Court File and Parties
Court File No.: CV-13-492146 Date: 2016-06-07 Ontario Superior Court of Justice
Between: Donald Shaxon and Jason Springett, Plaintiffs – and – Richard Kipping and Share Agent, LLC, Defendants
Counsel: Alastair McNish, for Responding Parties/Plaintiffs Harvin Pitch, for Moving Parties/Defendants
Heard: May 19, 2016
Before: R.F. Goldstein J.
[1] Shaxon and Springett are stock promoters. They live and work in Ontario. In 2012 they contracted to do some work for Kipping, who is also a stock promoter. Kipping lives and works in British Columbia. Kipping engaged Shaxon and Springett to promote shares of VoIP-Pal.com Inc. in Ontario. VoIP-Pal is a publicly listed corporation with headquarters in Nevada. Shaxon and Springett were to be paid in shares of VoIP-Pal.
[2] Share Agent was a law firm and stock transfer agent at the time. It never carried on business in Canada. It was simply used as an agent to transfer shares. In 2012 its headquarters was in Colorado.
[3] In November 2013 Shaxon and Springett issued a Statement of Claim in this Court naming Kipping and Share Agent as defendants. Kipping and Share Agent have not defended. Instead they bring a motion to dismiss on the basis that Ontario has no jurisdiction over the matter.
[4] For the reasons that follow, I agree. Ontario does not have jurisdiction. The action is dismissed.
Background
[5] In 2010 or 2011 Shaxon was introduced to Kipping by email through Larry Melnyk, a Vancouver-based investment advisor. Shaxon was supposedly interested in doing some promotion work for Kipping. They agreed in January 2012, through email, that Shaxon would carry out some stock promotion work in exchange for some VoIP-Pal shares. They had not yet met. That arrangement was not the contract that is at issue in this proceeding.
[6] In early May 2012, Kipping and Shaxon met in Burlington, Ontario. They agreed that Shaxon would do more stock promotion work for Kipping. Shaxon suggested that his friend and business associate, Springett, would also be interested in doing some stock promotion work for Kipping. The idea was that their promotion efforts would increase the share price and thus the value of Kipping’s investment in VoIP-Pal. Later that month they met in Vancouver. They then negotiated, by email, the terms of a contract.
[7] I will deal with the terms of the deal in more detail below, but suffice to say that the basic terms were that Shaxon and Springett would promote the stock and be paid in shares of VoIP-Pal. There were some other benefits of the deal, such as the use of Kipping’s vacation property in Hawaii. The deal was firmed up in May 2012. Shaxon and Springett say that they began to promote the shares in order to increase the share price. Kipping says that they did not. The alleged breaches are the subject of the lawsuit.
[8] As security for performance of the contract, Kipping was to transfer 3,000,000 shares of VoIP-Pal to an account that both Shaxon and Kipping could access. Kipping says that the stock promotion work was not to commence until the share were in the account. Kipping would not release the shares until he was satisfied that the contract had been performed to his satisfaction.
[9] Although there are some differences between the Plaintiffs and the Defendants as to timing, it appears that Kipping informed Shaxon and Springett that there were restrictions on the transfer of VoIP-Pal shares. They could not be transferred to a Canadian brokerage account. As a result, it was necessary to open an offshore account.
[10] Kipping’s stock transfer agent was Share Agent. In September 2012 Shaxon contacted Share Agent to make arrangements for the transfer of the shares. Share Agent set up a corporation in Belize that could hold the shares and a brokerage account in the name of that corporation. On September 20, 2012 Share Agent transferred the 3,000,000 VoIP-Pal shares to the brokerage account.
[11] At that point, according to Kipping, Shaxon and Springett were to start promoting the shares of VoIP-Pal. At the time, VoIP-Pal was literally a penny stock. According to Kipping (but not Shaxon and Springett) the contract called for the promotion efforts to raise the share price to 5 cents per share. It never reached that level. Kipping says that Shaxon and Springett never did any work to promote the stock. On October 12 2012, Share Agent arranged for the 3,000,000 shares in Belize to be transferred back at Kipping’s instructions.
[12] According to Shaxon and Springett, they began performing their work under the contract as soon as it was complete in May 2012. They say that Kipping breached the contract by failing to deliver the 3,000,000 shares. They issued a statement of claim against Kipping and Share Agent on November 4, 2013.
Issues and Analysis
[13] In a jurisdiction case there are two issues to be decided: does Ontario have jurisdiction over the matter? And, if so, is Ontario the convenient forum?
(a) Does Ontario have jurisdiction?
[14] The parties are in agreement that the Ontario courts will have jurisdiction where there is a real and substantial connection between the claim and Ontario: Club Resorts v. Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572. The Court in that case set out a list of presumptive connecting factors that will entitle a court to assume jurisdiction over a matter. A party need only establish one or more of these factors (as set out at para. 90):
(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 connected with the dispute was made in the province.
[15] I will deal with each of the defendants in turn.
Kipping:
[16] Shaxon and Springett rely on the second and fourth presumptive connecting factors in dealing with Kipping.
[17] I turn first to the question of where the contract was made. Shaxon and Springett argue that the contract was made in Ontario because Shaxon received the offer in Ontario and accepted it here. They point to Sub-rule 17.02(f) of the Rules of Civil Procedure. That sub-rule permits service of a statement of claim outside Ontario, which is obviously consistent with Van Breda:
17.02 A party to a proceeding may, without a court order, be served outside Ontario with an originating process or notice of a reference where the proceeding against the party consists of a claim or claims,
(f) in respect of a contract where,
(i) the contract was made in Ontario…
[18] I disagree that the contract was made in Ontario. The fourth presumptive connecting factor does not apply.
[19] The general common law rule that a contract is made in the place that the offeror receives notice of the acceptance of the offer from the offeree: Inukshuk Wireless Partnership v. 4253311 Canada Inc., 2013 ONSC 5631, 117 O.R. (3d) 206 at para. 25; Christmas v. Fort McKay First Nation, 2014 ONSC 373 at para. 18.
[20] Mr. McNish, for Shaxon and Springett, relies on Trillium Motor World Ltd. v. General Motors of Canada Ltd., 2014 ONCA 497. Lauwers J.A. observed in that case at para. 70 that the strict traditional common law rules of contract may not always be appropriate when determining jurisdiction. He also made the following observations at paras. 33-37:
I make four observations about the Supreme Court's approach that are relevant to the task of the court in this case.
First, the basic message is that an Ontario court should be neither too quick nor too slow to take jurisdiction over a dispute.
Second, there is usually another court that could take jurisdiction on a similar basis.
Third, there is no perfect court for a dispute that crosses borders. The connections with the province need not be the strongest nor all point in the same direction, as LeBel J. noted in Van Breda, at para. 34. There may not be a single preferable place when many of the witnesses and parties are from different places, as LeBel J. observed in Spar, at para. 73.
Fourth, the smooth operation of the Canadian common market is a relevant consideration in the application of the real and substantial connection test.
[21] I do not think that the Trillium decision assists Shaxon and Springett simply because on any analysis the contract was not formed in Ontario. Further, this was a simple contract between stock promoters. There were no lawyers involved and no jurisdiction clauses. This was not a case involving multiple parties where considerations of market efficiency play a role.
[22] What does play a key role are the facts. On May 21 2012 Shaxon and Springett came to Vancouver. They met with Kipping at a restaurant in Coquitlam later either on May 22 (according to the affidavit of Corinne Kipping) or May 23 (according to Shaxon’s affidavit) along with Melnyk. On May 23 Shaxon exchanged a series of emails with Kipping. Those emails constitute the terms of the contract between them. The timing of the email chains is important because they pinpoint where Shaxon and Springett were when offer and acceptance occurred.
[23] To complicate matters, however, and for technical reasons that I do not understand, the various printouts of Shaxon’s emails sometimes have Ontario time and sometimes British Columbia time. Understanding the events requires some sleuthing through the emails.
[24] On May 22 at 6:52 am Kipping emailed Shaxon and asked him “what is the plan for the market today”. Shaxon responded at 6:58 am that he was golfing instead of working that day, and staying at the Fairmont Waterfront. At 7:01 am Kipping responded by asking Shaxon “when do we finish our deal, what time are you leaving Wednesday?” At 10:08 am Shaxon emailed Kipping and said that they would be leaving the next day (May 23 2012) at 5:00 pm.
[25] The printout for Shaxon’s Hotmail account is not clear as to whether the time refers to Ontario time or British Columbia time, but it makes sense that it was British Columbia time based on the sequence of events. Shaxon’s email response at 6:58 am was to Kipping’s question at 6:52 am. Kipping then responded at 7:01 am. If Shaxon had been in Ontario, and the printout were displaying Ontario time, then Shaxon’s 6:58 am response would have read 9:58 am in the context of that email chain. I am satisfied that the critical emails on May 22 and May 23 occurred when Shaxon and Springett were in Vancouver, including the last email (which I will deal with below). I am also satisfied that Shaxon’s reference to a 5:00 pm departure referred to local (British Columbia) time, based on the context of the conversation.
[26] On May 23, clearly after the meeting in person, Shaxon sent an email to Kipping. The email indicated terms, which in my view constituted an offer:
Ok, Jason and I just spoke about everything, and this is what we would accept to start working:
DTC 1 million into my accont with Larry, and 2 million into Jason’s account with larry.
A return flight from Toronto to Maui, for 4 people… with either a 1 week or 2 week stay at your place.
And lastly, at least 1 appearance on your golf show for me.
Let me know if you can do this, if so, get it in motion.
[27] One email attached as an exhibit notes the time as 7:30 pm; another email chain attached as an exhibit notes the time as 4:30 pm. Shaxon indicated in his affidavit that he can not recall whether they were still in British Columbia when he sent this email. Given that Shaxon and Springett were leaving Vancouver on a 5:00 pm flight, it makes sense that they were in Vancouver at the airport when this email was sent.
[28] It also makes sense that Shaxon and Springett were in Vancouver when Shaxon sent the email because Kipping immediately responded at 4:51 pm, which must have been local (British Columbia) time. In that email he stated:
Larry cannot buy stock!!!
You have my place for 10 days.
Move the stock to 5 cents and I will buy your tickets, and you are already going to be on my show… dah! I want US to do a show with the fireman for their chosen charity too!
Stock is no problem.
[29] Kipping’s counsel argues that this email constituted acceptance of the offer and therefore a contract was made. He says that since all parties were in British Columbia, the contract was made in British Columbia.
[30] Counsel for Shaxon and Springett argues, in contrast, that this did not constitute a meeting of the minds because Shaxon and Springett never agreed to the 5 cents. They point to a series of follow up emails that undoubtedly went between the parties when Shaxon and Springett were back in Toronto.
[31] I agree with Kipping’s counsel on this point. Even applying the broad approach mentioned by Lauwers J.A. in Trillium Motors I find that Kipping’s email constituted acceptance of the offer and that both parties were in British Columbia at the time. I disagree that the subsequent emails suggest that the meeting of the minds occurred later. There were certainly details to be worked out, but that is not the same thing. For example, the restrictions on the stock in Canada were the source of the reference to “Larry cannot buy stock” but that did not affect the overall bargain (although it was a source of argument about subsequent performance). As well, I do not accept that the 5 cent issue was a problem for Shaxon and Springett. Shaxon says that Kipping is disingenuous in his affivavit that the 5 cent share price was a term, because, as a sophisticated investor, he knows that a share price cannot be guaranteed. Maybe so, but Shaxon never suggested in any subsequent email that the 5 cent share price was not a term or was not achievable. The subsequent email of May 24 (see below) can be read very differently.
[32] As well, at 8:02 pm Shaxon responded to Kipping’s email. He said:
That’s fine about Larry. We don’t need him to buy. We just want our stock in there. (Larry is gonna open an account at TD to start buying it).
[33] Even if I am incorrect about Kipping’s acceptance of the offer in his 4:51 pm email, Shaxon’s 8:02 email certainly constituted acceptance – and Shaxon was clearly still in Vancouver when he sent that email. I recognize that 8:02 pm was obviously Ontario time, but it does not make sense that Shaxon and Springett were already in Ontario: if they had left Vancouver even shortly after 5:00 pm (their flight was scheduled for 5:00 pm) then they certainly could not have been back in Ontario by 8:02 pm (Ontario time). That would have meant a flight of less than three hours between Vancouver and Toronto. I think that I can (and do) take judicial notice of the fact that Canada is a very large country and that it takes more than three hours to fly from Vancouver to Toronto, even with a favourable tailwind.
[34] In any event, the next email from Shaxon to Kipping was sent at 11:30 am the next day (May 24) when Shaxon and Springett were unquestionably back in Ontario:
I’m up! ;) get things in motion… As soon as the paper is in J’s and my account, we’ll get’er going. 5 cents rich… No problem.
[35] This email is not acceptance, as argued by counsel for Shaxon and Springett. They had already accepted. There is nothing about this email to suggest that this is where and how the meeting of the minds occurred. Whether or not the 5 cent term applied, or who breached, is not a question on this motion.
[36] I am aware that in a jurisdiction motion the plaintiff is not required to prove his or her case. All that is required is that the plaintiff’s claim come within the ambit of Rule 17.02: Upper Lakes Shipping Limited v. Foster Yeoman Limited (1993), 14 O.R. (3d) 548 (Gen.Div.) at para. 17. That said, the plaintiff must prove, on a balance of probabilities, that one of the presumptive connecting factors applies and for that a finding fact is necessary. I find as a fact that they cannot establish this particular presumptive connecting factor.
[37] I turn to the presumptive connecting factor of carrying on business. Shaxon and Springett argue that Kipping carried on business in Ontario. They argue that because Kipping took some actions and had meetings in Ontario, he was carrying on business. They point to the fact that he met with ClubLink officials in order to promote his golf show.
[38] Mr. McNish very candidly agreed that this is not his strongest point. His candour is appropriate. Shaxon and Springett cannot establish this presumptive connecting factor. Carrying on business is not the same as getting on an airplane and having a meeting, or sending some emails. “Carrying on business” means requires an actual presence: Van Breda at para. 87. The fact that Shaxon and Springett were promoting the stock of VoIP-Pal in Ontario does not mean that Kipping carried on business in Ontario. It means that Shaxon and Springett carried on business in Ontario.
Share Agent:
[39] No detailed analysis is required for dealing with Share Agent. Mr. McNish conceded that if there is no jurisdiction for Kipping in Ontario based on the contractual presumptive factor, then there is no jurisdiction for Share Agent.
[40] I agree with Mr. McNish’s concession, but it is noteworthy that no contract between Shaxon and Springett and Share Agent was made in Ontario. No offer was accepted in Ontario. Share Agent was (at the time) a law firm and stock transfer agent in Colorado. It dealt with shares of a Nevada corporation transferred from British Columbia to Belize. There is no real and substantial connection between Share Agent and Ontario.
(b) Is Ontario the convenient forum?
[41] It is not necessary for me to decide this issue. Ontario does not have jurisdiction.
Disposition
[42] Kipping and Share Agent moved for relief either under Rule 21.01(3)(a) dismissing the action or under Rule 17.06(1)(b) staying the action on the basis of a lack of jurisdiction.
[43] The only authority cited to me dealing with the difference between a stay and a dismissal under the Rules is the decision of my colleague Corrick J. in Luk v. Pottery Barn, 2010 ONSC 5540, where she noted at paras. 8-9:
I have reviewed a number of Ontario decisions in which a court found that Ontario lacked jurisdiction simpliciter over an action.1 In eleven cases, the action was stayed. In two cases, the action was dismissed. None of the cases discuss why a stay or dismissal was the appropriate disposition, although in some cases, only a stay was sought.
In my view, no purpose would be served staying an action that cannot be revived because Ontario has no substantial connection with it. The effect of a stay is to keep an action alive, although dormant. If the court lacks jurisdiction simpliciter over an action at the time of the stay, it will lack jurisdiction over the action once it is sought to be revived. In those circumstances a dismissal is the appropriate disposition.
[44] I agree with those observations. Accordingly, the action is dismissed as against both defendants pursuant to Rule 21.01(3)(a).
Costs
[45] Counsel may each file a costs outline and costs submissions of no more than two pages within 30 days of the release of this judgment.
R.F. Goldstein J. Released: June 7, 2016