Court File and Parties

COURT FILE NO.: CV-21-331 DATE: 2023/04/06 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

AUREUS SOLUTIONS INC. Respondent (Plaintiff) – and – CANADIAN PACIFIC RAILWAY COMPANY Applicant (Defendant)

COUNSEL: J. Ng, for the Plaintiff D. Tupper and W. Sattar, for the Defendant

HEARD: March 8, 2023

Reasons for Decision

PARFETT J.

[1] This motion is a request by the Defendant, Canadian Pacific Railway Company (“CP”) to dismiss the Statement of Claim of the Plaintiff, Aureus Solutions Inc (“Aureus”), on the basis that this court lacks jurisdiction over the claim.

[2] For the reasons set out below, the motion is granted.

Background

[3] CP is a federal corporation involved in transportation. CP carries on business throughout Canada, but its head office is in Calgary, Alberta.

[4] Aureus is a federally incorporated company providing environmental compliance, management, and wastewater consulting services across Canada. Aureus’ head office is in Kingston, Ontario.

[5] Aureus had provided consulting services to CP since 2011. There were previous contracts between Aureus and CP. However, those contracts were for specific projects.

[6] In spring 2020, two things happened simultaneously. CP began an audit of the services provided by Aureus and they entered into negotiations with Aureus for a Master Services Agreement that would govern their ongoing relationship.

[7] The Supply of Services Agreement (“SSA”) was signed on November 18, 2020. This agreement contained a forum selection clause granting exclusive jurisdiction to Alberta courts in the event of any claim against CP.

[8] In April 2021, CP provided a letter to Aureus terminating the SSA as of July 21, 2021. Aureus filed a Statement of Claim in this court alleging breach of contract, negligent and fraudulent misrepresentation, deceit arising during the course of contract negotiations. Alternatively, the Statement of Claim alleges breach of the duties of good faith, honesty, and fair dealing with respect to the termination of the SSA. Finally, Aureus also requests declaratory relief and recission of unenforceable terms of the SSA or the entirety of the SSA.

Issues

1. Should the claim be dismissed for lack of jurisdiction; or
2. Is Ontario forum non conveniens?

Position of the Parties

[9] The arguments of both parties focussed on the issue of the validity of the forum selection clause. I advised the parties at the outset that I was of the view that in the present era of easily available videoconferencing, a forum non conveniens argument, involving exclusively the location of witnesses, which was the case here, was unlikely to succeed.

[10] The Defendant states simply that the contract is prima facie valid and, therefore, the forum selection clause applies and the action in Ontario must be dismissed.

[11] The Plaintiff argues that the essence of the action is that the contract is void and, therefore, the forum selection clause is not applicable in this case.

Legal Principles

[12] The leading authority on the enforcement of a forum selection clause is Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27, a 2003 decision of the Supreme Court of Canada. Essentially, that case stands for the proposition that while enforcement of a forum selection clause is discretionary, a person seeking to avoid such a clause must show ‘strong cause’ for derogating from the forum selection clause.

[13] There is a two-stage test set out in Pompey to determine whether a forum selection clause is enforceable:

• First, the party relying on the clause must demonstrate that the clause is ‘valid, clear and enforceable and that it applies to the cause of action before the court.’
• Second, if the clause is found to be valid, the second stage shifts the onus onto the opposing party to show ‘strong cause’ as to why the court should not enforce the clause. The court ‘must consider all the circumstances,’ including the ‘convenience of the parties, fairness between the parties and the interests of justice.’ [2]

[14] Importantly, in the analysis of the present case is the approach taken in Pompey to allegations of fundamental breach. The court states,

…a court, in the context of an application for a stay to uphold a forum selection clause in a bill of lading, must not delve into whether a party has deviated from, or fundamentally breached an otherwise validly formed contract. Such inquiries would render forum selection clauses illusory since most disputes will involve allegations which, if proved, will make the agreement terminable or voidable by the aggrieved party. Moreover, while the choice of forum for the determination of the existence of the agreement would be made without reference to the forum selection clause in the contract, if the agreement were found to remain intact, resort to the said clause would presumably be necessary to decide the appropriate forum in which to settle the rights of the parties under the agreement. [3]

[15] The factors to be applied in the analysis of the issue of whether the contract governs the issue of forum selection are set out in the decision of Expedition Helicopters Inc. v. Honeywell Inc., 2010 ONCA 351, and state that a forum selection clause can be avoided where:

• The contract is brought about by fraud or improper inducement;
• The contract is otherwise unenforceable;
• The court in the forum named in the 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. [5]

Analysis

[16] In its materials, the Plaintiff argued that the onus on the Defendant is high and that as in Rule 20 motions, Rule 21 motions can only be granted if the Defendant can show that it is plain and obvious that the claim cannot succeed. This argument was not pursued orally to any significant degree. The focus of the debate was whether the forum selection clause applied in the circumstances of this case.

[17] Aureus does not dispute that the forum selection clause is valid, clear and enforceable. However, as noted earlier, its position is that the substance of the dispute occurred before the contract was signed and, therefore, the clause does not apply. Instead, the court should engage in the forum simpliciter analysis.

[18] Aureus relies heavily on the decision of Goudie v. City of Ottawa, 2003 SCC 14. That is a case involving a labour dispute and the issue was whether the dispute should be brought in the courts or to the Labour Relations Board. In that case, the court noted that the courts have jurisdiction over contracts predating a collective agreement. [7]

[19] I agree with the Defendant that this case is not helpful in dealing with the issue in the present case.

[20] There is no dispute that the parties engaged in lengthy negotiations prior to signing the SSA. It is also agreed that an audit was ongoing between the parties that overlapped in time with the contract negotiations. The Plaintiff contends that the Defendant made misrepresentations during the audit and the negotiations that breached the principles of good faith and honesty. Consequently, the Plaintiff argues that at the time the misrepresentations occurred, there was no contract, and the forum selection clause should not apply.

[21] In my view, I am not in a position currently to opine on the validity of the contract. The allegations that there were fraudulent misrepresentations are just that – allegations. Those allegations are disputed by the Defendant. Those factual disputes must wait for the court that hears the action to decide. For the purposes of this motion, I find there is a signed agreement containing a forum selection clause.

[22] As noted in Pompey, the mere fact that the Plaintiff alleges that the contract is voidable is not sufficient, of itself, to provide the ‘strong cause’ needed to oust a forum selection clause. To the contrary, the court has said that there are ‘compelling public policy reasons in favour of upholding the ‘strong cause’ test.’ [8]

[23] In the present case, both parties were sophisticated commercial entities who negotiated over several months and ultimately signed an agreement that both parties acknowledge was a comprehensive services contract. Aureus says that the forum selection clause was never brought to their attention, but it had formed part of every previous contract they signed with CP. A failure to properly read a contract is not a reason to not enforce the forum selection clause. [9]

[24] Consequently, the forum selection clause applies, and the action will be dismissed.

Costs

[25] Unless the parties cannot agree to costs, written submissions can be provided. The submissions should be limited to three double spaced pages, excluding bills of costs or cases. CP’s submissions are due two weeks after the release of this decision, and Aureus’ submissions four weeks after the release of this decision.

The Honourable Madam Justice Julianne Parfett

Released: April 6, 2023