiction -- Plaintiff and defendant residing in Ontario and defendant carrying on business in Ontario -- Parties investing in companies and properties in Vermont -- Plaintiff suing defendant in Ontario on allegedly unpaid promissory note -- Alleged default occurring in Ontario -- Ontario having jurisdiction simpliciter -- Defendant's residence in Ontario triggering presumption that [page447] Ontario had jurisdiction -- Defendant not rebutting that presumption -- Real and substantial connection existing between subject matter of litigation and Ontario.

The plaintiff and the defendant were Ontario residents and the defendant carried on business in Ontario. The parties were originally partners in relation to the purchase and development of lands for the operation of hotels in Vermont and New Hampshire. The plaintiff brought an action against the defendant in Ontario claiming that the defendant owed him money in relation to an unpaid promissory note. The defendant brought a motion to stay the action, arguing that it should be tried in Vermont.

Held, the motion should be dismissed.

The defendant's residence in Ontario triggered a presumption that Ontario had jurisdiction. The defendant had not rebutted that presumption. There was a real and substantial connection between the subject matter of the litigation and Ontario. Both parties lived in Ontario; the defendant had never been to Vermont in any of his dealings with the plaintiff; the defendant had made his investments in companies and properties in Vermont and New Hampshire from his home base in Ontario; while relevant documents were signed in Vermont, they were signed by the defendant's Vermont lawyer, in whose favour he had executed a power of attorney from his actual physical location in Ontario; and the default occurred in Ontario. Ontario had jurisdiction simpliciter.

The litigation had a number of important connections to Vermont. Nevertheless, Vermont was not clearly the more appropriate forum for the litigation. Of particular importance were the facts that the defendant had no assets in Vermont, so the plaintiff would have to bring enforcement proceedings in Ontario if he sued successfully in Vermont, and that the plaintiff was barred from entering the United States as a result of criminal convictions. Even if the technology were available to permit the plaintiff to attend and participate in any Vermont proceedings remotely, virtual attendance was a poor substitute for actual physical presence. There was no unfairness to the defendant in permitting the trial to take place in Ontario.

MOTION for a stay of proceedings.

Cases referred to
Breeden v. Black, 2012 SCC 19, 291 O.A.C. 311, 429 N.R. 192, 343 D.L.R. (4th) 629;
Club Resorts Ltd. v. Van Breda, 2012 SCC 17, 291 O.A.C. 201, 429 N.R. 217, 343 D.L.R. (4th) 577;
Éditions Écosociété Inc. v. Banro Corp., 2012 SCC 18, 291 O.A.C. 277, 343 D.L.R. (4th) 647;
Young v. Tyco International of Canada Ltd. (2008), 92 O.R. (3d) 161, 2008 ONCA 709.

Murray Maltz, for plaintiff Gurdeep Nagra. [page448]
Ian N. Roher and Kristina A. Davies, for defendant Verinder Malhotra.

K.L. CAMPBELL J.: --

1. Introduction

[1] The plaintiff, Gurdeep Nagra, has commenced an action against the defendant, Verinder Malhotra, claiming that the defendant owes him US$3.5 million in relation to an unpaid promissory note. The plaintiff wants the action tried in Toronto.

[2] The parties were originally partners in relation to the purchase and development of lands for the operation of various hotels in Vermont and New Hampshire in the United States. More particularly, the parties were equal shareholders in some ten different American companies which owned the properties and operated the hotels. Both parties personally guaranteed the various mortgages and other debts associated with these ventures.

[3] Sometime in 2007, the defendant became interested in buying-out the plaintiff's share of the companies. Eventually, on November 19, 2007, after negotiations between the parties had concluded, the parties entered into a Purchase and Sale Agreement, wherein the plaintiff sold his 50 per cent interest in these companies to the defendant for $3.5 million. The plaintiff transferred the entirety of his interest in the companies to the defendant. In turn, the defendant gave the plaintiff a promissory note, also dated November 19, 2007, in the amount of $3.5 million. The terms of this promissory note required the defendant to pay 5 per cent interest (when not in default), and pay the debt in five equal annual installments of $700,000 plus the accrued interest. The final payment was to be made on December 1, 2012.

[4] While the defendant has now liquidated all of his interest in these companies, the promissory note to the plaintiff remains wholly unpaid. The defendant has made none of the prescribed annual installments. With this action, the plaintiff seeks to recover this debt from the defendant.

[5] By way of defence, the defendant claims that the plaintiff failed to disclose, prior to completing the Purchase and Sale Agreement, the existence of numerous loans, liens and other payables against the corporations. These debts allegedly totalled some $7.1 million. Indeed, the defendant contends that these debts were deliberately concealed from him by the plaintiff. Further, the defendant claims that, after he discovered this "material non-disclosure" of these "financial irregularities" in the companies, the parties agreed that payment to the plaintiff would only be made from the proceeds, if any, of the sale of two particular real estate properties.

[6] The defendant now moves to stay this action, arguing that the plaintiff's claim should be tried in Vermont, not Ontario. Accordingly, this motion engages the legal principles recently articulated by the Supreme Court of Canada in a trilogy of cases, namely, Club Resorts Ltd. v. Van Breda, 2012 SCC 17; Éditions Écosociété Inc. v. Banro Corp., 2012 SCC 18; and Breeden v. Black, 2012 SCC 19.

[7] In the result, for the reasons that follow, the defendant's motion is dismissed. In my view, there is a real and substantial connection between the litigation and Ontario, and the defendant has failed to establish that Vermont is clearly the more appropriate and convenient forum for the trial of this action. Accordingly, the plaintiff's action will be permitted to continue in Ontario.

2. The "Real and Substantial Connection" Test

a. Introduction -- The governing analytical approach

[8] As a constitutional principle, the courts of Ontario will have jurisdiction over a civil dispute where there is a "real and substantial connection" between the Province of Ontario and the dispute between the parties. It is only in such circumstances that the Ontario courts can legitimately exercise the state's power of adjudication over the dispute. In an effort to provide greater certainty and stability as to the existence of this jurisdiction simpliciter, the Supreme Court of Canada has adopted an analytical approach that recognizes certain "presumptive connecting factors". This approach focuses upon the identification of "objective factors" that might link the subject matter of the litigation to the court that has adjudicative jurisdiction over the dispute. This reliance upon a set of recognized (but not exhaustive) presumptive factors provides greater predictability than a regime based on the exercise of purely individualized discretion. This approach also promotes the key goals of fairness and efficiency. The presumption of jurisdiction that flows from the existence of any one of these objective connecting factors is not, however, irrebuttable. Accordingly, where the Ontario court finds that one or more of these recognized presumptive connecting factors applies (or is prepared to acknowledge a new presumptive factor), then the court will assume jurisdiction over the dispute unless the defendant can rebut the operating presumption by demonstrating the absence of any "real and substantial connection" between Ontario and the dispute. Where none of the recognized or new presumptive connecting factors exist, however, the onus remains on the plaintiff to establish a sufficient connection between Ontario and the litigation.

b. The presumptive connecting factors generally

[9] In Club Resorts Ltd. v. Van Breda, the Supreme Court of Canada, in the context of a tort action, helpfully provided a non-exhaustive list of presumptive connecting factors that, if established by the plaintiff, would presumptively demonstrate the necessary "real and substantial connection" between the dispute and the forum to convey jurisdiction simpliciter.

c. The defendant resides in Ontario -- The presumption of jurisdiction operates

[10] The defendant resides in Ontario. His family home is in Brampton, and he carries on business there as a doctor. This triggers the presumption of jurisdiction.

d. The defendant cannot rebut the presumption of jurisdiction

[11]–[12] The court concluded that the defendant failed to rebut the presumption. There was a real and substantial connection between the litigation and Ontario.

3. The Doctrine of Forum Non Conveniens

[13]–[50] The court analyzed the forum non conveniens factors including convenience of witnesses, applicable law, multiplicity of proceedings, enforcement of judgments, and fairness.

Key findings included:

• Both parties and many witnesses were located in Ontario.
• The defendant’s assets were located in Ontario, meaning enforcement would ultimately occur there.
• The plaintiff was barred from entering the United States due to prior convictions, making a Vermont trial significantly unfair.
• Requiring the plaintiff to litigate in Vermont would create serious access‑to‑justice concerns.

4. Conclusion

[51] Accordingly, the action will be permitted to continue in Ontario.

[52] In the result, the motion by the defendant is dismissed. An order shall issue accordingly.

[53] The only remaining issue is the costs of this motion. If the parties cannot reach an agreement with respect to that issue, the parties may approach me to establish a reasonable timetable for written submissions on the issue of costs.

Motion dismissed.