ONTARIO

SUPERIOR COURT OF JUSTICE

NOVATRAX INTERNATIONAL INC.

Applicant

v.

HAGELE LANDTECHNICK, KARL HAGELE AND BENJAMIN HAGELE

Respondent

DECISION ON MOTION

BEFORE THE HONOURABLE MR. JUSTICE I LEACH

on November 22, 2013, at LONDON, Ontario

APPEARANCES:

C. Bryson Counsel for the Applicant

E. Tingley Counsel for the Respondents

FRIDAY NOVEMBER 22, 2013:

By way of overall context, this is a motion by the defendants collectively in this commercial litigation. The motion is brought pursuant to rule 21 of the Rules of Civil Procedure, s. 106 of the Courts of Justice Act, R.S.O. 1990, c.C.43, and Section 7(1) of the Arbitration Act, 1991, S.O. 1991, c.17, to stay or dismiss this Ontario action on jurisdictional grounds.

In particular, the defendants argue that the relief they are requesting is warranted and appropriate in the circumstances having regard to the combined “choice of law” and “choice of forum” arbitration provisions found in the underlying commercial contract effectively giving rise to the present dispute between the parties.

I now have had an extended opportunity to carefully review the material filed by the parties, (in particular, their respective motion records, facta and books of authorities), and also to receive and consider counsel’s oral submissions.

Given the lengthy history of this matter to date and the presence in court of the parties, my feeling was and is that the appropriate disposition of the motion is relatively clear, (based on my understanding of the circumstances and governing authorities), and that it is best if I deal with this matter by way of oral reasons now, so that the parties have their decision relatively quickly and in a form that at least is more extended than a brief hand-written endorsement.

I begin with some further comments about the underlying circumstances here, and the relevant facts.

In that regard, certain matters appear to be conceded or not seriously in dispute.

The current litigation arises from a commercial contract, styled as an “Exclusive Sales Agreement”, that was reached between the corporate plaintiff, Novatrax International Inc., (henceforth referred to as “Novatrax”), an Ontario company based in this province, and the first corporate defendant, Hagele Landtechnik GmbH, (henceforth referred to as “Hagele Landtechnik”), a German corporation based in Germany.

The defendants sued in their personal capacity, Karl and Benjamin Hagele, (father and son respectively), are two principals of that German corporation.

The full text of the agreement to which I referred, dated June 17th, 2006, and approximately 12 pages long, including its Appendix, forms part of the motion record filed by the moving defendants, and is located at Tab 2A of the defendants’ motion record. I have reviewed the agreement in its entirety and have regard to all its provisions.

At the risk of over simplification, in broad terms the agreement, (which nominally is only between Hagele Landtechnik and Novatrax as named parties), contemplates an arrangement whereby the German corporation, (a manufacturer of various types of reversible industrial fans along, apparently, with associate kit accessories and replacement parts for those fans), conferred, under specified terms, certain rights, privileges and obligations whereby Novatrax generally would be the exclusive vendor of the German company’s products within a contractual territory specified to be the United States and Canada.

For present purposes, the provisions of the agreement which are front and center on this motion are those found in paragraph 18 of the agreement, under the heading “Chapter VI - Final Clauses”. Those provisions read as follows: “S.18 - Choice of Law Clause, Decisive Version, Place of jurisdiction: The contractual parties agree that German law is binding and to settle any disputes by a binding arbitration through the ‘Industrie und **Handelskammer’(**Chamber of Commerce) in Frankfurt. Both the English version and the German version of the contract are binding to the respective parties. If any difference in the translation arises in the future, the parties agree to settle the dispute also by a binding arbitration through the ‘Industrie und Handelskammer’ **(**Chamber of Commerce) in Frankfurt.”

There are a number of immediate observations I make about those provisions.

In particular, as noted above, on their face they simultaneously include what are known in the parlance of “private international law” or “conflict of laws” determinations, and arbitrations law, as: first of all, a “choice of law” clause, specifying that the law governing the parties’ obligations and disputes will be the law of Germany; secondly, a “choice of forum” or “selection of forum” clause – specifying “Frankfurt” and, given the context, obviously Frankfurt Germany in particular; and third, an “arbitration clause” whereby resolution of disputes is assigned not to the courts of Germany, but to arbitration by the Chamber of Commerce located in Frankfurt.

I also observe that, on their face at least, the provisions have an unqualified breadth to their application, insofar as the parties to the contract agreed that “any disputes”, (emphasis added), were to be resolved by the binding application of German law and binding arbitration by the Frankfurt Chamber of Commerce.

Both parties filed affidavit evidence in support of their positions on the motion.

Although it was filed in response, I will start with references to the plaintiff’s material.

The plaintiff has filed, through its principal Ms Van Lierop, extended affidavit evidence, (apparently not made the subject of any cross-examination by the defendants), which provides more information, from the plaintiff’s perspective at least, of the parties and their relationship.

The affidavit includes evidence as to the formation progress, breakdown and aftermath of that relationship, all of which give rise to the statement of claim issued by the plaintiff on January 21st, 2010. That statement of claim seeks damages and injunctive relief based on numerous causes of action sounding in contract and tort; so not only breach of contract, but also such torts as unfair competition, negligence, interference with economic relations, breach of a duty of good faith, and misrepresentation.

The affidavit evidence, in addition to supporting those allegations, effectively adds further claims in the nature of breach of confidence and use of confidential information.

Generally, I emphasize that I have reviewed and have regard to all of that evidence, and also to the statement of claim of the plaintiff, in their entirety.

For present purposes, however, in broad terms, the plaintiff in its pleading and affidavit evidence alleges very deliberate conduct on the part of the defendants to wrongfully undermine the parties’ contemplated business relationship, effectively terminate the parties’ agreement, and divert business customers and indeed employees from Novatrax, all with inevitable and devastating impacts on the plaintiff.

While that evidence is largely uncontradicted, I also note, however, the defendants’ indications that they have refrained from engaging in this substantive debate or tendering their competing evidence because of their jurisdictional objections, and because of their position that the applicable law relating to threshold determinations in motions such as this makes detailed exploration of the underlying substantive issues unnecessary and inappropriate in any event.

The defendants, for their part, when bringing the motion, tendered the affidavit evidence of Benjamin Hagele who, in addition to proffering the relevant agreement in evidence and indicating that Hagele Landtechnik carries on business in Germany, (where the two defendant individuals now reside), formally acknowledged that the statement of claim in this action was served on all defendants, in Ontario, on or about January 27th, 2010. In that regard, counsel for the defendants indicated and acknowledged that, for the purposes of this motion at least, it was conceded that all four of the defendants were present in Ontario on that date, either personally or by carrying on business, so as to constitute a basis for jurisdiction simpliciter.

To be clear, however, that concession was subject to reservation of the defendants’ primary contention that, while the Ontario Court therefore has the ability to assert jurisdiction based on jurisdiction simpliciter, it should not do so as a matter of discretion, based on the authorities relating to recognition and enforcement of selection of forum and arbitration clauses, such as those found in paragraph 18 of the agreement.

By way of final comments on the overall context and background to this matter, I mentioned earlier that this matter has an extended history. While not in evidence before me, in terms of what is contained in the motion records, counsel explained, and the documented history of the court file confirms, that this matter has not sat idle without further developments since the statement of claim was issued in 2010, and prior to the defendants bringing their motion.

To the contrary, there have been successive changes in counsel. From the plaintiff’s perspective, there also have been abortive default judgment proceeding initiated by the plaintiff, which then were set aside after motions and cross-examinations on affidavit material, and after the setting of a detailed timetable to then bring this motion on for hearing as soon as possible.

Plaintiff counsel has conceded that, for present purposes, there has been no relevant or meaningful delay in the defendants asserting their jurisdiction concerns both informally and then formally during the course of the parties’ dispute.

Turning then to the substantive issues on the motion and the relevant positions of the parties - and stating these in broad terms as well - the defendants say the governing authorities make it clear that this matter effectively is taken outside the otherwise applicable forum non conveniens analysis by the presence of those provisions that I have made reference to in paragraph 18 of the underlying agreement which, the defendants say, on their plain and ordinary meaning, and having regard to the nature of the parties’ relationship and dispute, are certainly broad enough to capture and cover the matters raised in this litigation.

In that regard, the defendants rely on indications in the authorities that clauses in the nature of those agreed to in paragraph 18 of the parties’ agreement are to be respected and enforced; that plaintiffs seeking to escape the operation of such clauses are obliged to show strong cause why that should not happen in a case such as this; and that, in the defendants’ opinion, the plaintiff has failed to do so.

The defendants accordingly ask that the claim against them be stayed on that basis, so that the dispute can be raised and addressed in Frankfurt by the agreed arbitration mechanism.

The defendants fairly - and I think reasonably - concede that, if a stay is not granted or justified on the basis of those paragraph 18 provisions and the analysis which is to be applied in considering their enforcement, then not only is jurisdiction simpliciter conceded, but the defendants also will concede that, based on an application of the otherwise applicable forum non conveniens analysis contemplated and outlined by authorities such as our Court of Appeal’s decision in Muscott v. Courcelles, 2002 44957 (ON CA), [2002] O.J. No. 2128 (C.A.), Ontario would be the more convenient and appropriate forum for litigation of this dispute, (for example, having regard to the predominant Ontario connections where most of the underlying events took place, where the parties and likely witnesses generally are located, where the damages predominantly were sustained, and similar considerations).

... PROCEEDINGS CONCLUDED

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