Court File and Parties

COURT FILE NO. CV-21-3664 DATE: 20230424 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Gaurav Tewari Plaintiff – and – Sirajuddin Kazani, Saifuddin Taher, Husein Amjad Ali, Habib Hussain, Kazani Trading Co. LLC, Kazani Paper Fz-LLC, and SNZ Trading Defendants

Gaurav Tewari, in person Irfan Kara, and Ally Lawrence, for the defendants (except Saifuddin Taher)

Heard on September 2, 2022, at Oshawa, by video conference

S.T. BALE J.:

Overview

[1] This action arises from alleged breaches of two agreements between Tewari De-Ox Systems, Inc. and the defendant Kazani Trading Co. LLC.

[2] On this motion, the defendants (other than Saifuddin Taher who is not a moving party) argue that this court does not have jurisdiction to hear and determine the plaintiff’s claim. They argue that the action should be dismissed or permanently stayed and that the plaintiff should be left to litigate his claims in the United Arab Emirates.

[3] In addition to the defendants’ motion, the plaintiff moves for default judgment, the defendants having been noted in default.

Factual and Procedural Background

[4] Gaurav Tewari is a resident of Ontario and is the majority shareholder of Tewari De-Ox Systems Inc., a corporation based in Ontario.

[5] Kazani Trading Co. LLC. and Kazani Paper FZ-LLC are corporations resident in and carrying on business in the UAE.

[6] SNZ Trading carries on business in Ontario.

[7] Saifuddin Taher, Husein Amjad Ali and Habib Hussain are individuals resident in the UAE.

[8] The plaintiff alleges that Sirajuddin Kazani is an individual resident in both Ontario and the UAE. Kazani’s position is that he is resident in the UAE only.

[9] Tewari De-Ox entered into two agreements with Kazani Trading – a “confidentiality and non-disclosure agreement” (“CNDA”) dated February 10, 2021 and a “memorandum of understanding” (“MOU”) dated March 4, 2021. Both agreements were entered into in the UAE.

[10] The CNDA provided that it was “solely for the purpose of entering into a business arrangement between the parties and no other purpose.” The MOU provided that its purpose was to establish the terms under which Tewari De-Ox would collaborate with Kazani Trading with respect to the distribution of Tewari De-Ox’s technology in the UAE.

[11] In the statement of claim, Tewari alleges that the defendants (collectively) have breached the terms of the MOU and have misappropriated trade secrets. He alleges that the defendants never intended to comply with the terms of the agreements and entered into them fraudulently for the purpose of obtaining proprietary information and competing with him.

[12] Of note is the fact that the contracting party, Tewari De-Ox Systems, Inc., is not named as a plaintiff, and that the named plaintiff, Gaurav Tewari, is not a party to either agreement. Also of note is the fact that while Tewari alleges that all defendants have breached the agreements, only Kazani Trading is a party to those agreements.

[13] The plaintiff served Sirajuddin Kazani, Saifuddin Taher, Husein Amjad Ali, Habib Hussain, Kazani Trading Co. LLC and Kazani Paper FZ-LLC in the UAE. In doing so, he failed to comply with Rule 17 of the Rules of Civil Procedure.

[14] On December 1, 2021, counsel for the moving defendants wrote to the plaintiff and advised that Torys LLP was in the process of being retained. The plaintiff immediately demanded a notice of intent to defend and threatened to note SNZ Trading in default.

[15] On December 3, 2021, SNZ Trading served the plaintiff with a notice of intent to defend, without prejudice to its rights to seek relief under Rule 21.

[16] On December 17, 2021, counsel for the moving defendants delivered a “with prejudice” letter to the plaintiff offering to settle on the basis of a without costs discontinuance, in light of what counsel alleged to be fatal procedural and substantive deficiencies. In the same letter, he advised the plaintiff that if the offer were not accepted, the moving defendants would move to dismiss the action. The plaintiff responded with “see you in court.”

[17] On December 17, 2021 and January 13, 2022, the plaintiff filed requisitions to note the moving defendants in default, and they are remain noted in default.

Relief Requested

[18] The plaintiff moves for default judgment, the defendants having been noted in default.

[19] The defendants (other than Saifuddin Taher) move for the following orders: (i) that the noting of the defendants in default be set aside; (ii) that service of the statement of claim outside Ontario on Sirajuddin Kazani, Husein Amjad Ali, Habib Hussain, Kazani Trading Co. LLC and Kazani Paper FZ-LLC be set aside, pursuant to rule 17.06(1)(a); (iii) that this action be stayed pursuant to rule 17.06(1)(b) on the ground that this court does not have jurisdiction to hear and determine the claim or that Ontario is not a convenient forum for the hearing of the proceeding; or, (iv) that the statement of claim be struck out pursuant to rule 21.01(1)(b), without leave to amend, on the ground that it discloses no reasonable cause of action.

Analysis

Setting aside noting in default

[20] At the time he noted the defendants in default, the plaintiff was on notice that the defendants intended to move for an order dismissing or staying the proceeding.

[21] Where there is a disagreement about pleadings, timing or otherwise, it is not appropriate for the plaintiff to take default proceedings. Default proceedings should only be taken where a defendant does not participate in the proceeding or where a defendant’s pleading has been struck out. Using the default rules for tactical advantage just sets the parties down the path of unnecessary motions to set aside the default. This is the opposite of ensuring the efficient, affordable, and fair resolution of the civil dispute on the merits: Strathmillan Financial Ltd. v. Teti, 2021 ONSC 7603, at paras. 1-5.

[22] In the result, the noting in default of the defendants Sirajuddin Kazani, Husein Amjad Ali, Habib Hussain, Kazani Trading Co. LLC and Kazani Paper FZ-LLC will be set aside and the plaintiff’s motion for default judgment as against them will be dismissed.

[23] Saifuddin Taher will remain noted in default. The plaintiff may move for judgment as against him at trial pursuant to rule 19.05(4).

Service of claim outside Ontario

[24] The plaintiff served SNZ Trading in Ontario. He served the remaining defendants in the UAE without leave under rule 17.03 to do so.

[25] Under rule 17.02, a party to a proceeding may, without a court order, be served outside Ontario, in circumstances set out in the rule. Under rule 17.04, an originating process served outside Ontario without leave must specifically refer to the provision of rule 17.02 relied on in support of such service. In the present case, the statement of claim contains no such reference and I am satisfied that none of those provisions are applicable to the claims against Ali or Hussain. Accordingly, service of the statement of claim as against Husein Amjad Ali and Habib Hussain will be set aside.

[26] Under rule 17.02(f)(iii), service outside Ontario is authorized in respect of a contract where the parties to the contract have agreed that the courts of Ontario are to have jurisdiction over legal proceedings in respect of the contract. In the present case, the MOU provided that the courts of the UAE or Ontario would “have jurisdiction over any action arising out of this MOU and over the parties … .” As it was a party to the MOU, I find that the service on Kazani Trading in the UAE was valid and service on it will therefore not be set aside.

[27] For reasons that I will explain in considering the question of jurisdiction, service on Sirajuddin Kazani and Kazani Paper will also not be set aside.

Jurisdiction

Jurisdiction simpliciter

[28] The defendants argue that this court does not have jurisdiction simpliciter to hear and determine the plaintiff’s claim. They argue that there is no real and substantial connection between Ontario, the subject-matter of the litigation and the defendants. In Club Resorts Ltd. v. Van Breda, 2012 SCC 17, at para. 91, the court identified the following non-exhaustive list of presumptive connecting factors which prima facie entitle a court to assume jurisdiction over a dispute:

(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.

[29] Defendants’ counsel argues that none of these presumptive connecting factors are present in this case and that the plaintiff has not otherwise demonstrated a real and substantial connection between Ontario, the subject-matter of the litigation and the defendants.

[30] However, in his affidavit, the plaintiff swears that at Expo 2021, Sirajuddin Kazani “introduced himself as a Canadian citizen and having corporations both in CANADA and UAE.” Later in the affidavit, the plaintiff says: “Since the defendant, Sirajuddin Kazani, a Canadian citizen and Ontario resident was in UAE, he was served in UAE on November 9, 2021.” Mr. Kazani has not provided an affidavit for use on this motion. I also note that defendants’ counsel conceded during argument that Kazani owns a home in Ontario. On the basis of this evidence and in the absence of evidence to the contrary, I find that Sirajuddin Kazani is resident in both Ontario and the UAE.

[31] The fact that SNZ is an Ontario corporation carrying on business in Ontario is also a presumptive connecting factor. The defendants argue that the presumption can be rebutted and that it is rebutted here because SNZ’s business in Ontario is wholly unrelated to the subject-matter of the dispute. However, the plaintiff alleges that SNZ was involved in the misappropriation of Tewari De-Ox’s trade secrets and SNZ has provided no evidence to support the argument that its business in Ontario is wholly unrelated to the subject matter of the dispute.

[32] In any event, “real and substantial connection” is not the only basis upon which a court may find that it has jurisdiction over a dispute. Another is the parties’ agreement. In the present case, the MOU contained the following jurisdiction agreement:

The construction, interpretation and enforcement of this MOU shall be governed by the laws of the Country of Canada and/or laws of United Arab Emirates. The courts of the UNITED ARAB EMIRATES OR of the province of ONTARIO, CANADA shall have jurisdiction over any action arising out of this MOU and over the parties, and the venue shall be either UNITED ARAB EMIRATES OR Richmond Hill, Ontario, CANADA, at sole discretion of Tewari De-Ox Systems, Inc.

[33] The defendants argue that the jurisdiction agreement is an unenforceable “floating clause” because jurisdiction is not determined until a subsequent event – Tewari De-Ox exercising its sole discretion – occurs. In support this argument, they cite Armar Shipping Co., Ltd. v. Caisse Alegerienne d’Assurance et Reassurance, [1980] 2 Lloyd’s Rep. 450. However, in The Amar, the question to be decided was one of choice of law. The bill of lading in that case provided that “[g]eneral average shall be adjusted, stated and settled … at such port or place as may be selected by the carrier.” The plaintiff carrier subsequently selected London as the place of adjustment and argued that the dispute should therefore be determined under English law. On appeal, the court held that a contract must have a proper law from inception and that a subsequent event cannot be a relevant factor in determining the proper law at an earlier date. This is because the rights and obligations of the parties in performing a contract must be defined by some system of private law from the outset: Amin Rasheed Shipping Corp. v. Kuwait Insurance Co., [1983] 2 All ER 884, [1984] A.C. 50 (H.L.). I do not see the ratio in these cases to be relevant to the question in the present case of whether an agreement that gives one party the sole discretion to choose between the courts of two jurisdictions can be a valid jurisdiction agreement.

[34] Where there is a forum selection clause, the court should give effect to the intentions of the parties as reflected in the clause – the parties should be held to their bargain: Loat v. Howarth, 2011 ONCA 509, at paras. 32-35. “Canadian courts have recognized that deference to forum selection clauses achieves greater international commercial certainty, shows respect for the agreements that the parties have signed, and is consistent with the principles of comity”: Halsbury’s Laws of Canada, “Conflict of Laws”, (Toronto: LexisNexis Canada, 2020 Reissue), at HCF-7. For these reasons, I find the jurisdiction agreement in this case to be valid and binding on the parties to the agreement – Tewari De-Ox Systems, Inc. and the defendant Kazani Trading Co. LLC.

[35] The question then becomes whether the defendants who are not parties to the MOU should be bound by the jurisdiction agreement. In Aldo Group Inc. v. Moneris Solutions Corp., 2013 ONCA 725, at paras. 45-47, the court explained the reasons for limiting the scope of forum selection clauses to those parties who have bargained for their application:

[T]here are good reasons to limit the scope of forum selection clauses to those parties who have bargained for their application. Litigation in a particular forum has real consequences that parties must evaluate … . It is precisely because signatories to a forum selection clause have weighed and accepted the forum and its risk that these clauses should be enforced. Non-signatories have not necessarily engaged in this weighing exercise.

[36] The plaintiff argues that the defendants who are not parties to the MOU are bound based on the following language in the CNDA: “When used herein, each of TEWARI and KAZANI shall include, individually and collectively, their officers, directors, employees, agents and associates.” He also points to paragraph 7(ii) of the MOU: KAZANI and its associates and affiliates will sign off on Tewari De-Ox Systems’ standard ‘Non-disclosure, Confidentiality and Non-circumvention Agreement.’ ” I disagree (except in relation to Sirajuddin Kazani). The difficulty with the argument is that neither Ali nor Hussain were signatories to either agreement and the plaintiff has provided no basis upon which the court could find that Mr. Kazani, in signing the agreements upon behalf of Kazani Trading, had authority to bind them. I also note that the MOU contains the following provision: “The rights, duties and obligations contained in this MOU shall operate only between the parties to this MOU and shall apply solely to the benefit of the parties to this MOU.”

[37] However, the positions of Sirajuddin Kazani and Kazani Paper are different from that of Taher, Ali and Hussain. Non-signatories to a forum selection clause may be bound based on the “closely related” doctrine which binds non-signatories where they are so closely related to the dispute that it is foreseeable that they would become bound by the clause. In Aldo Group, at para. 49, the court refers to two U.S. cases which the court says illustrate circumstances in which the “closely related” doctrine has been sensibly applied. In one of them, the court applied the doctrine to bind the corporate defendant’s president who had signed, on the company’s behalf, an agreement containing a New York forum selection clause.

[38] In the present case, Mr. Kazani signed the MOU upon behalf of Kazani Trading. He was therefore in a position to evaluate the consequences of agreeing to the forum selection clause and should be deemed to have accepted the risk that issues arising from the agreements would be litigated in Ontario. Similar reasoning applies to Kazani Paper.

[39] In the result, I find that the court has jurisdiction to hear and determine the plaintiff’s claims against the defendants Sirajuddin Kazani, Kazani Trading Co. LLC., Kazani Paper FZ-LLC and SNZ Trading.

Forum non conveniens

[40] The defendants argued that even if I were to find this court to have jurisdiction simpliciter, I should stay the proceedings on the basis of forum non conveniens. However, given that I have found the court to have jurisdiction based upon a forum selection clause, it is unnecessary for me to consider that argument. In Halsbury’s Laws of Canada, “Conflict of Laws”, at HCF-7, the authors provide the following analysis:

The grounds on which jurisdiction agreements may be set aside are limited to situations such as where a party has been fraudulently induced to enter into the contract, where the nominated court is unavailable, where the claim or the circumstances are outside of what was reasonably contemplated by the parties, where unforeseeable circumstances have since made a fair trial impossible, or where enforcement of the clause would be contrary to public policy. The existence of a forum selection clause can, by itself, be a sufficient reason for a court to decline jurisdiction, obviating the need to undertake such an analysis. A valid forum selection agreement is not simply one of the factors to consider in determining a jurisdictional challenge. Thus, the question is not one of exercising discretion as a court would do in a forum non conveniens analysis (i.e., as if there were no jurisdiction agreement). It is a question of whether the parties' agreement should be set aside for reasons relating to formation, consideration, and other matters affecting validity.

Strong cause test

[41] In the alternative, the defendants argue that I should stay the action, because there is strong cause for doing so. In support of their position, they cite Douez v. Facebook, Inc., 2017 SCC 33, at para. 29: “In exercising its discretion at this step of the analysis, a court must consider ‘all the circumstances’, including the ‘convenience of the parties, fairness between the parties and the interests of justice’ ” (citation omitted). They also cite Douez, at para. 34, to the effect that a party who has freely negotiated a jurisdiction clause is more likely to be bound by it than one who has had the clause imposed upon him or her. They argue that in the present case, the forum selection clause is “manifestly unfair” because it gives Tewari De-Ox the sole discretion to choose the forum as between the UAE and Ontario and they suggest that the clause was imposed on them. I disagree.

[42] In Douez, the forum selection clause was contained within a consumer contract that anyone who wants to use Facebook must agree to. The importance of the decision is in the majority’s reasons to the effect that the strong cause test should be less restrictive in the consumer context. In recognizing that commercial and consumer relationships are very different, the court said the following, at para. 31:

That said, the strong cause factors have been interpreted and applied restrictively in the commercial context. In commercial interactions, it will usually be desirable for parties to determine at the outset of a business relationship where disputes will be settled. Sophisticated parties are justifiably "deemed to have informed themselves about the risks of foreign legal systems and are deemed to have accepted those risks in agreeing to a forum selection clause" (Aldo Group Inc. v. Moneris Solutions Corp., 2013 ONCA 725, 118 O.R. (3d) 81, at para. 47). In this setting, our Court recognized that forum selection clauses are generally enforced and to be encouraged "because they provide international commercial relations with the stability and foreseeability required for purposes of the critical components of private international law, namely order and fairness" (GreCon Dimter inc. v. J.R. Normand inc., 2005 SCC 46, [2005] 2 S.C.R. 401, at para. 22).

[43] In the present case, there is no evidence to support the submission that the forum selection clause was imposed on Kazani Trading or that Mr. Kazani did not freely accept the risk that any claims arising from the agreements between Tewari De-Ox and Kazani Trading could be litigated in Ontario at the option of Tewari. There is also no evidence of any inequality of bargaining power.

[44] The defendants also argue that it would be inconvenient if the forum selection clause were to be upheld because UAE law would be the proper law to apply. Again, I disagree. The MOU provides that “[t]he construction, interpretation and enforcement of this MOU shall be governed by the laws of the Country of Canada and/or laws of United Arab Emirates.” In these circumstances, I see no reason why this court would choose to apply the laws of the UAE rather than the law of the forum.

[45] In the result, the action will be stayed as against the defendants Husein Amjad Ali and Habib Hussain; and the motion to stay the action as against Sirajuddin Kazani, Kazani Trading Co. LLC, Kazani Paper FZ-LLC and SNZ Trading will be dismissed.

Proper parties

[46] The defendants argue that Gaurav Tewari in not the proper plaintiff because the contracts in question are in the name of Tewari De-Ox Systems Inc. In response, Mr. Tewari says that he sees no difference between him and the company – that he “lives and breathes De-Ox.” While I understand that thinking, he must, as a matter of law, add Tewari De-Ox Systems, Inc. as a plaintiff if he wishes to sue on the agreements to which Tewari De-Ox is a party. He is granted leave to amend the statement of claim by adding the corporation and the action will be stayed until he has done so.

[47] The defendants argue that Sirajuddin Kazani, Husein Amjad Ali, Habib Hussain, Kazani Paper FZ-LLC, and SNZ Trading are not proper parties because they are strangers to the agreements and have no personal or direct interest in the issues being litigated.

[48] However, I do not see this to be a “proper parties” issue. Rather, I deal with it below in relation to whether the plaintiff has pleaded a reasonable cause of action against them.

Striking statement of claim for failure to disclose cause of action

[49] The defendants argue that the statement of claim should be struck out, without leave to amend, for failing to disclose a reasonable cause of action.

[50] In the statement of claim, under the heading “CAUSES OF ACTION”, the plaintiff sets out, under a number of subheadings, what he refers to as causes of action. The defendants argue that a number of those subheadings do not refer to causes of action “recognized at law.”

[51] The defendants argue that “trade secret violation” is not a cause of action that exists at law. They concede that an owner of a trade secret that has been misused, misappropriated or improperly disclosed has civil causes of action that may be asserted but that no such causes of action have been pleaded. I disagree. The plaintiff has pleaded breach of contract, breach of confidence, breach of fiduciary duty and unjust enrichment, all of which are causes of action which may be asserted where trade secrets have been misused. The fact that there may be no cause of action formally named “trade secret violation” is beside the point.

[52] The defendants argue that “Violation of Theft Liability Act” is not a recognized cause of action because there is no such legislation applicable in Ontario. I agree. It appears that the plaintiff is referring to Texas legislation. Paragraphs 36 and 37 of the statement of claim will therefore be struck out.

[53] The defendants argue that “anti-trust/anti-competitive activities” is not a recognized cause of action. They refer to the plaintiff’s allegation that the defendants “created a monopoly for themselves and have made it prohibitive for the plaintiff to penetrate the market in the Middle-East by violating all terms of both agreements”, but argue that the plaintiff does not plead that the alleged activities “violated any legislation or triggered a specific cause of action.” I disagree. Again, the fact that there may be no cause of action formally named “anti-trust/anti-competitive” is beside the point. It is sufficient that the plaintiff has pleaded that the activities in question amount to a breach of both agreements.

[54] The defendants argue that the plaintiff’s allegations of breach of contract have not been properly pleaded. They say that the allegations are bald assertions of liability that do not sufficiently indicate the case they have to meet. I disagree. The plaintiff has pleaded specific breaches of the financial terms of the agreement and of the terms of the agreement related to minimum volume of product to be ordered. He has pleaded that the defendants breached the CNDA and MOU by using confidential information to establish their own business in competition with him. He has pleaded extensive particulars of the confidential information in question. The facts of the breaches have been sufficiently pleaded. The evidence upon which the plaintiff will rely to prove those facts will be available to the defendants through the discovery process.

[55] The defendants argue that the plaintiff alleges that all the defendants, parties to the agreements or not, have breached the agreements, and that throughout the statement of claim, he refers to them as an indivisible group without pleading facts to establish a non-contractual cause of action against the non-parties. I agree that the plaintiff has pleaded his case as if all the defendants were parties to the agreements and, as I said earlier, I do not accept that the provisions of the CNDA and MOU relied upon by the plaintiff to make them parties are effective to do so. However, I do not agree that he has failed to plead facts to establish a non-contractual cause of action against the non-parties to the agreements.

[56] In paragraph 44 of the statement of claim, the plaintiff pleads that the defendants “did not leave any stone unturned to prevent the Plaintiff from entering the Middle East market by conspiring and starting their own subsidiary to commercialize the Plaintiff process.” It therefore appears that he is alleging a civil conspiracy.

[57] The elements of unlawful conduct conspiracy are set out in Agribrands Purina Canada Inc. v. Kasemaekas, 2011 ONCA 460, at para. 26:

• that the defendants acted in combination, by agreement or with a common design;
• that their conduct was unlawful;
• that their conduct is directed towards the plaintiff;
• that the defendants should have known that, in the circumstances, injury to the plaintiffs would likely result; and
• that their conduct caused injury to the plaintiff.

[58] In the present case, the plaintiff pleads that the defendants other than Kazani Trading acted together with Kazani Trading with the intent to unlawfully compete with him in the Middle East. He alleges that they did so by using fraudulent means to obtain confidential information from him (Kazani Trading entering into the CNDA and MOU with no intention of complying with their terms), and that as a result, he has suffered damages. In my view, that is a sufficient pleading of both civil conspiracy and fraud.

[59] As to the plaintiff’s pleading that the defendants other than Kazani Trading were parties to the agreements, it will be a simple matter for those defendants to deny that they were parties to, or bound by, those agreements.

[60] The defendants argue that the statement of claim fails to disclose a reasonable cause of action for breach of fiduciary duty. I disagree. It is not plain and obvious that a person who has been given trade secrets to be used under strict terms as to confidentiality does not have a fiduciary duty to the person permitting use of the information.

Disposition

[61] For the reasons given, orders to go as follows:

(i) that the noting in default of all defendants other than Saifuddin Taher be set aside; (ii) that the plaintiff’s motion for default judgment be dismissed, but that the plaintiff may move for default judgment against Saifuddin Taher at trial; (iii) that service outside Ontario of Husein Amjad Ali and Habib Hussain be set aside; (iv) that the action will be stayed as against the defendants Husein Amjad Ali and Habib Hussain; but the motion to stay the action as against Sirajuddin Kazani, Kazani Trading Co. LLC, Kazani Paper FZ-LLC and SNZ Trading will be dismissed; (v) that the action will be stayed against all parties until Tewari De-Ox Systems Inc. is added as a plaintiff and the plaintiff will have leave to amend the statement of claim to do so; (vi) that paragraphs 36 and 37 of the statement of claim will be struck out; and (vii) that the defendants’ motion to strike out the statement of claim will otherwise be dismissed.

[62] If the parties are unable to agree on costs, I will consider brief written argument provided that it is delivered to monica.mayer@ontario.ca, no later than May 29, 2023.

“S.T. Bale J.” Released: April 24, 2023

COURT FILE NO. CV-21-3664 DATE: 20230424 ONTARIO SUPERIOR COURT OF JUSTICE (PROCEEDING COMMENCED AT Oshawa)

BETWEEN:

Gaurav Tewari Plaintiff – and – Sirajuddin Kazani and others Defendants

REASONS FOR DECISION

S.T. Bale J. Released: April 24, 2023