MacLaren Art Centre v. D’Airain Corporation et al., 2018 ONSC 4498

COURT FILE NO.: CV-17-588930-00CL DATE: 20180921 ONTARIO SUPERIOR COURT OF JUSTICE

APPLICATION TO DETERMINE QUESTION OF OWNERSHIP IN AND APPROVAL OF SALE OF RODIN BRONZE SCULPTURES under Rules 14.05(3)(d) and 14.05(3)(i) of the Rules of Civil Procedure

BETWEEN:

MACLAREN ART CENTRE Applicant (Responding Party) – and – D’AIRAIN CORPORATION, PADDON + YORKE INC. and PICTURE PERFECT FILM ASSETS, LLC Respondents (Moving Parties)

Nadia Campion and Eric Brousseau, for the Applicant (Responding Party) Anna Husa, for the Respondent (Moving Party), Picture Perfect Film Assets, LLC

HEARD: July 6, 2018

REASONS FOR DECISION

MR. JUSTICE T. MCEWEN

[1] On July 6, 2018, I heard the motion of the respondent Picture Perfect Film Assets, LLC (“PPFA”) for an order staying this application (the “Ontario Application”) brought by the MacLaren Art Centre (“MAC”) on a permanent basis or, in the alternative, on a temporary basis pending the determination of MAC’s motion to dismiss the claim against it in the United States District Court, Western District of Washington in Seattle, Washington (the “Washington Action”).

[2] The Ontario Application concerns the validity of the Purchase and Sale Agreement (the “PSA”) that was entered into between MAC and the respondent D’Airain Corporation (“D’Airain”) on February 3, 2017, along with other related relief.

[3] On July 18, 2018, I dismissed PPFA’s motion with reasons to follow. I am now providing those reasons.

OVERVIEW

[4] This matter stems from a somewhat convoluted chain of events beginning in June 2000.

[5] MAC is a non-share corporation registered as a charity which operates a public art museum in Barrie.

[6] D’Airain is an Ontario corporation. Gordon Arnold is its sole officer and director. D’Airain, in part, is involved in the buying and selling of art.

[7] PPFA is a Washington company which, amongst other things, carries on cross-border commercial activities.

[8] Between 2000 and 2004 MAC accumulated a number of contemporary bronze sculptures (the “Foster Bronzes”) from Plaster Casts attributed to French artist Auguste Rodin from a group of art collectors called the Foster Group. Ultimately, MAC retained 24 Foster Bronzes. The provenance of these pieces has been the source of speculation and debate.

[9] MAC also signed a contract with Jennings Art Consultants Limited for 510 contemporary bronze castings attributed to Rodin. MAC never obtained possession of the 510 Rodin bronzes.

[10] Neither the Foster Group nor Jennings Art Consultants Limited is a party to these proceedings.

[11] Ultimately, in March 2006 MAC ran into financial difficulties and filed a notice of intention to make proposal under s. 50.4 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3. MAC’s creditors voted in favour of the proposal. On June 20, 2006, Justice Spies of the Toronto Commercial List issued three orders: an appointment order, a vesting order, and an approval order.

[12] Paddon + Yorke Inc. (“P+Y”) was appointed as interim receiver.

[13] Of interest is the fact that the receivership was limited to effecting the sale and vesting of the 510 Rodin bronzes to D’Airain. The proposal envisioned that, by virtue of D’Airain purchasing the Rodin bronzes, royalty payments would be paid to P+Y which were expected over a significant period of time—possibly exceeding 10 years. It was obviously hoped that a significant amount of royalties would ultimately be paid, and the involved parties expected at least $4,700,000.00 in royalties would be generated. No other MAC assets were included in the proposal.

[14] As noted, however, the 510 Rodin bronzes were never acquired.

[15] Ultimately, confusion arose regarding whether the Foster Bronzes were included in the 510 Rodin bronzes. In June 2016 P+Y purported to enter into a bill of sale with D’Airain for the Foster Bronzes, apparently believing that they were part of the 510 Rodin bronzes.

[16] On July 7, 2016, P+Y provided MAC with a Certificate of Full Performance of Proposal, dated June 30, 2016. According to MAC it later became apparent that the Foster Bronzes were not part of the 510 Rodin bronzes that were dealt with in the bankruptcy proceedings and subject to the aforementioned orders of the Commercial List. D’Airain acknowledged to MAC that P+Y did not have the right to sell the Foster Bronzes to D’Airain. Nonetheless, D’Airain then entered into a contract with PPFA in November 2016 to sell the Foster Bronzes to PPFA for $600,000.00.

[17] This sowed the seeds of the current dispute.

[18] Without going into inordinate detail as to whether the Foster Bronzes constituted part of the 510 Rodin bronzes contemplated in the bankruptcy proceedings, the provenance issue with respect to the Foster Bronzes continued to linger. According to MAC, it learned for the first time in December 2016 that PPFA was asserting ownership over the Foster Bronzes as a result of an agreement it had reached with D’Airain.

[19] In December 2016 counsel for MAC, Mr. Arnold Schwisberg, advised counsel for PPFA, Mr. Brian Krikorian, that MAC would not turn over the Foster Bronzes and that it intended to commence an application in Barrie to determine the rights and obligations of the parties with respect to the Foster Bronzes. Mr. Schwisberg advised the Foster Bronzes would remain in MAC’s possession until the court made a determination. The letter was also provided to PPFA, D’Airain and P+Y.

[20] Notwithstanding the dialogue between counsel, in December 2016 PPFA filed the Washington Action against MAC, its executive director Ms. Carolyn Bell Farell, D’Airain, Mr. Arnold, and a previous principal of MAC, Mr. William Moore. PPFA alleged “a widespread criminal enterprise” and “racketeering including numerous RICO acts”. Mr. Krikorian, who filed the lawsuit on behalf of PPFA, did not advise Mr. Schwisberg or any of the defendants of this significant step. Rather, Mr. Krikorian advised Mr. Schwisberg that PPFA was prepared to allow some time to resolve the issues concerning ownership.

[21] Later in December 2016, in an exchange between counsel, Mr. Schwisberg advised Mr. Krikorian that MAC and D’Airain had reached an understanding that PPFA would deal with the Foster Bronzes through D’Airain and that there would be a sale from MAC to D’Airain for the purposes of completing the sale of the Foster Bronzes to PPFA.

[22] In response, Mr. Krikorian advised for a second time that PPFA was content to allow more time to reach a resolution.

[23] In January 2017 Mr. Schwisberg confirmed with Mr. Krikorian that an agreement had been reached in principle with respect to the Foster Bronzes. Mr. Krikorian confirmed PPFA would work with D’Airain to resolve the matter. Unbeknownst to MAC, however, PPFA amended its initial complaint against the aforementioned defendants in the Washington Action.

[24] On February 3, 2017, MAC and D’Airain executed the PSA which was sent to Mr. Krikorian. It provided that D’Airain was to purchase the Foster Bronzes from MAC for the price of $150,000.00. Of interest is the fact that the PSA specifically provided wording, unbeknownst to PPFA, that D’Airain should not represent to the public or any third person that it acquired the Foster Bronzes from MAC—with the exception of PPFA, who would also be required to sign a non-disclosure agreement. According to MAC, the purpose for this was that it still had considerable doubt with respect to the provenance of the Foster Bronzes. PPFA, however, was not consulted.

[25] In March 2017 PPFA filed its second amended complaint in the Washington Action, notwithstanding ongoing discussions between the parties. At this time, PPFA added a new request: a judicial determination of the “validity and provenance” of the June 2016 P+Y bill of sale.

[26] On May 1, 2017, D’Airain paid the $150,000.00 owed to MAC to Mr. Schwisberg and arranged for the transfer of the statues.

[27] Ultimately, notwithstanding the fact that it received a $120,000.00 deposit from PPFA, D’Airain did not deliver the Foster Bronzes.

[28] In July 2017 the Washington court rejected, in part, a motion from MAC to dismiss the Washington Action. The Washington court only dismissed the claim against Ms. Bell Farrell and the RICO actions. The Washington court confirmed that it had “subject matter jurisdiction” over the dispute and personal jurisdiction over MAC.

[29] MAC continued to press for a dismissal of the Washington Action on jurisdictional grounds. In September 2017 PPFA amended its complaint to add Mr. Schwisberg and P+Y, and to advance other claims against MAC and Mr. Schwisberg based on the February 2017 PSA.

[30] In November 2017 PPFA filed a third amended complaint and the Washington court dismissed MAC’s motion to reconsider the dismissal.

[31] In December 2017 MAC commenced the Ontario Application and filed a motion in the Washington Action to dismiss that action on the basis of the pending Ontario Application.

[32] In May 2018 the Washington court dismissed yet another motion by MAC to dismiss and granted MAC a temporary stay in proceedings pending the outcome of the Ontario Application and PPFA’s motion to stay.

THE POSITION OF THE PARTIES

[33] PPFA raises a number of arguments in support of its motion to stay the Ontario Application.

[34] It submits that the Washington court has already ruled on numerous motions brought by MAC and has found that it had jurisdiction to deal with the issues contained in the pleadings before it. It further relies upon the fact that the Washington Action was commenced far in advance of the Ontario Application.

[35] PPFA submits that a forum non conveniens analysis favours staying the Ontario Application in favour of the broader and more advanced Washington Action.

[36] Further, PPFA submits that the Ontario Application constitutes a collateral attack on the orders of the Washington court and is further prevented by the doctrines of issue estoppel, res judicata and abuse of process.

[37] Last, PPFA submits that, on the basis of the “good case management rule,” the dispute should be heard in the Washington Action.

[38] MAC, on the other hand, submits that it is doing nothing improper, in fact or law, by bringing the Ontario Application.

[39] It generally submits that the PSA entered into between MAC and D’Airain is not an after-the-fact agreement to create jurisdiction, but rather was designed to correct a fundamental mistake of P+Y, which earlier purported to transfer title of the Foster Bronzes to D’Airain as part of its mandate in receivership. After the mistake was discovered, MAC entered into the PSA directly with D’Airain. MAC submits it had no knowledge of the agreement that D’Airain entered into with PPFA during the relevant time period.

[40] MAC submits that the Washington Action was a strategic lawsuit that was launched after PPFA learned of MAC’s intention, through Mr. Schwisberg, to bring the Ontario Application and obtain an interim order preserving the Foster Bronzes in MAC’s possession until a court has made a determination of the parties’ rights and obligations.

[41] MAC therefore submits that PPFA is not entitled to a stay of proceedings, which is an exceptional remedy, and that PPFA has failed to meet the appropriate legal test. In this regard MAC submits that the Ontario Application is not a collateral attack or abuse of process, nor does issue estoppel or res judicata apply.

[42] In essence, MAC submits that a review of the forum non conveniens factors confirms that Ontario is an appropriate forum for the determination of the issues raised in the Ontario Application, all of which deal with transactions arising out of the Ontario receivership and the events that flowed therefrom.

[43] Last, MAC submits that the good case management rule does not apply to the Ontario Application.

ANALYSIS

[44] The parties generally agree that the overarching principles concerning whether the Ontario Application should be stayed involve efficiency, fairness and justice. After that, they disagree as to how those principles should be applied in this case.

[45] As noted, PPFA relies upon the doctrines of issue estoppel, res judicata, abuse of process, and further submits that the Ontario Application is a collateral attack on the prior orders of the Washington court.

[46] I accept MAC’s submissions, however, that none of these equitable doctrines or arguments should govern the analysis on this motion to stay the Ontario Application.

[47] I believe that the traditional forum non conveniens analysis is the proper one to apply in this case, since PPFA is asking this court to exercise its discretion and restrain local proceedings—the Ontario Application—in favour of the Washington Action.

[48] I further do not believe that the good case management rule is of assistance to PPFA.

[49] I will review each of these three points below, in turn.

The doctrines of issue estoppel, res judicata, abuse of process, and collateral attack

[50] Firstly, I accept MAC’s submission that PPFA bears a high onus in trying to stay the Ontario Application under any equitable doctrine.

[51] PPFA must establish that continuing the Ontario Application would cause it substantial prejudice or an injustice and that the stay would not cause an injustice to MAC: Farris v. Staubach Ontario Inc., 2004 CarswellOnt 1160 (S.C.), at para. 15.

[52] While the court in the Washington Action has accepted jurisdiction, it is significant that the Washington Action is much broader than the Ontario Application. The Washington Action includes the dispute that results from the contract that it was entered into between PPFA and D’Airain. That contract stipulated that the law of Washington was to govern.

[53] MAC has no contractual relationship with PPFA.

[54] The Ontario Application and the relief sought therein have their genesis in the original bankruptcy application. The parties involved in that application were MAC, D’Airain and P+Y.

[55] Any determination in the Ontario Application will have no effect upon PPFA’s action against D’Airain. While it well may have some effect on PPFA’s Washington Action against MAC, I see nothing inappropriate in this. The declaration and ancillary orders sought specifically relate to the PSA entered into between MAC and D’Airain, the ability of MAC to sell the Foster Bronzes to D’Airain, and other associated relief originating in the three orders of Justice Spies made June 20, 2006.

[56] As stated by the court in Guarantee Co. of North America v. Gordon Capital Corp. (1994), 18 O.R. (3d) 9 (Ont. Ct. [Gen. Div.]):

[…] The motion before this court is a motion for a stay of proceedings in the Ontario action and accordingly the appropriate test to be applied is the test of forum non conveniens and whether the Ontario court should decline jurisdiction on the basis that there is a more appropriate or convenient forum where the issues in this action ought to be resolved. It does not appear to me that the question of whether the Quebec court has appropriately or properly assumed jurisdiction in the Quebec action is determinative of whether the stay should be granted. Further, the submissions made by counsel for Gordon as to which of the two actions, i.e., the Ontario action commenced by Guarantee or the Quebec action commenced by Gordon, ought to proceed would be relevant only if the court determined that only one of the two actions could proceed. In my view, as stated above, that is not the issue before this court. This court is not being asked to deal with whether the Quebec action should proceed but rather whether the Ontario action should be stayed. For the reasons outlined above, I am not satisfied that this court ought to decline jurisdiction by staying the Ontario action and accordingly I need not decide whether it is more appropriate that the Ontario action be stayed and the Quebec action proceed or that the Quebec action be stayed and the Ontario action proceed.

[57] I find that the relevant issue on the facts of this case is whether this court ought to grant a stay on the basis of forum non conveniens. Accordingly, it is my view that it would be inappropriate to apply any of the aforementioned doctrines in PPFA’s favour in the Ontario Application. If I am wrong and an equitable analysis would be proper, I would still decline to grant the stay sought by PPFA.

[58] First, a proceeding should not be stayed on the sole basis that a foreign court has assumed jurisdiction over the disputed question: DY 4 Systems Inc. v. Diamond Point International Inc., 1997 CarswellOnt 3125 (Ont. Ct. J. [Gen. Div.]), at para. 14.

[59] Further, when deciding the issue of justice and fairness the court is obligated to promote the orderly administration of justice and not mechanically apply equitable doctrines where to do so would work injustice: Amtim Capital Inc. v. Appliance Recycling Centers of America, 2014 ONCA 62, 118 O.R. (3d) 617 [Amtim], at para. 15. The Washington court has not issued any final order in respect of MAC. There is no final ruling on which MAC can make a collateral attack, or which PPFA can invoke as res judicata.

[60] PPFA also raises the argument that the Ontario Application is a strategic one. I do not dispute that there is strategy involved in bringing the Ontario Application given what has transpired, particularly in the Washington Action. In my view, however, it is no less tactical than the initial filing in the Washington Action which was brought by PPFA shortly after learning of MAC’s intention to proceed in the Ontario court.

[61] Tactical decisions to initiate lawsuits are not, in and of themselves, inappropriate and I cast no aspersions in the direction of either PPFA or MAC in this regard.

[62] Based on all of the above, it is my view that even if I were to apply the aforementioned doctrines as opposed to a forum non conveniens analysis, I would still not stay the Ontario Application because MAC did not have any dealings in Washington state and this application has its roots in the 2006 litigation before Justice Spies on the Commercial List. Moreover, the Washington Action is broad; the Ontario Application is narrow. In these circumstances, in exercising my discretion, I would not stay this application.

[63] I have, however, in a general sense considered these equitable principles in the context of the forum non conveniens analysis, as I believe there is some overlap between the factors to be considered in the aforementioned doctrines and on the application of forum non conveniens.

The Good Case Management Rule

[64] I do not accept that the good case management rule applies in the circumstances of this case. This rule seems to have been historically applied sparingly in Ontario.

[65] The good case management rule appears to have originated in the English Court of Appeal decision in the case of Attorney General v. Arthur Andersen & Co. (United Kingdom), [1989] E.C.C. 224 (Eng. C.A.). Thus far, the rule has only been applied in Ontario where a plaintiff has sought to stay its own proceeding: Arab Monetary Fund v. Hashim, 1992 CarswellOnt 403 (Ont. Ct. J. [Gen. Div.]). In the circumstances of this case I therefore see no reason to stray from the typical forum non conveniens analysis. The Ontario Application is sufficiently independent that there is no need for this court to wait to discover what the Washington court will do. In any event, in the context of the forum non conveniens analysis, it is my view that good case management favours refusing to stay the Ontario Application.

Forum non conveniens

[66] I begin this analysis by acknowledging that I am not surprised that the Washington court dismissed MAC’s motions to stay that action on the basis of lack of jurisdiction or forum non conveniens. The Washington Action includes the PPFA/D’Airain contract that is governed by the law of the state of Washington, PPFA is located in Washington and its damages were sustained there.

[67] It is my respectful view, however, that these factors alone do not determine the issue before this court.

[68] Both sides rely upon a significant number of cases in support of their positions. I do not propose to review them all but rather only those that are most important to my analysis.

[69] I am guided by the decision of the Court of Appeal in Young v. Tyco International of Canada Ltd., 2008 ONCA 709, 92 O.R. (3d) 161 [Young], wherein the court held that three principles should guide the motion judge’s exercise of discretion:

1. The standard to displace the plaintiff’s chosen jurisdiction is high.
2. The balancing of the relevant factors should aim to achieve the twin goals of efficiency and justice.
3. Because a forum non-conveniens motion is typically brought early in the proceedings, the motion judge should adopt a prudential, not an aggressive, approach to fact finding.

[70] Secondly, the Supreme Court of Canada decision in Van Breda v. Village Resorts Ltd., 2012 SCC 17, [2012] 1 S.C.R. 572 [Van Breda], finally determined the way Canadian courts should approach the forum non conveniens analysis.

[71] In considering the analysis the Supreme Court of Canada stated as follows:

Regarding the burden imposed on a party asking for a stay on the basis of forum non conveniens, the courts have held that the party must show that the alternative forum is clearly more appropriate. The expression “clearly more appropriate” is well established. It was used in Spiliada and Amchem. On the other hand, it has not always been used consistently and does not appear in the CJPTA or any of the statutes based on the CJPTA, which simply require that the party moving for a stay establish that there is a “more appropriate forum” elsewhere. Nor is this expression found in art. 3135 of the Civil Code of Quebec, which refers instead to the exceptional nature of the power conferred on a Quebec authority to decline jurisdiction: “…it may exceptionally and on an application by a party, decline jurisdiction…”.

The use of the words “clearly” and “exceptionally” should be interpreted as an acknowledgment that the normal state of affairs is that jurisdiction should be exercised once it is properly assumed. The burden is on a party who seeks to depart from this normal state of affairs to show that, in light of the characteristics of the alternative forum, it would be fairer and more efficient to do so and that the plaintiff should be denied the benefits of his or her decision to select a forum that is appropriate under the conflicts rules. The court should not exercise its discretion in favour of a stay solely because it finds, once all relevant concerns and factors are weighed, that comparable forums exist in other provinces or states. It is not a matter of flipping a coin. A court hearing an application for a stay of proceedings must find that a forum exists that is in a better position to dispose fairly and efficiently of the litigation. But the court must be mindful that jurisdiction may sometimes be established on a rather low threshold under the conflicts rule. Forum non conveniens may play an important role in identifying a forum that is clearly more appropriate for disposing of the litigation and thus ensuring fairness to the parties and a more efficient process for resolving their dispute.

[72] Subsequently the Supreme Court of Canada in Black v. Breeden, 2012 SCC 19, [2012] 1 S.C.R. 666 [Black], recited with approval the following factors commonly considered by Quebec courts in exercising discretion which include:

1. the place of residence of the parties and witnesses;
2. the location of the evidence;
3. the place of formation and execution of the contract;
4. the existence of proceedings pending between parties in another jurisdiction and the stage of any such proceeding;
5. the location of the defendant’s assets;
6. the applicable law;
7. the advantage conferred on the plaintiff by its choice of forum;
8. the interests of justice;
9. the interests of the two parties;
10. the need to have the judgment recognized in another jurisdiction.

[73] In considering Young, Van Breda, and Black, and the principles set out therein, it is my view that PPFA has not met the onus of establishing that Washington is clearly the more appropriate forum as required: Black, para. 37. I am satisfied that the forum non conveniens factors demonstrate that Ontario is an appropriate forum for the following reasons:

• The Ontario Application stems from bankruptcy proceedings initiated in Ontario several years ago that called for a multi-year business arrangement which unfortunately did not come to fruition. All of the parties in that litigation are based in Ontario.
• The place of residence of the parties and witnesses with respect to the Ontario Application are in Ontario, with the exception of PPFA. The same can be said with respect to the location of the evidence and the place and formation of the relevant contracts.
• PPFA is not a party to the P+Y Bill of Sale or the MAC-D’Airain PSA.
• The orders of Justice Spies govern P+Y’s authority to enter into contracts.
• The law of Ontario governs the PSA transaction.
• MAC is not a party to the contract entered into between PPFA-D’Airain.
• The Ontario Application involves discrete issues and PPFA can participate fully if it wishes to do so.
• Even though the Washington Action has been in existence for approximately one year longer than the Ontario Application it was initiated immediately after Mr. Schwisberg advised Mr. Krikorian that MAC was prepared to bring an application in this province. In any event, the Washington Action is in its early stages and no substantive decisions on the merits have yet been rendered.
• The location of witnesses and evidence insofar as the Washington Action is concerned is not relevant with respect to the issues raised in the Ontario Application.
• The jurisdiction of the Washington court will not be ousted depending on the outcome of the Ontario Application.

[74] Even if PPFA is correct in submitting that the Ontario Application will affect its claim in the Washington Action, this factor does not undermine the traditional forum non conveniens analysis: Lapointe Rosenstein Marchand Melancon LLP v. Cassels Brock & Blackwell LLP, 2016 SCC 30, [2016] 1 S.C.R. 851, at para. 44.

[75] While it is less than ideal that two actions may proceed this is only one factor to be considered and, in my view, is outweighed by the many factors above. Nothing in the Ontario Application will determine PPFA’s rights against D’Airain and, as mandated by the Supreme Court of Canada in Young, I have attempted a prudential approach to fact finding.

[76] Lastly, while I do acknowledge that PPFA has obtained default judgment against two of the defendants in the Washington Action (not MAC) that is, as stated by the Court of Appeal in Amtim, only one relevant factor amongst the others in conducting the analysis. Further, I do not accept PPFA’s submissions that allowing the Ontario Application to proceed would predetermine PPFA’s claim to ownership under the contract with D’Airain. The relief sought in the Ontario Application simply deals with the relationship between MAC and D’Airain. It does not provide specific relief with respect to the agreement between PPFA and D’Airain. I acknowledge that it may affect PPFA’s rights against MAC, and any others associated with MAC, but given the factors noted above, the Ontario Application should still not be stayed.

[77] Given the above, MAC ought not to be deprived of its local and chosen forum. It is an Ontario-based charity that has no contractual relationships with PPFA and the issues surrounding this application arise from events that took place solely in Ontario. Ontario is an appropriate forum and in this context I find that PPFA has not met its burden to prove that this court should prefer Washington as the “clearly” more appropriate forum.

DISPOSITION

[78] For the reasons above the motion is dismissed.

[79] I reviewed the bills of costs submitted by the parties. MAC is entitled to its costs which I award on a partial indemnity basis in the amount of $53,679.15. I appreciate that this amount may be considered to be on the high side, but given the amount of preparation necessary to hear this rather complicated motion and the importance of the issue to MAC the amount sought is not unreasonable.

[80] Costs are to be paid within 60 days.

Mr. Justice T. McEwen Released: September 21, 2018