Court File and Parties

Court File No.: CV-13-476346 Date: 2016-05-03 Ontario Superior Court of Justice

Between: STUART BUDD & SONS LIMITED, 290756 ALBERTA LTD., SAAB ON THE QUEENSWAY LTD., 798983 ONTARIO INC., 9216-0415 QUEBEC INC., 6847781 CANADA LTD., FORBES SAAB AND USED CAR SHOP INC. and SPRINGMAN & SPRINGMAN LIMITED, Plaintiffs

– and –

IFS VEHICLE DISTRIBUTORS ULC, INTERNATIONAL FLEET SALES INC., MICHAEL LIBASCI and PEGGY KING, Defendants

Counsel: Andy Seretis, for the Plaintiffs Matthew J. Latella and Sarah P. Petersen, for the Defendants

Heard at Toronto: March 22, 2016

Before: Marrocco A.C.J.S.C.

Reasons for Judgment

[1] The plaintiffs sued the defendants for a declaration that they validly rescinded their Saab Dealer Sales and Service Agreements pursuant to Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c.3. They also sought compensation or damages pursuant to section 7(1) of the Arthur Wishart Act. Alternatively, they sought damages for breach of contract. One of the plaintiffs, 290756 Alberta Ltd., claims the same relief pursuant to the Arthur Wishart Act and the Alberta Franchises Act, R.S.A. 2000, c. F-23.

[2] The defendants move for an order:

• setting aside the service ex juris of the statement of claim;
• dismissing the proceeding for want of jurisdiction; or, in the alternative,
• staying this action on the basis of forum non conveniens.

The Problem

[3] Is there a real and substantial connection between this claim and this forum?

[4] If there is a real and substantial connection between this claim and this forum, should this Court decline its jurisdiction, displace the forum chosen by the plaintiffs, and find, as the defendants urge, that California is the clearly more appropriate forum for this claim?

[5] Jurisdiction simpliciter and forum non conveniens determinations are considered in Club Resorts Ltd. v. Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572. The Supreme Court held that, apart from the question of attornment, this court can assume jurisdiction over this claim if there is a real and substantial connection between the subject matter of this claim and this court.

[6] On a jurisdiction motion after considering the statement of claim and the evidence adduced on the motion, the issue for the motion judge is whether the claimant has established a good arguable case that the cause of action is sufficiently connected to Ontario to permit an Ontario court to assume jurisdiction. See Ontario v Rothmans, 2013 ONCA 353 at para.106.

What is the subject matter of this litigation?

[7] Rule 25.06 of the Ontario Rules of Civil Procedure, R.R.O. 1990, Reg. 194, provides that the statement of claim “shall contain a concise statement of the material facts on which the party relies for the claim… but not the evidence by which those facts are to be proved.”

The alleged material facts

[8] The plaintiffs are Saab automotive dealers located in: Oakville, Ontario; Kitchener, Ontario; Toronto, Ontario; Calgary, Alberta; Québec City, Québec; Laval, Québec; Dartmouth, Nova Scotia; and Surrey, British Columbia.

[9] The defendants are:

• IFS Vehicle Distributors ULC, incorporated in British Columbia, which carried on business as the franchisor and supplier of the Saab dealership network.
• International Fleet Sales Inc., incorporated in California, which carried on the business of supplying parts and accessories to IFS Vehicle Distributors ULC.
• Michael Libasci, the President and sole director of IFS Vehicle Distributors ULC and the President and CEO of International Fleet Sales Inc. Mr. Libasci resides in California;
• Peggy King, the Secretary and Treasurer of IFS Vehicle Distributors ULC and the Chief Financial Officer of International Fleet Sales Inc. Ms. King resides in California.

[10] IFS Vehicle Distributors ULC and International Fleet Sales Inc. are affiliated companies.

[11] The plaintiffs were parties to Saab Dealer Sales and Service Agreements (the “Dealer Agreements”) entered into with the defendant IFS Vehicle Distributors ULC on or about August 16, 2010. The Dealer Agreements granted them the right to sell and service Saab motor vehicles and to sell Saab parts and accessories.

[12] Saab motor vehicles are manufactured by a Swedish company, Saab Automobile AB.

[13] From 2000 to 2010, Saab Automobile AB was owned by General Motors which, through General Motors of Canada Limited, operated a dealership network in Canada.

[14] Each of the plaintiffs was a Canadian Saab dealer for General Motors of Canada Limited.

[15] In 2008, General Motors announced its intention to sell Saab Automobile AB. Saab Automobile AB stopped manufacturing Saab vehicles and was reorganized pursuant to the Swedish equivalent of the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36. General Motors of Canada Limited terminated the Saab dealership network in Canada.

[16] A reorganized Saab Automobile AB was sold to Spyker Cars N.V., a Dutch-based automobile manufacturing company, and began manufacturing Saab vehicles again in March 2010, by which time there were no Saab dealers remaining in Canada.

[17] The defendant IFS Vehicle Distributors ULC was incorporated in June 2010 to act as the new franchisor and supplier for a new Saab dealership network in Canada.

[18] IFS Vehicle Distributors ULC entered into agreements to purchase Saab vehicles from Saab Automobile AB and to purchase parts and accessories for Saab vehicles from and through its affiliate International Fleet Sales Inc.

[19] In an effort to sell franchises to the plaintiffs, IFS Vehicle Distributors ULC, through International Fleet Sales Inc., Michael Libasci, or Peggy King, made representations to the plaintiffs regarding its plans for a new Saab dealership network in Canada.

[20] At the end of June 2010, International Fleet Sales Inc., after reviewing the plaintiffs’ facilities, advised each of the plaintiffs that they were approved as Saab franchisees.

[21] In July 2010 the Ontario and Alberta plaintiffs received a document purporting to be a Disclosure Document prepared in accordance with and pursuant to section 5(4)(b) of the Arthur Wishart Act and section 4(3)(c) of the Alberta Franchises Act. The Disclosure Document did not contain the financial statements for the defendant IFS Vehicle Distributors ULC, although these statements were required by both statutes.

[22] Despite promising to deliver the appropriate financial statements, IFS Vehicle Distributors ULC never did.

[23] In addition, the Disclosure Document failed to disclose material facts. Specifically, it did not disclose:

• whether IFS Vehicle Distributors ULC owned any assets;
• whether IFS Vehicle Distributors ULC was sufficiently capitalized or a shell company;
• that IFS Vehicle Distributors ULC could only operate with the support of International Fleet Sales Inc., which could be withdrawn at any time;
• material terms of the agreement between IFS Vehicle Distributors ULC and Saab Automobile AB;
• that Saab Automobile AB, despite the reorganization, was undergoing financial difficulties and that the production of Saab vehicles was in jeopardy;
• that Spyker Cars N.V. did not possess sufficient capital to inject into Saab Automobile AB or was unwilling to do so.

[24] All the Dealer Agreements stipulate that they are governed by the laws of the Province of Ontario. 290756 Alberta Ltd.’s agreement is also governed by the Franchises Act of Alberta.

[25] The plaintiffs in Nova Scotia, Quebec and British Columbia, who were entitled to a Disclosure Document pursuant to the laws of Ontario which by contract governed those agreements, received no Disclosure Document.

[26] Between July 12, 2012 and August 3, 2012, the plaintiffs exercised their right to rescind their Dealer Agreements as provided for in the Arthur Wishart Act and the Alberta Franchises Act.

[27] Rescission required the defendants to pay the following amounts within 60 days, pursuant to section 6(6)(d) of the Arthur Wishart Act and section 14(2) of the Alberta Franchises Act:

• any money received from each of the plaintiffs other than money for inventory, supplies or equipment;
• amounts for remaining inventory as well as amounts for supplies and equipment purchased pursuant to the Dealer Agreement; and
• compensation for losses experienced in acquiring, setting up and operating the dealership as provided for in Arthur Wishart Act.

[28] The defendants individually and collectively failed to pay these amounts and the plaintiffs seek judgment requiring them to do so.

[29] The plaintiffs, relying upon the same facts and sections 1(1) and 7 of the Arthur Wishart Act and section 9(1) of the Alberta Franchises Act also claim damages for statutory misrepresentation.

[30] The plaintiffs claim that International Fleet Sales Inc., Michael Libasci and Peggy King were “franchisor’s associates” within the meaning of section 1 of the Arthur Wishart Act and “associates of the franchisor” within the meaning of section 1 of the Alberta Franchises Act and are therefore jointly and severally liable with IFS Vehicle Distributors ULC pursuant to sections 6(6) and 7(1) of the Arthur Wishart Act and sections 9 and 12 of the Alberta Franchises Act.

[31] In the alternative, the statement of claim asks for damages for breach of the Dealer Agreements. Specifically, it claims that IFS Vehicle Distributors ULC failed to:

• supply vehicles, parts and accessories;
• advertise, promote and assist in the promotion of the Saab brand in Canada; and
• provide reasonable support and assistance.

[32] 290756 Alberta Ltd. claims the same relief and relies on the Alberta Franchises Act as well as the law of Ontario.

[33] Finally, the statement of claim asserts that the plaintiffs are entitled to serve the claim outside Ontario without a court order pursuant to the Ontario Rules of Civil Procedure.

The subject matter of this litigation

[34] Accordingly, I am satisfied that the subject matter of the litigation is:

• the plaintiffs’ right to rescind their Dealer Agreements according to the provisions of Ontario’s Arthur Wishart Act and the Franchises Act of Alberta;
• what the defendants owe to the plaintiffs, according to the Arthur Wishart Act and the Franchises Act of Alberta, if a lawful rescission occurred; or
• alternatively, according to the law of Ontario and Alberta, the plaintiffs’ entitlement to and the amount of damages for breach of contract.

Is there a real and substantial connection between this subject matter and this Court?

[35] The Supreme Court of Canada in the Van Breda decision stated that there are certain “presumptive connecting factors” which, unless rebutted, establish a real and substantial connection and entitle a court to assume that it is properly seized of the subject matter of the litigation. One of these factors is whether the defendant carried on business in the province: Van Breda, at para. 87.

IFS Vehicle Distributors ULC carried on business in the Province of Ontario?

[36] Whether a corporation is carrying on business in a province is a question of fact – see Ingersoll Packing Co. v. New York Central and Hudson River Railway, [1918] O.J. No. 90, 42 O.L.R. 330 at para. 24, 42 O.L.R. 330 at 330, at p. 337:

The question is undoubtedly one of fact, and it is for that reason I have set out the facts somewhat fully in this judgment.

[37] Whether a defendant carries on business in Ontario should be determined on the totality of the evidence and in the circumstances of the case: Applied Processes Inc. v. Crane Co. (1993), 15 O.R. (3d) 166 (Gen. Div.), at para. 8.

[38] I am satisfied on a balance of probabilities, based on the statement of claim and the evidence filed on this motion, that for purposes of deciding the issue of jurisdiction at this early stage in the proceedings, IFS Vehicle Distributors ULC carried on an active business in the Province of Ontario.

[39] The following uncontested facts are helpful in reaching this conclusion:

• IFS Vehicle Distributors ULC obtained an extra-provincial license to permit it to carry on business in Ontario;
• IFS Vehicle Distributors ULC negotiated and sold three SAAB dealerships in Ontario;
• IFS Vehicle Distributors ULC sold vehicles and, through International Fleet Sales Inc., parts to dealers in Ontario;
• The bank to which all Dealers were directed to make payment was the Scotiabank Main Branch in Toronto, Ontario;
• IFS Vehicle Distributors ULC maintained a lockbox for collecting cheques in Toronto, Ontario;
• IFS Vehicle Distributors ULC maintained a presence in Ontario at Budds’ Saab, located at 2400 South Service Road West, Oakville, Ontario, in the following ways:
  • This address appeared on invoices for vehicles and parts;
  • IFS Vehicle Distributors ULC told the Ontario government when it obtained its extra-provincial license that this address was its “principal place of business” in Ontario;
  • IFS Vehicle Distributors ULC, in a Disclosure Document provided to some but not all of the plaintiffs, indicated that this address was “its premises in Ontario”;
  • This address was used on the manufacturer’s certification provided to each of the plaintiffs.

[40] The nature of the South Service Road presence is also helpful in reaching this conclusion.

[41] The intended nature of this presence at the South Service Road address is described in a July 10, 2010 email to Chris Budd from Jim Steinhagen. Mr. Steinhagen was described by Mr. Libasci in his affidavit as the “primary dealer contact” of IFS Vehicle Distributors ULC. Mr. Steinhagen, in 2010, signed a document called the “Manufacturer’s Certification of Dealer” as the CEO and Authorized Representative of IFS Vehicle Distributors ULC. I am satisfied for the purposes of this motion that Mr. Steinhagen’s statements are capable of being admissions on behalf of IFS Vehicle Distributors ULC.

[42] In the July 10, 2010 email, Mr. Steinhagen said:

We would like to rent a “desk” in your facility and make it our address in Canada. We would use the following address IFS Vehicle Distributors ULC c/o Budds Saab 2400 South Service Road West Oakville Ontario Canada L7L 5M9.

[43] The “desk” turned out to be an office at Budds’ Saab.

[44] Mr. Christopher Budd, a part owner of Stuart Budd and Sons Ltd., was cross-examined on an affidavit which he had provided. During his cross-examination Mr. Budd stated that the office at his dealership was used by a man named “Serge”. Mr. Budd indicated that he believed that Serge was the National Service Manager for IFS Vehicle Distributors ULC. He indicated that Serge took care of training and service issues related to Saab vehicles. Mr. Budd indicated that Serge would use the office whenever he saw fit. Mr. Budd indicated that he had nothing to do with Serge’s schedule and did not know what it was. He testified that Serge had access to the office whenever he came to the dealership.

[45] I am satisfied that Mr. Budd’s evidence concerning “Serge” is confirmed by an email from Mr. Steinhagen dated October 6, 2011, which is copied to a person named “Serge St. Louis”. This email concerns the availability of Saab parts software.

[46] Mr. Steinhagen’s October 6, 2011 email also makes the following relevant comment about the South Service Road address: “the IFS address on the pro forma will be changing. It currently and incorrectly shows our address here in Michigan and that will be changing to the IFS Vehicle Distributors ULC address in Oakville-which is the correct address”.

[47] Mr. Bedard, the owner of the Saab dealership in Québec City, who was cross-examined on an affidavit which he had provided, testified that Mr. Steinhagen had told him that the South Service Road location was the Canadian office of IFS Vehicle Distributors ULC. Mr. Bedard’s testimony concerning this admission by Mr. Steinhagen was not challenged by Mr. Steinhagen and I accept Mr. Bedard’s evidence concerning the statement made by Mr. Steinhagen.

[48] IFS Vehicle Distributors ULC’s approach to carrying on business in Ontario is also helpful.

[49] The approach of IFS Vehicle Distributors ULC to the formalities of operating in Ontario is described by Mr. Steinhagen in the July 10, 2010 email:

We plan to have a service manager in Canada and I am reaching an agreement with Serge -who your folks are familiar with. However, IFS would rather not go through the effort of setting up payroll etc. What I was thinking is that you could handle this for us - for a fee. We would pay you the salary and a handling fee and you would arrange to pay the person and handle the taxes/benefit costs and have the person paid. Not sure this can be arranged; we may need to think about it some more but that is our thought…

[50] IFS Vehicle Distributors ULC never paid a fee to Mr. Budd; however, it is also true that “Serge”, the National Service Manager of IFS Vehicle Distributors ULC, was never on Mr. Budd’s “payroll etc.”

Conclusion concerning carrying on business

[51] As indicated, when I consider the uncontested facts and all of the evidence including the evidence to which I have made specific reference, I am satisfied on a balance of probabilities that for the purposes of deciding the issue of jurisdiction at this early stage in the proceedings IFS Vehicle Distributors ULC carried on an active business in the Province of Ontario.

Has this presumptive connecting factor been rebutted?

[52] The burden of rebutting the presumption of jurisdiction is on the party challenging the assumption of jurisdiction: Van Breda, at para. 95. There was no attempt to rebut this presumptive connecting factor. Rather, the defendants took the position that IFS Vehicle Distributors ULC did not carry on business in Ontario and that this presumptive connecting factor was not established.

Conclusion concerning jurisdiction

[53] Because IFS Vehicle Distributors ULC carried on business in Ontario, and because this presumptive connecting factor has not been rebutted, I am satisfied that this court’s jurisdiction over this claim has been established and that this claim may proceed subject to this court’s discretion to stay this proceeding on the basis of the doctrine of forum non conveniens.

Forum non conveniens

[54] Having determined that the Superior Court of Justice in Ontario has jurisdiction, it is now appropriate to consider whether the Court should decline its jurisdiction and deprive the plaintiffs of their right to select this as the forum in which their claim is to be determined. The Court may only do this if the defendants establish that there is another forum which is clearly more appropriate, in the sense that it would be fairer and more efficient to try this matter in that alternative forum: Van Breda, at paras. 102 and 103.

[55] The defendant submitted that California is a more appropriate forum. They submitted that the defendants or their management are either resident or operating in California, and that it is the most common connection between each of the defendants and the plaintiffs. They also submitted that the courts in California are capable of dealing with foreign law questions. Finally, the defendants made the assertion, at paragraph 104 of their original factum, that California is in a better position to dispose of the matter fairly and efficiently.

[56] The defendants also submit, at paragraph 3 of their supplementary factum, that they would not object to jurisdiction if the plaintiffs each commenced proceedings in their home province.

Conclusion

[57] I am satisfied based on all the evidence that the defendants have failed to discharge their onus of establishing that there exists a better and more appropriate forum than Ontario to fairly and efficiently dispose of this litigation. Specifically, the following factors are helpful in reaching this conclusion:

• Three of the plaintiffs reside in Ontario;
• The remaining five plaintiffs reside in Canada and would be able to attend court in Toronto or elsewhere in Ontario;
• Two representatives of IFS Vehicle Distributors ULC, its CEO Mr. James Steinhagen and Mr. Jim Moreen, are in Southfield, Michigan, and their evidence can easily be taken in Windsor, Ontario, which borders Detroit;
• Although not necessary for my decision, I note that attending outside of California is not unduly onerous for the defendants because the defendants have offered to consent to jurisdiction if each of the plaintiffs sues in their home province. Had the plaintiffs been so inclined, the defendants would then have appeared and defended in British Columbia, Alberta, Ontario, Québec and Nova Scotia;
• All of the Dealership Agreements specify that they are governed by the law of Ontario, although it will be necessary to apply the Franchise Act of Alberta to the 290756 Alberta Ltd. agreement. It was not suggested during the course of argument that there is any provision in Alberta’s Franchises Act dealing with rescission, disclosure, franchisor associates or damages, which is materially different than the Arthur Wishart Act. In any event, any differences between the Arthur Wishart Act and the Franchises Act of Alberta would have to be proven by expert evidence if this matter were tried in California;
• The claim against Michael Libasci, Peggy King and International Fleet Sales Inc. is based on the theory of liability that each of them is a “franchisor’s associate” or an “associate of a franchisor” and therefore jointly and severally liable with IFS Vehicle Distributors ULC pursuant to sections 6(6) and 7(1) of the Arthur Wishart Act and, with respect to 290756 Alberta Ltd., section 1(2) of the Franchises Act of Alberta;
• Trying this claim in Ontario will avoid the expense of proving Ontario law in a foreign jurisdiction by expert evidence.

Service ex Juris

[58] Because I am satisfied that the defendant IFS Vehicle Distributors ULC carried on business in Ontario, I am satisfied that, pursuant to Rule 17.02(p), all of the defendants can be served with originating process without leave of the court.

Complaints about the joinder of plaintiffs

[59] The defendants argued in their factum that the joint adjudication of the matters in issue was entirely unnecessary. They point out that there are contracts signed and dealerships located in different provinces. They submitted that the claims of non-Ontario dealers had little or nothing to do with Ontario. They submitted that the claim was an amalgam of eight separate claims based on eight separate contracts. Finally, the defendants submitted that the non-Ontario plaintiffs “cannot achieve jurisdiction over their claims… via the principles of joinder”.

[60] The defendants relied upon the decision of Lailey v. International Student Volunteers Inc., 2008 BCSC 1344, 88 B.C.L.R. (4th) 357, at para. 34, in which the Supreme Court of British Columbia stated that the claim of one plaintiff over which the court had no territorial competence could not be “bootstrapped” onto claims over which the court did have jurisdiction. This decision is unhelpful for the reasons set out by Strathy J. (as he then was) in Cannon v. Funds for Canada Foundation, 2010 ONSC 4517 at paras. 80-91 and I decline to follow it.

[61] The Supreme Court of Canada made it clear in the Van Breda decision that once the court determines that a presumptive connecting factor has been established and not rebutted it should assume jurisdiction over all aspects of the case. See Van Breda at paras. 99 & 100.

[62] In my view, at this point on a motion concerning jurisdiction, it is sufficient to say that the plaintiffs have submitted their claim against the defendants to this Court for adjudication.

[63] Questions of joinder can and in my view should be determined after jurisdiction is established to avoid confusing the test for jurisdiction with the test for joinder. In addition, arguing that a plaintiff has been improperly joined in the claim according to the laws of Ontario is capable raising the issue of attornment.

The status of the Quebec City Dealership

[64] The defendants obtained and relied upon an admission that the Québec City dealership, 9216-0415 Québec Inc., was voluntarily dissolved in 2011 and not since revived. The legal implications flowing from the corporate status of the Québec City Dealership is not helpful when applying the Van Breda test for the assumption of jurisdiction. This issue is best explored after jurisdiction has been established.

[65] In addition, arguing the effect of a Québec corporation’s status on litigation in Ontario is capable of raising the issue of attornment. Attornment was not considered in Van Breda and not argued here.

General Conclusion

[66] Accordingly, the defendants’ motion is dismissed.

[67] The parties have five days from the release of these reasons to provide submissions concerning costs. The submissions shall not exceed five pages.

Marrocco A.C.J.S.C. Released: 2016-05-03