Hitlab Inc. v. Anderson, 2015 ONSC 2535

CITATION: Hitlab Inc. v. Anderson, 2015 ONSC 2535

COURT FILE NO.: CV-14-508749

DATE: 20150422

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Hitlab Inc. and Hitlab U.S.A., Inc., Plaintiffs

AND:

Andrew Anderson, James Hogan and Galan Bridgman, Defendants

BEFORE: Justice S. F. Dunphy

COUNSEL: Joseph Sereda, for the Plaintiffs

David Meirovici, for the Defendants

HEARD: April 15, 2015

ENDORSEMENT

[1] Can a plaintiff who moves from one province to another after a tort or breach of contract has occurred effectively import jurisdiction to hear a claim along with his suitcases?

[2] This is a motion brought under Rule 17.06 of the Rules of Civil Procedure by the defendants for an order staying this proceeding on the grounds that service outside of Ontario is not authorized by the Rules and that Ontario is not a convenient forum for the hearing of the proceeding. In any reasons for judgment issued by the Superior Court of Ontario in relation to a motion under Rule 17.06 of the Rules of Civil Procedure, the first line ought to read “this is an appeal from the order of Master _____ dated…”. Rule 17.06(2) authorizes the “court” to make an order which of course means that the motion is within the jurisdiction of the Master and should have been made to the Master (Rule 37.02(2) and Rule 37.04 of the Rules of Civil Procedure).

[3] In the present case, the motion had originally been returnable before a judge on November 25, 2014 (despite Rule 37.04) and had been adjourned to this date for a 2-hour appointment due to a major health emergency afflicting counsel for the plaintiff (from which I am glad to see he has now recovered). Our court staff rely upon counsel to adhere to Rule 37.04 and cannot be expected to detect every instance where counsel have scheduled a matter before a judge instead of the court/Master. The matter having been scheduled some time ago and having been adjourned by a judge to this date, I elected exceptionally to allow the matter to proceed this morning. Our normal practice, as counsel is well aware, would have been to adjourn the matter to be rescheduled before a Master. I advised counsel that I do not expect to see further instances of this occurring in the future. Access to justice is a major issue before our courts and failing to use the services of our Masters as they are meant to be used leads to inefficiencies and delays in our system to say nothing of the parties losing a substantive right of appeal. In having heard this matter, I do not wish it be considered by any that I am setting a precedent that violations of Rule 37.04 will be accepted or routinely overlooked.

[4] The plaintiffs Hitlab Inc. (“Hitlab”) and Hitlab U.S.A., Inc. (“Hitlab USA”) commenced an action by Statement of Claim against Andrew Anderson, James Hogan and Galan Bridgman. The defendants were former employees of the plaintiffs (there are some issues around which of the two plaintiff companies was the employer that are discussed below). It is alleged that the defendants breached duties of fidelity and fiduciary duties by conspiring, among other things, to set up a competing business and misappropriate assets belonging to the plaintiffs. The defendants’ employment terminated (a term I use as neutrally as possible without intending to delve into the merits) in December, 2013 and it is alleged that they appropriated assets of their employer on departure and used these to establish a business of their own.

[5] The defendants are each citizens of the United States and residents of California. The defendant Anderson had been hired by Hitlab in 2011 to help them establish Hitlab USA as a wholly-owned subsidiary of Hitlab in the United States. Mr. Anderson had been instrumental in the hiring of the other two defendants. Two of the defendants had employment agreements which were stated to be governed by the laws of the State of California. Mr. Anderson was interviewed for his position via Skype or in person in California and conducted substantially all of his employment activities in the United States after he was hired. Mr. Hogan was hired under a letter agreement by “Hitlab, through its subsidiary Hitlab USA”.

[6] The plaintiff Hitlab is incorporated in Alberta but at all times material to the issues in the litigation (i.e. prior to December, 2013), had its corporate offices in Montreal. The directors of Hitlab reside in Quebec, the United States and the United Kingdom. There is no suggestion on the evidence that Hitlab had any offices or substantial presence in Ontario at all until 2014 - after the events giving rise to the litigation occurred. Hitlab does claim that it had certain software developers who worked with the defendant Anderson who were physically located in Ontario.

[7] Hitlab USA is incorporated in Delaware and established its corporate offices in California in December 2011. Hitlab USA was a wholly-owned subsidiary of Hitlab and paid the wages of the defendants. Hitlab USA did not develop to the point of having any revenues and was entirely funded by Hitlab.

[8] The plaintiff alleges that as a result of the actions of the defendants, its business was severely crippled. The plaintiff Hitlab argues that it has, effectively moved from Quebec to Ontario as a result of the defendants’ actions and they argue that if Quebec would have had proper jurisdiction to hear the complaint, they should, in effect, be permitted to bring that jurisdiction with them when moving into Ontario as a result, they allege, of the wrongs committed by the defendants.

[9] The defendants argue that California is the only proper jurisdiction to hear the dispute, whether by reason of jurisdiction or forum non conveniens. They concede for the sake of argument that Quebec might have had proper jurisdiction over the claim, but they argue that Ontario cannot acquire that jurisdiction merely because the plaintiff has moved.

[10] Both parties have cited the decision of LeBel J. of the Supreme Court of Canada in Club Resorts Ltd. v. Van Breda, 2012 SCC 17.

[11] Mr. Sereda has made a very imaginative argument. Nevertheless, I am bound by Van Breda and I can see no room in that decision to create a new, portable category of jurisdiction that can follow plaintiffs who move from one jurisdiction to another.

[12] In Van Breda, LeBel J. described a logical and orderly means of assessing whether a court may assert jurisdiction and then, only if it may assert jurisdiction, the grounds upon which it may nevertheless exercise its discretion to decline to do so. He found (at para. 101) that “a clear distinction must be drawn between the existence and the exercise of discretion”. Forum non conveniens, he found, “comes into play when jurisdiction is established. It has no relevance to the jurisdictional analysis itself”.

[13] The first step, therefore, is to consider all of the factors relevant to the question of whether the court has jurisdiction. Only then can the court consider whether it ought to assert it.

[14] Determining the question of whether the court has jurisdiction is itself a two-step process which LeBel summarized in para. 94 of the decision. In the first step, the party asserting jurisdiction over a foreign party bears the onus of establishing one of the presumptive substantive connections to the claimed forum. If a presumptive connection is established, the party resisting jurisdiction then bears the onus of rebutting the presumption resulting from the connecting factor.

[15] While the categories of presumptive connections are expressly not closed (para. 91), new categories should only be created bearing similarity to the existing ones and the court is enjoined (at para. 93) that it “should not assume jurisdiction on the basis of the combined effect of a number of non-presumptive connecting factors”.

[16] In the case of a claim in tort, the four factors identified by LeBel J. as constituting presumptive connecting factors were “(a) the defendant is domiciled or resident in the province; (b) the defendant carries on business in the province; (c) the tort was committed in the province; and (d) a contract with the dispute was made in the province” (at para. 90).

[17] It can be seen that none of the presumptive connections relies upon a consideration of the residence or domicile or preferences of the plaintiff. The first two factors consider the connections of the defendant to the forum while the second two factors consider what I might summarize as the situs of the “subject-matter of the dispute” which is either the tort itself or a contract out of which the tort claim has arisen.

[18] While the categories are not closed, new categories if created should be at least in pari materia if they are to be considered. I cannot see how I could create a new category of jurisdiction based on a jurisdiction which the plaintiff formerly resided in where there was connection either via tort or contract.

[19] In my view, unless the plaintiff can validly establish that the subject-matter of the litigation in this case involves a tort the situs of which is Ontario or a contract entered into here, Van Breda obliges me to find that Ontario has no jurisdiction to hear the matter and I need inquire no further. The onus to prove jurisdiction is upon the plaintiff.

[20] There is no question in this case of a contract made in Ontario. The defendants had employment contracts governed by California law and made with parties located in Quebec and California. There is no conceivable means of characterizing the facts as establishing a contract made in Ontario and even a contract made in Quebec does not become a contract made in Ontario because the plaintiff moved after the fact. The same analysis applies to the claim of tort. There is simply no means of arguing that any of the torts alleged in this case occurred in Ontario and the fact that some damages are now being felt in Ontario as a result of the plaintiff’s move does not give Ontario tort jurisdiction.

[21] The fact of the matter is that there are two possible jurisdictions that might be said to have a real and substantial connection in application of Van Breda: Quebec and California. Without deciding that Quebec could assert jurisdiction (which I have no jurisdiction to do), I cannot conclude that the plaintiff who might have chosen Quebec over California can somehow “transfer” his election to Ontario. If Quebec is an appropriate or eligible forum, Ontario does not make its way upon the possible list solely by virtue of being the place the plaintiff moved to from Quebec. California has not gone anywhere and certainly has a presumptive connection that would justify it having jurisdiction.

[22] Accordingly, I grant the defendants’ motion and stay this proceeding in accordance with Rule 17.06(1)(b) of the Rules of Civil Procedure. The defendants shall be entitled to their costs on a partial indemnity basis which I have fixed at $9,500 after reviewing the defendants’ outline of costs and reviewing submissions in relation thereto from the plaintiff.

Justice S.F. Dunphy

Released: April 22, 2015