Court File and Parties

COURT FILE NO.: CV-16-11653-00CL DATE: 20170612 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Karsten Arend, Hansjoerg Wagner and Bitrush Corp., Applicants AND: Werner Boehm, Alfred Dobias and Mezzacap Investments Ltd. and Elfriede Sixt, Respondents

BEFORE: L. A. Pattillo J.

COUNSEL: Alistair Crawley, Clarke Tedesco and April Engelberg, for the Applicants Werner Boehm and Elfriede Sixt, Respondents, appeared by phone from Austria

HEARD: May 31, 2017

Endorsement

Introduction

[1] The respondents, Werner Boehm (“Boehm”), Alfred Dobias (“Dobias”) and Elfriede Sixt (“Sixt”) (together the “Moving Parties”) each move to stay or dismiss the Application on the ground that an Ontario court has no jurisdiction to hear the matter or, in the alternative, is not the most appropriate forum. The Moving Parties also seek to set aside service of the Amended Notice of Application and stay the proceedings on the basis that service is not authorized by the Rules of Civil Procedure, R.R.O. 1990 Reg. 194 (the “Rules”) and that the Application is frivolous or vexatious or otherwise abusive (the “Jurisdiction Motions”).

Background

[2] Following service of the Amended Notice of Application, the respondents appeared through counsel at a scheduling appointment on March 20, 2017. Counsel raised the jurisdictional/ forum non conveniens issues. Justice Hainey set a hearing date for the Application of April 21, 2017 and directed that the jurisdictional issue was to be argued at the hearing of the Application. Justice Hainey further directed that the respondents must reply to the Application on the merits notwithstanding the jurisdictional issue and that by doing so they would not be deemed to attorn to the jurisdiction of the court.

[3] The Jurisdiction Motions were heard at the outset of the hearing of the Application. Boehm, Dobias and Sixt filed material on their respective Jurisdiction Motions by email and participated by conference telephone call. They filed no material in response to the Application.

[4] The respondents no longer have counsel. Boehm and Dobias have filed Notices of Intention to Act in Person. In light of Justice Hainey’s March 20, 2017 direction, however, I do not consider that step to constitute an attornment to the jurisdiction.

[5] At the conclusion of submissions on the Jurisdiction Motions, in the interests of time and efficiency of resources, I reserved my decision and proceeded to hear argument on the Application. This is my decision on the Jurisdiction Motions.

i. The Application

[6] In the Application, the applicants, Karsten Arend (“Arend”), Hansjoerg Wagner (“Wagner”) and BitRush Corp. (“BitRush”), seek various relief pursuant to s. 248 of the Business Corporations Act, R.S.O. 1990 c. B.16 (the “OBCA”) and in particular:

a) A declaration that Boehm, in his capacity as CEO of BitRush has acted oppressively, in breach of his fiduciary duty to BitRush;

b) An order transferring shares of BitRush from the respondent MezzaCap Investments Ltd. (“MezzaCap”) to certain other stakeholders to whom the shares are owed; an

c) An order that MezzaCap’s remaining shares in BitRush be cancelled.

ii. BitRush

[7] BitRush is a Toronto based Ontario corporation, which was publicly traded on the Canadian Securities Exchange (the “CSE”) and the Frankfurt Exchange. On December 2, 2016, the Ontario Securities Commission issued a cease trade order against its shares.

[8] BitRush was formed in late 2015 through a reverse takeover initiated and implemented by Boehm. It is a financial technology (“FinTech”) company engaged in the development and implementation of various cryptographic technologies and blockchain based solutions. Its principal focus is on implementing a cryptographic payment system for the internet that can support both cryptocurrency (like bitcoin) and/or traditional currencies. It also is involved in developing online advertising services and gaming technologies for the internet.

[9] BitRush’s business is reflective of the worldwide impact of business connected with the internet. While BitRush is centered in Toronto, its investors, officers and businesses are located around the world. Arend, BitRush’s President and a board member, is a resident of Ontario. Wagner, who is a shareholder and director, is a resident of the Philippines and Dobias who was a board member until he resigned on February 22, 2017, is a resident of Austria. Bohem, who was the CEO of BitRush up until his termination on December 7, 2016, is a resident of the United Kingdom (“U.K.”) and an Austrian national. MezzaCap, BitRush’s majority shareholder, is a U.K. corporation. BitRush’s online advertising services are being developed by a firm in Vancouver. Its gaming technologies are being developed by a team in Bratislavia.

Discussion

[10] The analysis for determining both jurisdiction and forum non convenience is set out by the Supreme Court of Canada in Van Breda v. Village Resorts Ltd., [2012] S.C.R. 572 (S.C.C.).

I. Jurisdiction

[11] The test for jurisdiction is whether there is a real and substantial connection, based on objective factors, between the subject matter of the proceeding (the Application) and the forum (Ontario).

[12] Van Breda sets out a two-stage test for determining whether a court has jurisdiction simpliciter. In the first stage, the Applicants have the onus of identifying what the court refers to as “presumptive connecting factors” that connect the subject matter of the litigation with the forum. [1] Where presumptive jurisdiction has been established, the respondents may rebut it by establishing facts which demonstrate that the presumptive connecting factor does not point to any real relationship between the subject matter of the litigation and the forum or points only to a weak relationship between them. [2]

[13] As noted by Newbould J. in Inukshuk Wireless Partnership v. 4253311 Canada Inc., 2013 ONSC 5631 (S.C.J.) at para. 19, the bar to establish jurisdiction simpliciter is a low one. A plaintiff need only establish “a good arguable case” which means no more than a “serious question to be tried” or a “genuine issue” or that the case has “some chance of success.”

[14] In Van Breda, which was a tort case, the court identified four presumptive factors: the defendant is domiciled or resident in the province; the defendant carries on business in the province; the tort was committed in the province; and a contract connected with the dispute was made in the province. The court noted that the list of presumptive factors is not closed and set out a framework for identifying presumptive connecting factors, noting that relevant considerations include the similarity of the connecting factor with recognized connecting factors, and the treatment of the connecting factor in statute and case law. [3]

[15] As noted, the Application seeks orders pursuant to s. 248 of the OBCA. Section 248 grants to this court exclusive jurisdiction to determine issues dealing with the oppression remedies of the OBCA.

[16] Apart from the exclusive nature of the jurisdiction of this court to decide claims under s. 248 of the OBCA, I am further of the view that where the proceeding involves issues which go to the heart of the corporation’s business and affairs, the jurisdiction of the corporation’s domicile is a presumptive connecting factor.

[17] In addition to the fact that BitRush was incorporated in Ontario (and has its head office in Toronto), the applicants point to a number of additional connecting factors, including:

a) BitRush was traded on a public market in Canada;

b) Dobias was a director and Boehm the CEO of BitRush during the material times. As such they were “doing business in Ontario”;

c) A significant percentage of BitRush’s shares in issue remain in escrow with its transfer agent who is located in Toronto.

[18] The above connecting factors are more than sufficient, in my view, to establish a real and substantial connection between the subject matter of the Application and Ontario. Accordingly, the applicants have established Ontario has presumptive jurisdiction over the Application.

[19] The materials filed by the Moving Parties in support of their Motions raise a number of issues including inconvenience to the respondents; places of residence and incorporation of MezzaCap and other companies; language issues; travel issues; availability of legal aid; location of where the contracts were made; purported parallel proceedings; and potential issues with the enforcement of an Ontario judgment.

[20] In his submissions, Boehm stressed that he has never been in Ontario and that he carried most of his activities for BitRush in Austria. While that might be, as an officer of the corporation he would have understood and expected that disputes dealing with the affairs of the corporation would be dealt with at the place of incorporation.

[21] None of the above issues undermine the presumptive factors above identified which point to a real and substantial connection with Ontario. At best they go to the issue of whether Ontario is the appropriate forum to determine the dispute.

[22] Accordingly, I conclude that Ontario has jurisdiction simpliciter to hear the Application.

II. Forum Non Conveniens

[23] Where it is established that the court has jurisdiction over the proceedings, the burden of establishing why the court should decline to exercise that jurisdiction falls on the Moving Parties.

[24] To establish forum non conveniens, the Moving Parties must meet a three part test:

a) The Moving Parties must identify an alternate forum;

b) The Moving Parties must establish that there is a real and substantial connection between the alternate forum and the subject matter of the proceeding; and

c) The Moving Parties must show why the alternate forum is clearly more appropriate than the forum selected by the applicants. [4]

[25] In my view, the Moving Parties have not established there is an alternate forum that is “clearly more appropriate” to decide the issues than Ontario.

[26] The Moving Parties identify Austria as the alternate forum.

[27] Austrian courts do not have jurisdiction to decide claims under s. 248 of the OBCA. Given the exclusive jurisdiction of Ontario to decide oppression claims under s. 248 of the OBCA, I agree with the statement of McLellan J. of the New Brunswick Court of Queen’s Bench in Nord Resources Corp. v. Nord Pacific Ltd., 2003 NBBR 201 (NBQB) at para. 17: “The concept of forum non conveniens does not apply.”

[28] In Kaynes v. BP plc, 2014 ONCA 580, the Court of Appeal held that exclusive jurisdiction of an alternative forum is a factor to be considered in a forum non conveniens analysis. In my view, however, the converse does not apply. Simply put, given the exclusive jurisdiction of Ontario, there can be no alternate forum in which the issues raised by the applicants can be decided.

[29] In addition, while the Moving Parties have established some connections with Austria (Dobias and Sixt are residents of Austria, some of the contracts may have been made in Austria) there are many other factors which are not connected to Austria (Arend is an Ontario resident, Wagner is a resident of Singapore, Boehm is an Austrian citizen but resides in the U.K., MezzaCap is a U.K. corporation, the initial agreements relating to the reverse takeover and Boehm’s retainer as a consultant and CEO of BitRush provide that they are governed by the laws of Ontario and Canada).

[30] The Moving Parties also submit that there are parallel proceedings which have been started or are soon to be started in Austria which will give rise to wasted resources or conflicting judgments. In my view, the Moving Parties have not established parallel proceedings that would support Austria as an alternate forum. None of the Austrian proceedings identified by the Moving Parties involve the same claims or the same parties as raised in the Application. Further, they are criminal proceedings which have been initiated and which have either been dismissed or withdrawn and if continuing involve parties other than the parties to the Application. Sixt has threatened to or has commenced proceedings for payment of her invoices but that issue is not part of the Application.

III. Service

[31] The Moving Parties further submit that the Notice of Application and the Amended Notice of Application were not properly served on them pursuant to r. 17.02 of the Rules.

[32] In my view, service outside Ontario was authorized by r. 17.02. The claim involves the shares of BitRush which are personal property (OBCA s. 41). A significant percentage of BitRush’s shares which are in issue remain in escrow with BitRush’s transfer agent which is located in Toronto. The claim therefore involves personal property in Ontario (r. 17.02 (a)).

[33] There is no issue that the Application has not been brought to the Moving Parties’ attention. As noted, they retained counsel and sought an adjournment of the Application in order to file material.

[34] Accordingly, I would not stay the Application on the basis that service outside Ontario has not been carried out in accordance with the Rules.

IV. Frivolous or Vexatious

[35] Boehm and Dobias further submit that the Application should be stayed because it is frivolous and vexatious “and otherwise abusive of section 248”. They submit that Arend and Wagner “unlawfully” deprived MezzaCap Investments of possession of a share certificate for BitRush shares.

[36] The issue of whether a claim is frivolous or vexatious is determined having regard to the claim being asserted. In my view, the claims as set out in the Amended Notice of Application in respect of the respondents’ actions cannot be characterized as either frivolous or vexatious. Nor do I consider the claims in the Application to be either frivolous or vexatious because of other alleged actions of the Applicants.

[37] Further, I consider a motion to stay or dismiss a claim on the basis that it is either frivolous or vexatious or both to be a substantive pleading motion which can only be raised by a defendant or respondent where the court has jurisdiction simpliciter. In my view, therefore, that ground of attack is not available to Boehm and Dobias as part of a motion to challenge jurisdiction. That said, even if Boehm and Dobias have standing to bring such a motion, it cannot succeed for the reasons stated.

Conclusion

[38] For the above reasons, therefore, the Jurisdiction Motions are dismissed.

L. A. Pattillo J. Date Released: June 12, 2017

[1] Van Breda at para. 82 [2] Van Breda at para. 95 [3] Van Breda at para. 91 [4] Van Breda at paras. 103 and 108