Real Crowd Capital Inc. v. 1034179 BC Ltd.

COURT FILE NO.: CV-18-596795 DATE: 20190513 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Real Crowd Capital Inc., Applicant AND: 1034179 BC Ltd., Respondent

BEFORE: Master P.T. Sugunasiri

COUNSEL: Splawski, G., Counsel for the Respondent/Moving Party Murdoch, D., Counsel for the Applicant/Responding Party

HEARD: November 23, 2018 and April 5, 2019

REASONS FOR DECISION

Overview

[1] This Application is a straightforward claim for commissions alleged to have been earned by the Applicant under a Letter of Agreement in assisting the Respondent to obtain financing for a real estate development in British Columbia. The Respondent is in BC while the Applicant is in Ontario. The real estate project is in BC. The Respondent brings a motion to stay the Ontario Application on the basis that Ontario lacks jurisdiction and that in any event BC is the more convenient forum.

[2] As explained below, I dismiss the motion. I conclude that the Application involves a contract formed in Ontario and that Ontario is the most convenient forum for its adjudication.

Preliminary issue – a Master’s jurisdiction to determine jurisdiction simpliciter

[3] In Club Resorts Ltd v Van Breda (“Van Breda”), 2012 SCC 17, the Supreme Court of Canada made it clear that whether the Ontario Superior Court of Justice has jurisdiction over a particular matter (“jurisdiction simpliciter”) is different than whether Ontario is the more convenient forum for adjudication. This difference is further reflected in the Respondent’s prayer for relief.

[4] In its Notice of Motion, the Respondent seeks:

1. An Order dismissing or permanently staying the within Application on the basis that this Honourable Court does not have jurisdiction to adjudicate the claim against 103 in relation to the subject-matter of the within application;
2. In the alternative, an order staying the Application on the ground that British Columbia is the more convenient and appropriate forum, and Ontario is not the convenient and appropriate forum.

[5] In seeking this relief, the Respondent relies on section 106 of the Courts of Justice Act (“CJA”), and Rule 17.06 of the Rules of Civil Procedure (“Rules”). These provisions read as follows:

Courts of Justice Act

s. 106. STAY OF PROCEEDINGS – A court, on its own initiative or on motion by any person, whether or not a party, may stay any proceeding in the court on such terms as a considered just.

Rules of Civil Procedure

17.06 (1) A party who has been served with an originating process outside Ontario may move, before delivering a defence, notice of intent to defend or notice of appearance,

(b) for an order staying the proceeding.

(2) The court may make an order under subrule (1) or such other order as is just where it is satisfied that,

(a) service outside Ontario is not authorized by these rules; or

(c) Ontario is not the convenient forum for the hearing of the proceeding.

[6] A master is a member of the judiciary appointed by the Attorney General of the Province Ontario. As such, her jurisdiction is constrained by provincial legislation and regulations. Masters are, for all intents and purposes, a statutory judge with no inherent jurisdiction. There is no doubt that a master has jurisdiction to stay a proceeding if Ontario is not the convenient forum. The issue is whether a master has jurisdiction to determine jurisdiction simpliciter given Rule 21.01(3)(a) which gives a judge exclusive jurisdiction to stay a proceeding when the Superior Court of Justice lacks jurisdiction over a subject matter.

[7] The Court invited the parties to make written submissions on the issue of jurisdiction. I am satisfied that I have jurisdiction to determine the within motion in its entirety. I appreciate counsel’s assistance to the Court on this point. In particular I accept the Applicant’s submissions as follows:

a. The exclusive jurisdiction given to a federally-appointed judge in Rule 21.01(3) to stay a proceeding where “the court has no jurisdiction over the subject matter of the action” does not oust a master’s jurisdiction under section 106 of the Courts of Justice Act and Rule 17… This rule does not relate to territorial jurisdiction, which is at issue in the present case. Rather, the rule only relates to subject matter jurisdiction.

b. The British Columbia Court of Appeal has described the difference between territorial jurisdiction and subject-matter jurisdiction as follows:

Territorial jurisdiction, known at common law as jurisdiction simpliciter, is concerned with connection between the dispute and the court’s territorial authority… In contrast, subject-matter jurisdiction is concerned with the court’s legal authority to adjudicate the subject matter of the dispute. [See Conor Pacific Group Inc. v Canada (Attorney General), 2011 BCCA 403 at 38.]

c. The Supreme Court of Canada has noted that “Rule 21.01(3) permits a defendant to seek a stay or dismissal of the action on the basis that the court has “no jurisdiction over the subject matter of the action”. Thus, when another forum – an arbitration panel, a tribunal or other court – has the exclusive jurisdiction to deal with the claim, the Ontario Superior Court of Justice will not take jurisdiction, based upon agreement or statute. [See Momentous Ca Corp. v. Canadian American Assn. of Professional Baseball Ltd., 2012 SCC 9 at 5-7.]

d. That Courts have considered jurisdiction simpliciter under the rubric of rule 21.01(3)(a) without considering whether this rule properly confers that jurisdiction should not be conclusive of the issue since the court has applied both rule 17.06 and rule 21.01(3)(a) to determine jurisdiction simpliciter.

[8] Considering the jurisprudence and the Rules together, I am satisfied that I have jurisdiction to determine both jurisdiction simpliciter and forum non conveniens. I turn to those issues below.

Brief Facts

[9] The facts are largely not in dispute.

[10] The Applicant, Real Crowd Capital Inc. (“Real Crowd”) is an Ontario company that facilitates funding required by real estate owners to complete development projects. Real Crowd operates under the Securities Act (Ontario) and is registered as an exempt market with the British Columbia Securities Commission.

[11] The Respondent, 1034179 BC Ltd. is a British Columbia company (“103”). It owns and develops real property in British Columbia (BC). 103’s registered office is in BC and it carries on business exclusively in that province. It does not have a registered office or place of business elsewhere.

[12] 103 engaged Real Crowd as its exclusive agent to secure financing for a development property in Maple Ridge, BC. The arrangement was reflected in an Engagement Letter dated May 5, 2017. According to 103’s affiant, Real Crowd delivered the Engagement Letter to the directors of 103 located in BC. The directors accepted the offer, signed it in BC, and returned it by email to Real Crowd in Ontario.

[13] The Engagement letter provided that Real Crowd would be paid 1% of the total gross amount of financing for its services (“Debt Fee”). Payment of the Debt Fee was staggered: 25% was payable upon acceptance of a letter of interest from a lender; 25% was payable once the lender issued a commitment letter; and the outstanding balance was due from the initial advance of the loan.

[14] The relationship then broke down, the details of which are not important here. Suffice it to say that Real Crowd commenced an application in Ontario to obtain an order directing payment of the Debt Fee in the amount of $144,500.

Law and Analysis

[15] There are two issues to determine:

a. Does the Ontario Superior Court of Justice have jurisdiction to hear the proceeding; and b. If it does, is Ontario the convenient forum.

[16] My answer to both is yes.

Ontario has Jurisdiction

[17] Both parties agree that this Court has jurisdiction simpliciter over the application where there is a “real and substantial connection” between the dispute and Ontario. [See Van Breda, supra note 1 at 80-81 and 94-95.] That determination is a two-stage inquiry:

a. The Applicant must demonstrate that there is a presumptive connecting factor tying the Application to Ontario. In Ontario the courts looks to the enumerated heads in rule 17.02 of the Rules of Civil Procedure; and b. If so, can the Respondent rebut the presumption by showing that, on the facts of the particular case, the connecting factor is insufficient to establish a real and substantial connection. [See Ibid. and also Neger v Neger, 2018 ONSC 6739 at 18-19.]

[18] The standard of proof to establish a connecting factor is a “good arguable case”. [See King v Giardina, 2017 ONSC 1588 at 17 and 20 citing Ontario v Rothmans Inc., 2013 ONCA 353 at 54, 110 118-9.]

[19] The relevant connecting factors raised by Real Crowd is found in rule 17.02(f)(i) and (iv), namely that the Engagement Letter was made in Ontario and breached in Ontario.

[20] The parties agree that in the normal course, contracts are formed in the place were acceptance is received. In this case, that is Ontario. However, 103 argues that this general rule is displaced due to the language of the Engagement Letter. It relies on the Supreme Court of Canada’s decision in Lapointe Rosenstein Marchand Melancon LLP v Cassels Brock & Blackwell LLP, 2016 SCC 8 to support its position.

[21] Lapointe is a case arising out of the restructuring by GM Canada in the midst of the 2009 financial downturn. GM Canada offered compensation to dealers pursuant to “Wind-Down Agreements” by which dealers, if they accepted GM’s offer, would terminate their dealerships.

[22] Unlike in conventional contracts, the Wind-Down Agreements were not binding on GM Canada on acceptance by any given dealer. Instead, the Wind-Down Agreements were “conditional upon all of the Non-Retained Dealers accepting the offer. GM Canada explained in a letter accompanying the agreements that Any Wind-Down Agreement signed and returned to GM Canada would not become effective unless and until GM Canada provides written notice to those dealers that the Acceptance Threshold Condition and any other required conditions have been met or have been waived by GM Canada. In other words, in the unique facts of that case, the agreement was not binding on receipt of acceptance, as in the normal course, but rather on written notice from GM that the threshold condition had meet met or waived. In those circumstances, the Supreme Court held that the contract was formed when GM Canada providing written notice to the dealers who accepted its offer, not when the dealers received GM’s notice.

[23] 103 submits that the wording of the Engagement Letter in the present case is similar. In particular it states:

By your acceptance of this Engagement Letter you appoint RCC to act as exclusive Agent in connection with the financing… [Emphasis added]

[24] In my view, this case is not similar to the unique facts of Lapointe. The Letter of Engagement is a conventional contract in which it is not complete until acceptance has been conveyed. To conclude otherwise would mean that if 103 never conveyed its acceptance of the Engagement Letter, RCC would still be bound by the contract and expected to do the work. This defies commercial reasonableness. In any event, Real Crowd has demonstrated a good arguable case that the Engagement Letter was formed in Ontario and connects the Application to Ontario.

[25] Having accepted that Real Crowd has established a good arguable case that the Engagement Letter was formed in Ontario, I need not discuss the locus of the alleged breach.

[26] I also conclude that 103 has failed to rebut the presumption. I have not been provided with any argument or pointed to any evidence to rebut the presumption of jurisdiction. This application has a real and substantial connection to Ontario.

Ontario is the Convenient Forum

[27] Ontario is the appropriate forum for this straightforward application. It is clear from Van Breda that 103 must demonstrate that BC is clearly the more convenient forum and that 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. In my view, 103 has failed to meet its burden.

[28] The non-exhaustive list of factors to consider are succinctly articulated by my colleagues Master McGraw in We Serve Health Care LP v Onasanya, 2018 ONSC 1758 at 61 and 62 and Nishikawa, J. in Neger, supra note 5 at 33:

a. The location of the parties, witnesses and evidence; b. The applicable law and its weight in comparison to the factual questions to be decided; c. The location where the bulk of the evidence will come from; d. The existence of any contractual provisions determining forum; e. The importance of avoiding a multiplicity of proceedings; f. Any geographical factors suggesting the natural forum; g. Whether declining jurisdiction would deprive the plaintiff/ applicant of a legitimate juridical advantage; h. The cost of transferring the case to another jurisdiction of declining the stay; i. The impact of the transfer on the conduct of litigation or on related parallel proceedings; j. The possibility of conflicting judgments; k. Problems related to the recognition and enforcement of judgments; and l. The relative strength of the connection of the two parties.

[29] As in all discretionary matters, I add that the Court must consider the overall fairness of litigating the dispute in the forum selected by Plaintiff/Applicant. Further, I note that the threshold for displacing the Applicant’s choice of forum is high and that the Court should adopt a cautious approach to fact-finding particularly with respect to matters that are at the heart of the lawsuit. [See We Serve, supra note 11 at 63.]

[30] I will now turn to the most relevant of the factors listed above. Neither party provided me with any additional factors that may be particular to the circumstances of this case.

The location of the parties, witnesses and evidence

[31] 103 submits that all of their material witnesses reside in BC. This includes four witnesses from the financiers. This Application seeks payment of a commission. According to 103’s principal, Mr. Anandji, 103 intends to take the position in the Application that the Engagement Letter is void because neither Real Crowd nor its representative, Mr. Gemmell is a registered mortgage broker under BC’s Mortgage Broker’s Act, RSBC 1996, c 313. It is unclear why the evidence of the potential financiers of the Maple Ridge project is relevant and 103 has advanced no evidence nor argument on the point.

[32] I acknowledge that 103’s principal is in BC. This does not necessary favour BC. Applications are intend to be straightforward, with few disputed facts and on a paper record. Real Crowd has brought this application pursuant to rule 14.05(3)(d) and (h) which state:

(3) A proceeding may be brought by application where these rules authorize the commencement of a proceeding by application or where the relief claimed is,

(d) the determination of rights that depend on the interpretation of a deed, will, contract or other instrument, or on the interpretation of a statute, order in council, regulation or municipal by-law or resolution;

(h) in respect of any matter where it is unlikely that there will be any material facts in dispute requiring a trial.

[33] As such, any cross-examinations ought not to be extensive and in any event, there is no longer a presumption of in-person examinations in modern day litigation. As noted by Master Muir in Concord Adex Inc. v 20/20 Management Limited, 2017 ONSC 3897 at 11 (citing Justice Newbould in Midland Resources Holdings Ltd. v Shtaif, [2009] OJ No 5216 (SCJ)): “Video examinations of witnesses should be encouraged rather than discouraged. Use of such technology can help address the high cost of modern litigation and will further the objectives of Rule 1.04.”

[34] In sum, on a simple application such as this proceeding on a paper record, the location of the parties, witnesses and evidence is at best a neutral factor.

The applicable law and its weight in comparison to the factual questions to be decided

[35] According to 103, it will be necessary for the Court adjudicating this Application to apply BC law because of its argument that the Engagement Letter is void because neither Real Crowd nor Mr. Gemmell are registered under BC’s Mortgage Brokers Act. This is central to 103’s response to the Application and I agree that in general, a domestic court has more expertise in applying domestic laws than a foreign court. However, in the circumstances of this case, I adopt Justice Nishikawa comment in Neger that Ontario courts often apply foreign law. In sum, this factor only mildly favours BC.

The cost of transferring the case to another jurisdiction of declining the stay and the impact of the transfer on the conduct of litigation or on related parallel proceedings

[36] Both parties have retained sophisticated Toronto counsel. There is an arguable case that the contract was formed in Ontario. The work under the contract was performed in Ontario. The property is in BC but its locus is irrelevant. There are affiants in both BC and Ontario. I agree with Real Crowd that had it not been for this motion, the parties could have been well underway in the litigation and close to adjudication. Transferring this matter to BC would involve BC counsel being retained and getting up to speed and commencing a new application. This leads to inflated litigation costs and delay, both of which can be avoided by maintaining the Application in Ontario with little or no detriment to 103. In my view, these factors and overall fairness favours keeping the Application in Ontario.

Problems related to the recognition and enforcement of judgments

[37] It is 103’s submission that its assets are in BC and that Real Crowd would therefore have to enforce any judgment in BC. This, it suggests, favours BC as the appropriate forum.

[38] I respectfully disagree. Any problem in collection is for Real Crowd to bear. It has clearly accepted that risk by commencing the Application in Ontario. This factor is neutral at best.

Disposition

[39] Based on the summary of my reasons, I dismiss 103’s motion. Ontario has jurisdiction simpliciter over this dispute and 103 has not demonstrated that BC is clearly the more appropriate forum for this Application.

Costs

[40] The parties have agreed to costs of $5500 to the successful party. As such, costs are payable to Real Crowd in the all-inclusive amount of $5500 payable within 30 days of today. I am grateful to both counsel for their able and helpful submissions.

Original signed Master P. Tamara Sugunasiri Date: May 13, 2019