ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-09-0017-00
DATE: 2012-08-28
BETWEEN:
BALE-EZE INDUSTRIES INC. and GARY WALT Plaintiffs – and – FRAZIER INDUSTRIAL CO. INC., FRAZIER INDUSTRIAL CO. LTD., c.o.b. as FRACAN and WILLIAM MASCHARKA Defendants
J. David Ross, for the Plaintiffs
John Mastorakos, and Anya-Deane Best, for the Defendant Mascharka.
HEARD: August 25, 2011 at Belleville
T.D.RAY, J
Introduction
[ 1 ] This motion is brought by the defendant, Mascharka, under rule 21 of the Rules of civil procedure, for an order dismissing this action against him on the ground that the Superior Court of Justice did not have jurisdiction since parallel proceedings had already been commenced in the State of New Jersey, and a contract between the parties stipulates that New Jersey will be the jurisdiction for any disputes. The plaintiff’s position is that Mascharka was not a party to the contract in question, and furthermore, the New Jersey action had been commenced after the current action. The plaintiffs cross motion seeks an order requiring the defendant to deliver a statement of defence.
[ 2 ] The late Thomson, J. heard the motion but died before completing his decision. Rather than re-arguing the motion, counsel have asked that I decide the issues on the basis of the materials filed on the motion, the transcript of submissions, and Thomson, J.’s notes.
Background
[ 3 ] This action was launched January 21, 2009, for damages for breach of contract and misrepresentation in the amount of 7.5 million dollars. The action against the corporate defendants was dismissed on consent, but continued against the defendant, Mascharka, who is continuing this motion.
[ 4 ] Mascharka is the Chief Executive Officer of the corporate defendants. His motion is based on a choice of law provision in the fabricator agreement between the corporate parties that stipulates any disputes shall proceed under the laws of New Jersey:
This Agreement shall be construed and shall be interpreted under the laws of the State of New Jersey. By executing this Agreement, both parties irrevocably consent to the jurisdiction of the Federal and State Courts of the State of New Jersey which, subject to the arbitration clause herein contained, shall have exclusive jurisdiction over any disputes or claims arising under this Agreement. [1]
[ 5 ] The agreement also contains an arbitration clause which provides as follows:
In the event of a dispute that cannot be resolved by the parties to this Agreement, and prior to legal proceedings, both fabricator and Frazier hereby agree to binding arbitration in accordance with the rules set forth by the American Arbitration Association. Venue in any such arbitration shall be set exclusively in Morris County, New Jersey ... should a party institute suit or other action in violation of this provision, the other party shall be entitled to recover all costs incurred as a result thereof including reasonable attorney’s fees. [2]
[ 6 ] The plaintiffs’ position is that the action against Mascharka is personal to him, and therefore, the choice of law and arbitration provisions in the fabricator agreement are not relevant to this action.
[ 7 ] The statement of claim deals almost exclusively with the relations between the corporate parties. Since the action has been dismissed as against the corporate parties, the only pleading which might possibly be interpreted to involve Mascharka personally, as opposed to his role on behalf of the corporate defendants as Chief executive Officer, is paragraph 24, as follows:
- Bale-eze states and the fact is William Mascharka, misrepresented his own and Frazier’s intentions, goals, and commitments to Gary Walt and Bale-eze who reasonably relied on said misrepresentations. As a consequence Bale-eze and Gary Walt suffered the damages described above.
[ 8 ] This pleading is important because firstly, it is the pleading of the corporate plaintiff, Bale-eze and its principal; secondly, it anticipates the ongoing relationship between the corporate parties which is the subject of the balance of the pleading; and thirdly, the particulars missing from paragraph 24 are found in the pleading involving the issues between the corporate parties. Mascharka is described in the statement of claim as Chief Executive Officer. He is not described in personal terms. Any references in the statement of claim are to Mascharka either explicitly or by inference as representing the corporate defendants.
[ 9 ] Walt and Mascharka began dealing with each other in 2000 through the companies of which they were the principals. The fabricator agreement was entered into May 24, 2006, and it is that agreement which governed their relationship. While neither Walt nor Mascharka were personally parties to that agreement, their companies were.
[ 10 ] Following is a chronology:
2000: Walt and Mascharka began dealing with each other through Bale-eze and Frazier(s), the companies of which they were the principals.
May 31, 2006: Fabricator Agreement between Frazier and Bale-eze that will fabricate for Frazier storage rack systems and Bale-eze will have Frazier property at its Belleville facility. Contains arbitration and choice of law (New Jersey) provisions.
May, 2006: Lending Agreement between Frazier and PNC Bank wherein Bale-eze subordinates its interest in Frazier’s collateral.
December 19, 2008: Ontario Injunction application commenced by Frazier to enjoin Bal-eze from transferring or disposing of Frazier’s chattels from its location in Belleville, Ont. Affidavit of Mascharka [3] explicitly recited that the action to claim damages would be brought in New Jersey.
December 19, 2008: Ex parte Interim Injunction, Byers, J., granted to Frazier.
January 21, 2009: Action commenced in Ontario by Bale-eze and Walt (principal of Bale-eze) against Frazier (two corporate entities) and Mascharka (principal of both corporate entities). The defendants were not served until June 30, 2009, and July 21, 2009 respectively. [4]
February 17, 2009: New Jersey action commenced by Frazier against Bale-eze and Walt. [5]
November 26, 2009: Motion by Frazier to dismiss Bale-eze’s action on the ground of Arbitration and choice of law provisions in the Fabricator Agreement.
After November 26, 2009: Bale-eze discontinued the action against the two corporate defendants leaving only Mascharka as a defendant who continues this motion.
Issues
[ 11 ] The issues are as follows:
a. Are the jurisdiction and arbitration clauses in the Fabricator Agreement binding on the Superior Court of Justice?
b. Can Mascharka shelter behind these clauses so as to successfully stay this action?
c. Was the defendants’ injunction proceeding an attornment to Ontario so as to bar this motion?
Legal Principles
[ 12 ] The provisions of rule 21.01(3)(a) and (c) contemplate this type of motion which challenges the jurisdiction of the court, and where another proceeding has been commenced between the same parties on the same subject matter in another jurisdiction. Neither party relies upon rule 17 to argue forum conveniens.
[ 13 ] Delivery of a statement of defence pleading the foreign forum selection clause does not prejudice a motion by the defendant so as to amount to a consent or attornment to the jurisdiction. Parties should be held to their bargains concerning forum selection, unless a “strong cause” can be shown otherwise. [6]
Analysis
[ 14 ] Neither party has seriously contended that the jurisdiction and arbitration clauses in the Fabricator Agreement are not binding on the parties, and therefore, not binding on the parties to the agreement. These are typical clauses found in commercial agreements, and are intended to bring clarity to the process and jurisdiction for the resolution of disputes. No strong cause has been shown as to why these clauses should not be enforced.
[ 15 ] The central issue is whether the action against Mascharka personally is, in fact, personal and outside the Fabricator Agreement so as to enable the action to go forward without being affected by the jurisdiction and arbitration clauses. The language of paragraph 24 of the plaintiff’s statement of claim, while purportedly personal to Mascharka, clearly contemplates a dispute between the corporate parties. The corporate defendants are no longer parties but the statement of claim has not been amended by the plaintiff [7] , so that all of the statement of claim must be read in the context of the claim against Mascharka in order to flesh out the particulars.
[ 16 ] The injunction proceeding launched by the defendant did not constitute attornment to Ontario jurisdiction. [8]
[ 17 ] Withdrawal of the claims against the corporate defendants reinforces the inference that the plaintiff knew full well that the provisions of the Fabricator Agreement prevented it from proceeding with its action in Ontario. However, the language of the statement of claim in its entirety makes it clear that the dispute is with the corporate defendants; and that the naming of Mascharka as a defendant is not an independent claim against him, but part of the overall dispute between the parties to the Fabricator Agreement.
[ 18 ] In the face of the express agreement between the parties with respect to the forum, and no justifiable reason having been advanced not to permit the agreement to be enforced, this action cannot proceed in Ontario.
[ 19 ] The defendant’s motion is therefore granted, and the action is dismissed.
[ 20 ] Unless the parties can agree concerning costs, they may make written submissions addressed to my chambers in Ottawa, of two pages or less, within 20 days, with a further 5 days for reply.
Honourable Justice Timothy Ray
Released: August 28, 2012
COURT FILE NO.: CV-09-0017-00
DATE: 2012-08-28
ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: BALE-EZE INDUSTRIES INC. and GARY WALT Plaintiffs – and – FRAZIER INDUSTRIAL CO. INC., FRAZIER INDUSTRIAL CO. LTD., c.o.b. as FRACAN and WILLIAM MASCHARKA Defendants REASONS FOR JUDGeMENT Honourable Justice Timothy Ray
Released: August 28, 2012
[1] Fabricator Agreement, dated May 31, 2006, paragraph 19.1
[2] Fabricator Agreement, paragraph 19.2
[3] Reply affidavit, sworn January 27, 2010.
[4] It is a reasonable inference that the defendants knew nothing of the Ontario action when they commenced their New Jersey action.
[5] Served March 18, 2009.
[6] Momentous.ca Corp. v. Canadian American Association Of Professional Base Ball Ltd . 2012 SCC 9 @ para 8,9.
[7] Which the plaintiff was at liberty to do without order or leave of the defendant since no defence has been delivered.
[8] By analogy to the statement of defence in Momentous.ca , note 6.