Court File and Parties

COURT FILE NO.: CV-15-2795-00 DATE: 2016 06 01 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Benefact Consulting Group Inc. AND: Endura Manufacturing Company Limited

BEFORE: Trimble J.

COUNSEL: Ben Hanuka, Counsel for the Moving Party (Endura) Ryan Zener, Counsel for the Responding Party (Benefact)

HEARD: April 19, 2016

Endorsement

Nature of Motion

[1] Endura Manufacturing Company Ltd. (“Endura”) moves for an order setting aside service of the claim ex juris and staying this action in Ontario.

Brief Facts

[2] Benefact, a tax consulting firm with its head office in Mississauga, carries on business from offices or with sales representatives in Ontario, Alberta and British Columbia. It specializes in preparing and filing documents for customers across Canada to obtain the Scientific Research and Experimental Development (“SR&ED”) investment tax credits from the Federal and Provincial governments.

[3] Endura manufactures specialized industrial paints such as anti-graffiti and environmentally friendly primers and topcoats from its location in Edmonton. It has no operations in Ontario.

[4] In 2010, Benefact approached Endura at its offices in Edmonton to present their SR&ED tax consulting services. Initially, the approach was electronic, although a Benefact representative did attend at Edura’s office. On September 10, 2010, the parties entered into a contract on Benefact’s standard form whereby Benefact would provide its SR&ED tax credit services for Endura’s tax years 2008 and 2009. Contracts were signed in every year following concerning the SR&ED tax credits for the previous calendar year.

[5] Pursuant to the agreements, Benefact prepared and filed SR&ED tax credit applications on Endura’s behalf. The applications were based on federal and Alberta laws. To discuss technical issues, meetings took place at Endura’s Edmonton offices or by email. Benefact charged Endura a contingency fee based on the tax credits that were approved. Benefact applied Alberta sales tax to its fees each year.

[6] Starting with the renewal for the 2012 calendar year, signed in October, 2013, Benefact included in its standard form contract a clause which said Ontario law applied and the parties attorned to the Ontario courts. This clause was not in the contracts for the 2008 to 2011 tax years. That clause read:

This Agreement shall be exclusively governed by the laws of the Province of Ontario and the applicable laws of Canada without reference to any conflict of laws principle thereof. The parties hereby attorn to the jurisdiction of the courts of the Province of Ontario.

[7] Landon Goudreau, Endura’s representative dealing with the contract, noticed the choice of law and forum clause when he reviewed the contract for 2012 tax year. He crossed out “Ontario” and inserted the word “Alberta” and sent the amended agreement to Benefact. Benefact refused to accept any modification to the choice of law/forum selection clause. On December 4, 2013, Mr. Goudreau signed the contract on behalf of Endura for the 2012 tax year tax credit which contained the choice of Ontario law clause.

[8] Contracts were signed in May and October of 2014 with respect to the tax credits for the 2013 tax year and the 2014 & 2015 tax years, respectively. Benefact exerted a great deal of pressure on Endura to sign these two agreements. Those two contracts also contained the forum selection clause.

[9] The forum selection clause was not an issue raised in discussions after December 4, 2013. The two year duration was. Benefact wanted a 2 year agreement; Endura did not. The two year renewal term had been a sticking point between the parties beginning with the first agreement. Goudreau, on behalf of Endura, repeatedly disagreed with the request for a two year contract term. He preferred a one year term.

[10] Goudreau says he mistakenly signed the two-year contract for 2014 and 2015, despite having expressed his intention to a Benefact representative that he would not sign for a two year term. After discovering the error, Mr. Goudreau communicated with Benefact’s counsel. The business relationship broke down in February, 2015. Endura did not send any information to Benefact for the 2014 or 2015 tax years. Benefact did not provide any services for those years. Endura claimed that Benefact had surreptitiously induced Endura to sign for a two year term.

[11] Benefact sued in Ontario for its fees in respect of this two year agreement covering the 2014 & 2015 tax year’s SR&ED tax credits.

[12] Endura says that the action in Ontario should be stayed, the proper forum being Ontario.

Issues

[13] There are three issues:

1. Should the choice of law clause apply so that the action may continue in Ontario?
2. Is there a real and substantial connection to Ontario?
3. Is Ontario forum non conveniens?

Issues and Discussion

Issue 1: Should the forum selection clause apply?

Endura’s Position

[14] Benefact obtained Endura’s signature to the 2014-2015 agreement under questionable circumstances, using unfair tactics. Benefact should not be able to benefit from its questionable conduct. It would not be reasonable or just in the circumstances of this case to require Endura to adhere to the terms of the forum selection clause in the 2014-2015 agreement.

[15] Endura agrees that the leading authority on the enforcement of forum selection clauses is Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27, [2003] 1 SCR 450, which says that enforcing a forum selection clause is discretionary, but that the person seeking to avoid the form clause must show a “strong cause” for overriding it. Endura admits that the law favours enforcement.

[16] Pompey sets out factors to be applied in the analysis. Endura says that the key Pompey factors do not exist in this case for the following reasons:

1. There is no evidence that a forum selection clause is standard industry practice in the tax consulting industry.
2. The clause cannot be said to have been negotiated by parties with even bargaining power. It cannot be said that Endura had its “eyes wide open” that disputes under the agreement would be adjudicated in Ontario.
3. Benefact acted in bad faith. It misled Endura about the renewal term and obtained Endura’s signature to the 2014-2015 agreement in an unfair manner. Benefact should not benefit from its own misleading conduct.

Benefact’s Position

[17] Benefact, too, agrees that Pompey is the leading authority. The Ontario Court of Appeal has also made it clear that where a forum selection clause exists and the jurisdiction of the selected forum is challenged, the existence of the clause must “pervade the analysis and must be given full weight in the consideration of the other factors.” (see Expedition Helicopters Inc. v. Honeywell Inc. (2010), 2010 ONCA 351, 100 O.R. (3d) 241 (C.A.) at para 9 and 11).

[18] The evidence overwhelmingly establishes that Endura knowingly entered into the agreement and was aware of the Ontario forum clause. Endura accepted the forum clause with its eyes wide open. It has failed to satisfy its evidentiary onus in three ways:

1. Endura has provided no evidence of unconscionability, unequal bargaining power or undue influence. Endura attempted to negotiate away, but accepted the Ontario attornment clause in 2013 for the 2012 tax year. It appeared in every contract subsequently. Endura was a sophisticated business entity capable of understanding the plain wording of the clause. There was no inequity in bargaining power, nor was there any undue pressure. Endura was free to walk away and not renew its business relationship with Benefact.
2. Endura knew of and understood or ought reasonably to have understood the Ontario attornment clause. Endura specifically bargained over and ultimately accepted the clause in 2013, after considering its options for six weeks.
3. Even if there was bad faith on Benefact’s part in respect of the agreement governing the 2012 tax year, the parties still entered into the two 2014 agreements regarding the 2013 and 2014 & 2015 tax years. Both contained forum clauses. The forum clause was not an issue in those contracts, only the contract term.

Analysis and Discussion:

[19] As a general rule when parties select the forum to hear their disputes, the courts have a very strong predisposition for upholding the forum selection clause as it was part of the bargain made by the parties. This preference reflects the view that parties should be encouraged to reach agreements and, once agreements are reached, the parties should be held to them. The courts retain residual discretion to override that selection where circumstances warrant.

[20] I allow Benefact’s motion. I find that there is a binding forum selection clause. Further, there is no reason to override it. I make this finding only for the purposes of this motion. Specifically, I make no finding that would bind the judge hearing the trial of this matter, on a full record.

[21] The leading cases on forum selection clauses are Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27, Expedition Helicopters Inc. v. Honeywell Inc., 2010 ONCA 351, and Momentous .ca Corp. v. Canadian American Assn. of Professional Baseball Ltd., 2012 SCC 9. These have been approved more recently in CP Ships Limited v. Iccecorp Logistics et al., TUI AG Third Party, 2015 ONSC 624, Manjos v. Fridgant, 2016 ONCA 176, and Emkay Canada Fleet Services Corp. v. Imperial Oil, 2016 ONSC 2710.

[22] In Pompey the bill of lading contained a forum selection clause that read “any claim or dispute arising hereunder or in connection herewith shall be determined by the courts in Antwerp and no other Courts”.

[23] Bastarache J. noted the common use of forum selection clauses in international commerce and concluded that the “strong cause” test applies, concluding “Once the court is satisfied that a validly concluded bill of lading otherwise binds the parties, the court must grant the stay unless the plaintiff can show sufficiently strong reasons to support the conclusion that it would not be reasonable or just in the circumstances to require the plaintiff to adhere to the terms of the clause. In exercising its discretion, the court should take into account all of the circumstances of the particular case”.

[24] In Expedition Helicopters, the contract between the parties set out that Arizona law was the parties’ choice for applicable law and that the state or federal court in Phoenix, Arizona had exclusive jurisdiction to hear any disputes. Juriansz J.A., for the Court, found, following Pompey, that the law favours enforcing forum selection clauses, and held, following Expedition, that the parties should be held to the bargain that they made (see para. 8 and 32).

[25] When may a court depart from a forum selection clause? Rarely.

[26] Bastarach, J., in Pompey, said that overriding a forum selection clause should be done in exceptional circumstances, only.

[27] In Expedition, at para. 24, Juriansz J.A. listed the following as circumstances that might, in context, justify overriding a forum selection clause:

• The Contract is brought about by fraud or improper inducement
• Contract is otherwise unenforceable;
• The court in the forum named in the forum selection clause has declined jurisdiction
• The claim or circumstances have arisen that are outside of what was reasonably contemplated when agreeing to the clause; or
• Public policy requires it.

[28] This list is not closed. Juriansz, J.A. rejected inconvenience as a reason.

[29] The nature and rarity of the circumstances wherein a court may override a forum selection clause reinforces the importance of forum selection clauses. Bastarach, J.’s approach indicates that the forum selection clause analysis is not just another factor to consider in the jurisdiction simpliciter analysis or the forum non conveniens analysis. As Dunphy, J. points out in CP Ships, “… the location of witnesses, for example, was not admitted as constituting strong cause by itself since the parties had agreed in accepting the clause that witnesses might have to be transported to resolve claims. The existence of disproportionate litigation costs was similarly rejected as a factor.” (at para. 16).

[30] In this case, Endura says that the forum clause is different than in the traditional cases. It does not provide that the jurisdiction of the Alberta courts is absolute. It simply says that the parties “attorn to” the jurisdiction of the Ontario courts.

[31] It is not necessary for the forum selection clause to say that the selected forum is “exclusively” the specified forum. The overall sense of the clause, however, must say that. In CP Ships, the forum selection clause said “Competent court for the determination of any disputes arising from or in connection with this Guarantee shall be the local courts of Hannover, Germany”. Dunphy, J. held that this clause effectively conveyed exclusive jurisdiction on the German courts. He said: “The only jurisdiction the parties have selected is that of Hannover. In the context in which it is found, I have no hesitation in finding in this case that the parties jointly intended to select Hanover as the court intended to hear disputes arising from the guarantee. The defendant admitted as much in cross-examination.” (at para. 18).

[32] Dunphy, J. went on to say that the forum selection clause is found in a clause that also stipulates German law shall govern, exclusively. The only reason the Hanover-based guarantor would have for stipulating that Hannover is “competent” was if it was meant to say that Hannover was “the competent” (emphasis added - in other words, mandatory) jurisdiction, and not one of several potentially eligible jurisdictions.

[33] In Benefact’s contract, the contract is governed “exclusively” by the law of Ontario “without reference to any conflict of laws principles thereof”. The clause is much the same as in CP Ships, except that the Ontario court is not said to be “competent”. This difference notwithstanding, I find Dunphy, J.’s logic compelling. I find that by saying that the law of Ontario shall apply exclusively and that the parties shall not invoke conflict of laws principles, and by saying that the parties “attorn to” the Ontario Courts they deemed Ontario to be the only jurisdiction in which their disputes will be determined.

[34] Are there circumstances in this case that suggest that the forum selection clause should be overridden?

[35] Endura says that the contract is unconscionable. There was uneven bargaining power, and it was tricked into accepting the contract with the forum selection clause.

[36] I disagree.

[37] The parties are sophisticated commercial players. Each entered the contract for the 2012 tax year with their eyes wide-open. Endura made an issue of the forum selection clause, but acquiesced in the face of Benefact’s insistence on it. It should be no surprise that it appeared in the two subsequent contracts. In those contracts, the forum selection clause was there to be seen.

[38] Endura says that Benefact did not draw the forum selection clause in the contracts for the 2013 and 2014 & 2015 tax years to its attention, and took advantage of Endura’s mistake in not seeing them. Benefact’s failure to do so does not amount to an improper inducement to agree to the clause. A person who signs a commercial contract acts at his or her own peril if s/he fails to read the document before signing it (see Manjos v. Fridgant, 2016 ONCA 176, per curiam, para. 7 and 8). Since Endura read the contract in 2013 concerning the tax credit for the 2012 tax year and noticed the forum selection clause, there is no reason why it should not have read the two contracts in 2014 for the 2013, and the 2014 & 2015 tax years. That the forum selection clause remains in those two contracts says that either Endura saw the clause and did not object, or did not read the contract before signing it.

[39] None of the factors that Juriansz J.A. lists in Expedition as those in which the forum selection clause should be overridden, apply here. Endura says that in 2014, whether the contracts should be 2 year contracts was an issue. Endura admits that it rushed to sign the contract for 2014 & 2015 tax years under pressure from Benefact. Endura signed the contract for the 2014 &2015 tax year thinking that it was a one year contract when it was, in fact, a two year contract. Endura says it was an honest misunderstanding that Endura sought to rectify immediately.

[40] In effect, Endura argues that the contract for the 2014 & 2015 tax years was entered into under a mistake, and is not binding. Therefore, the forum selection clause in that contract is not applicable. Endura says that by virtue of Bhasin v. Hrynew, 2014 SCC 71 at para. 43, good faith and unconscionability are now linked. The considerations of fairness should prevent one party from taking undue advantage of another. Reading Bhasin with Pompey, says Endura, it is not reasonable or just to require that Endura adhere to the terms of the contract for the 2014 &2014 tax years.

[41] I disagree. Accepting Endura’s position would require me to rule on whether the contract exists or whether it never came into being. That is the ultimate issue. I cannot decide this issue on affidavits. For the purposes of this motion, only, I find, prima facie, that there is a signed agreement which contained the forum selection clause. Therefore, the forum selection clause, which I presume a commercial contracting party read, or did not read at its peril, applies.

[42] Deciding, as I have, that the forum selection clause applies and that there is no reason to override it, I need go no further. I will address, however, the remaining issues.

Issue 2: Is there a real and substantial connection to Ontario?

[43] Had I found that the forum selection clause did not apply, or circumstances prevailed which meant that I should override the clause, I find that there is a real and substantial connection between the lis between the parties and Ontario.

[44] The parties agree that in order to determine whether a domestic court should have jurisdiction over a foreign defendant, including a defendant domiciled in another province, the court must apply a two part test set out in Van Breda v. Village Resorts Ltd., 2012 SCC 17, [2012] 1 S.C.R. 572. First, the court must look at whether it CAN accept jurisdiction. Jurisdiction simpliciter is a legal determination of whether there is a real and substantial connection to Ontario. Second, the court must look at whether it SHOULD accept jurisdiction. Forum non conveniens is a discretionary determination.

Endura’s Position

[45] Ontario does not enjoy jurisdiction simpliciter over this dispute. There is no real and substantial connection between Ontario and the facts underlying this action, for the following reasons:

1. There are no presumptive connecting factors to Ontario.
2. Benefact’s place of business in Ontario is neither a presumptive nor a sufficient connecting factor.
3. Endura does not have offices and does not carry on business in Ontario.
4. Benefact suffered its damages in Ontario is not a presumptive or sufficient connecting factor.
5. It cannot be said that the contract underlying the dispute was made in Ontario. It is predominately connected to Alberta. The tax credit applications filed on Endura’s behalf were based on federal and Alberta provincial law. Benefact charged a contingency fee based on the credits that the federal and Alberta governments approved. Benefact treated its services as Alberta transactions, as it charged Alberta sales tax on the fees it charged.
6. Even if a presumption of some connection to Ontario exists, the evidence about the nature of the tax preparation contract in place rebuts it.

Benefact’s Position

[46] Benefact argues that there are presumptive factors under a Van Breda analysis that establish jurisdiction simpliciter in Ontario for the following reasons.

1. The agreements were made in Ontario. All of the work and activity done by Benefact was done in Ontario. The contract contemplated that the work was to be done in Ontario. The fact that the tax credit claims were assessed using federal and Alberta laws is not the subject matter of the agreements. Neither party had control of the application of laws by the CRA. The parties worked together to submit the claims and manage any reviews. All of the work was always done in Ontario. Further, the fact that Alberta sales tax was applied to Benefact’s fees does not result in any attornment or agreement by Benefact that Alberta laws govern. This is merely a technical requirement mandated by the CRA to collect sales tax.
2. Second, the breach of contract was committed in part or entirely in Ontario. When Endura refused to continue to do business with Benefact, they refused to facilitate work that would have taken place substantially or entirely in Ontario. The mere fact that the breaching party is located in Alberta is not sufficient to place the breach in Alberta.
3. Benefact submits the court should find a new presumptive factor under Van Breda – that the attornment clause is a connecting factor and it requires Ontario courts to assume jurisdiction. The parties freely and explicitly elected Ontario law, after negotiation and acceptance. This would promote the values of order, fairness and comity considered in Van Breda.

Analysis and Discussion:

[47] Van Breda instructs us that Rule 17.02 is procedural in nature. Before a court can consider if it SHOULD assume jurisdiction, it has to conclude that it CAN, as a matter of law.

[48] In addressing that second question, the Supreme Court said that in order for a Provincial court to take jurisdiction over a matter, there must be a “presumptive connecting factor”. The Supreme Court listed four, although there might be others:

1. The Defendant is domiciled or resident in the province. Mere presence is not enough;
2. The Defendant carries on business in the Province;
3. The tort was committed in the Province;
4. The contract connected with the dispute was made in the Province.

[49] Given that Endura is resident or domiciled in Alberta and carries on business there, and there was no tort committed in this matter, the only relevant presumptive factor is where the contract was made. Where the issue is the presumptive factor of where the contract was made, the court should focus on where the substance of the contact is being performed (see Sullivan v. Four Seasons Hotels Ltd, [2013] O.J. No. 3335 (S.C.J.)).

[50] Under the contract, Benefact was to take information generated in Alberta from Endura, an Alberta company, and to apply for research tax credits for Endura under Alberta and Federal tax laws. The contract was negotiated between Endura in Alberta and Benefact in Ontario. There was at least one visit (pre-contract) by a Benefact representative to Endura in Alberta. Benefact dismisses this as a “meet and greet”, equivalent to a representative stopping by for a purely a social purpose. This is a specious argument. The purpose of the visit was for a representative to stop by who was able to begin work on the contract, were it signed by then.

[51] On the other hand, Benefact was to do its work at its Ontario office. Benefact stresses this aspect of the contractual relationship.

[52] On the evidence, it is clear that the substance of the contract, the work done to receive the tax credit, was to be done in Ontario. The situation is akin to Endura sending a piece of equipment to Ontario to be serviced. Ontario courts can hear this dispute, there being jurisdiction simpliciter.

Issue 3: Is Ontario *forum non conveniens*?

[53] Even though the Ontario court CAN assume jurisdiction, SHOULD it? The onus is on the Defendant to show that Alberta is a MORE convenient forum than Ontario.

[54] Had I not found that the forum selection clause governed, I would have held that Alberta is clearly the more appropriate forum for this action notwithstanding that Ontario has jurisdiction simpliciter.

Endura’s Position

[55] Endura admits that it has the burden to show Alberta is “clearly more appropriate” a forum for this action. The factors in the case favour litigation in Alberta:

1. To defend the action, Endura will have to incur significant expenses for travel and legal expenses. Benefact’s claim is under $50,000, which falls under the jurisdiction of the Provincial Court of Alberta (Civil), analogous to Ontario’s Small Claims Court. The costs of defending the action in the Provincial Court of Alberta (Civil) would be substantially lower with a substantially simpler procedure.
2. The law applicable in the dispute is a neutral factor, as there is no difference in the law of contractual interpretation between Alberta and Ontario. The underlying services provided relate to federal and Alberta law.
3. Any judgement against Endura would have to be enforced in Alberta.
4. To ensure the fair working of the Canadian legal system as a whole, a provincial customer of a national provider of professional services should be sued in the province where the customer is located, not the province where the national head office of the professional services company is located.

Benefact’s Position

[56] Benefact argues that forum non conveniens favours Ontario. Having established the presumptive connecting factors in the real and substantial connection analysis, the court must exercise its discretion about whether it is appropriate for Ontario to assume jurisdiction over the within action. The onus lies on the defendant to establish that Alberta is clearly the more appropriate forum. Ontario is the proper forum for the following reasons:

1. The costs of litigating the action in one forum versus the other are negated by the existence of the forum selection clause. Endura accepted the additional cost of a dispute as a term of its ongoing business relationship with Benefact.
2. Procedural advantage favours Ontario. The pleadings and evidence engage at least 13 witnesses from Benefact. Endura only lists one potential witness, Landon Goudreau. The balance of convenience in respect of the number of witnesses clearly favours Ontario.
3. The dispute involves, at least in part, acts done or to be done in Ontario. The agreements were formed in Ontario.
4. Certainty of full documentary disclosure can only be achieved in Ontario pursuant to the Rules of Civil Procedure as opposed to the rules of the Provincial Court of Alberta (Civil). The location of documents, most of which would be in Alberta, is not a material factor.
5. Benefact concedes that the fact that the law of contract is the same in Ontario and Alberta but it is, at best, a neutral factor.
6. Alberta and British Columbia, where Endura has offices or may have assets, will both enforce Ontario judgments.
7. Seventh, Benefact submits that Endura’s position on the fair working of the Canadian legal system as a whole contains faulty analysis. The fair working of the Canadian legal system is best served by upholding the freedom of contract and the inviolability of bargains.

Analysis and Discussion

[57] Had I found that the forum selection clause did not bar this action and that there is a real and substantial connection between the lis and Ontario, I would still have found that the most appropriate forum is Alberta.

[58] In this case, most of the factors on forum non conveniens are closely balanced or neutral. The following factors tip the balance in favour of Alberta as the clearly more appropriate forum:

1. Benefact’s claim falls within the $50,000 jurisdiction of the Alberta Provincial Court (Small Claims Court). I agree that the cost of litigating in that Court, perhaps without counsel, is a significant factor when one considers the proportionality of the procedure and cost compared to the amount in issue.
2. Any potential judgement against Endura would have to be enforced in Alberta. Benefact points out that all Canadian provinces are parties to reciprocal enforcement agreements. However, there is still and expense and time delay in enforcing an Ontario judgment in Alberta.
3. It is clear from the forum selection clause that Benefact contemplated that it would be sued in other provinces than Ontario. Why? It must have known that its clients in other provinces would likely sue in their home provinces. Benefact’s position in the stream of commerce is no different than that of a manufacturer who ships its products to other jurisdictions. Benefact points to the forum selection clause as a factor to consider under forum non conveniens.
4. In order to be able to undertake a forum non conveniens analysis I would have had to have found that the forum selection clause did NOT operate or that it had to be overridden. Having done that analysis as the first step, the same analysis would have applied under forum non conveniens. In other words, I would have to have found that the forum selection clause did not apply for the reasons stated by Endura, namely that the contract at issue was entered into unfairly. Therefore, I would not have considered the forum selection clause in my forum non conveniens analysis.

Conclusion:

[59] The forum selection clause applies. Endura’s motion is dismissed.

Costs:

[60] Unless parties cannot agree to costs, I will receive written submissions on who should pay whom costs and in what amount. Submissions are limited to three double spaced pages excluding bills of costs or cases. Benefact’s submissions are due two weeks after the release of these reasons, and Endura’s four weeks after the release of these reasons.

Trimble J. Date: June 1, 2016

COURT FILE NO.: CV-15-2795-00 DATE: 2016 06 01 ONTARIO SUPERIOR COURT OF JUSTICE RE: Benefact Consulting Group Inc. AND: Endura Manufacturing Company ENDORSEMENT Trimble J. Released: June 1, 2016