Court File and Parties
Court File No.: CV-21-665011 Date: 20230620 Superior Court of Justice - Ontario
Re: PESORMAMA INC., Plaintiff And: BORDEN LADNER GERVAIS LLP ET AL, Defendants
Before: Associate Justice Josefo
Counsel: M. van Zandvoort, counsel for plaintiff, responding party on the motion, G. Tighe & A. Farley, counsel for defendants, moving parties on the motion,
Motion Heard: June 14, 2023 Decision Released: June 20, 2023
Endorsement
What this Motion is About:
[1] Defendants, a national law firm (occasionally, “BLG”) and Robb McNaughton, a partner based in BLG’s Calgary, Alberta office, move to have this Ontario action stayed pursuant to Section 106 of the Courts of Justice Act, based on forum non conveniens. Plaintiff resists the motion, asserting that this Court has and should take jurisdiction as Ontario is a convenient forum.
[2] The issue before me is not whether the plaintiff can sue defendants. Rather, it is where the plaintiff can sue these defendants—Ontario or Alberta—which is in dispute. It is not, however, in dispute that, as Mr. Tighe submitted, there is a tolling agreement as of May 2022. Thus, if I do stay the action, plaintiff may bring its action in Alberta consistent with the terms of that tolling agreement without fear of a limitation issue arising.
Relevant Factual Underpinnings:
[3] Cases involving relationships of any sort (marriage, business and employment, or solicitor-client) which go awry usually have a happy beginning, yet ultimately an unhappy ending. This case involving a solicitor-client relationship which started out positively and ended badly is no different.
[4] In or about April 2016, lawyer McNaughton, through a colleague at an accounting firm, met Rahim Bhaloo. Bhaloo, pursuant to both McNaughton’s April 17, 2023 affidavit and Bhaloo’s May 11, 2023 affidavit in response, subsequently informed McNaughton that he had a plan to open discount retail stores in Mexico called “Pesorama”, akin to the “Dollarama” format.
[5] On July 31, 2017, Bhaloo, for Pesorama, signed a retainer agreement (“agreement”) with BLG. It had been sent to Bhaloo by email. Bhaloo, pursuant to his affidavit (paragraph 20), noted that he “emailed the execution page” back to McNaughton later, on August 8, 2017. The agreement itself is dated June 6, 2017.
[6] Some key portions of the agreement are, in my view, relevant and inform my reasoning in this matter:
Robb McNaughton, [ telephone number omitted ] [ email address omitted ] will have primary responsibility for our relationship with you. If at any time you have questions, concerns, suggestions or criticisms, please contact the undersigned immediately.
We believe that a strong and lasting business relationship is based on clarity. In order to ensure this clarity in our relationship with you, we have prepared this engagement letter, which defines your and our respective roles and responsibilities. Please review it carefully. The agreement resulting from your acceptance of this engagement letter will be subject to the terms set out in this letter, including the general terms and conditions (the "Terms and Conditions") set out in the attached schedule, which forms an integral part of the letter. If this letter meets with your approval and reflects your understanding of your and our respective roles and responsibilities, please sign the enclosed duplicate copy and return it to the undersigned.
Description of Mandate: (a) You have retained us to provide you with legal services in connection with preparing and drafting an Offering Memorandum and Subscription Agreement. (b) We will provide you with legal services which in our professional judgment are reasonably necessary and appropriate to carry out this mandate. We estimate that our legal fees in relation to the Offering Memorandum will be in the range of between $20,000 and $25,000. We confirm that (i) we are not providing legal advice or services except as described above, and (ii) once our work on this matter has been completed (see Section 7 below), we will not advise you as to subsequent legal developments relating to this matter. Of course you may limit or expand the scope of our engagement from time to time, provided that we agree to any such expansion. If at your request we represent you on related or additional matters and do not ask you to enter into a separate engagement agreement, the terms of this engagement will apply to such other matters.
Governing Law and Language Our engagement with you is governed by the laws of the province of Alberta and the federal laws of Canada. Any dispute between us will be dealt with exclusively in the courts of that province. You and BLG agree that the agreement resulting from your acceptance of this engagement letter and all documents relating thereto shall be drafted in the English language. Vous et BLG consentent que la convention résultant de votre acceptation de cette lettre d'engagement ainsi que tous documents y afférent soient rédigés en anglais.
[7] From the record, it is clear that Bhaloo signed, scanned, and returned the agreement to McNaughton. This is notwithstanding his assertion, also at paragraph 20 of his affidavit that: “I do not recall reviewing the Retainer Agreement or signing it.” At paragraph 19, Bhaloo also asserted that McNaughton “…at no time discussed the terms of it with me.” I will address the relevance of that assertion subsequently in these reasons.
[8] The October 16, 2017 certificate of incorporation confirmed that Pesorama was incorporated as a federal corporation under the Canada Business Corporations Act. The head office was in Calgary, Alberta.
[9] Subsequently, with the various intervening details not required to be set out herein for purposes of this motion, Pesorama sought financing to “go public”, to use a commonly understood phrase. Yet matters did not proceed as everyone hoped. Additionally, Pesorama’s relationship with BLG was fraying, over at least initially, money.
[10] McNaughton testified in his affidavit (paragraph 23) that as of November 19, 2019, BLG’s receivables were $413,000. A reduction in the fees was apparently provided. McNaughton further asserted that Pesorama agreed to make two payments: one of $150,000 and two weeks later, another $200,000. While the first installment was paid on November 29, 2019, the second installment was only paid on July 31, 2021.
[11] On June 17, 2020, Bhaloo was dismissed for just cause from his position of CEO of Pesorama. He disputed the dismissal, leading to his taking legal steps. Ultimately, Minutes of Settlement were signed on July 23, 2020.
[12] Amongst the various litigious issues in Alberta in which Pesorama is now or has been involved, in December 2020 Bhaloo commenced what McNaughton describes as a “proxy battle” for Pesorama (paragraph 43 of his affidavit). Bhaloo was successful in this endeavour, leading McNaughton and others to leave the Pesorama Board of Directors in or about December 2020. Subsequently, Pesorama terminated BLG’s retainer. At the time of termination, BLG asserted that it was owed more than $702,000 for services rendered from November 19, 2019 through December 2020.
[13] On February 19, 2021, absent payment of its outstanding accounts, BLG commenced a process pursuant to the Alberta Rules of Court to pursue a “taxation” of its accounts. While in Ontario this is now described as an “assessment”, in days long past it was also called a “taxation”. It is helpful at this juncture to reproduce the relevant Alberta Rules of Court:
1.1(1) These rules govern the practice and procedure in: (a) the Court of King’s Bench of Alberta, and (b) the Court of Appeal of Alberta. (2) These rules also govern all persons who come to the Court for resolution of a claim, whether the person is a self-represented litigant or is represented by a lawyer.
10.9 The reasonableness of a retainer agreement and the reasonableness of a lawyer’s charges are subject to review by a review officer in accordance with these rules, despite any agreement to the contrary.
10.11 A lawyer’s charges may be reviewed in Alberta (a) at the request of a client if: (i) the lawyer resides in Alberta, (ii) the lawyer’s principal office is in Alberta, (iii) the lawyer’s charges specify an Alberta address for the lawyer or the law firm of the lawyer, (iv) most of the services were performed in Alberta, (v) the services were performed in connection with legal proceedings commenced in Alberta in which the lawyer was a lawyer of record, or (vi) the retainer agreement between the lawyer and the client so provides, and (b) at the request of the lawyer if: (i) the client resides in Alberta, (ii) the principal office or place of business of the client is in Alberta, (iii) most of the services were performed in Alberta and the lawyer has no office in the jurisdiction outside Alberta where the client resides or carries on business, or (iv) the retainer agreement between the lawyer and the client so provides.
10.18(1) A review officer (a) must refer any question arising about the terms of a retainer agreement to the Court for a decision or direction, and (b) may refer any question arising about a lawyer’s charges to the Court for a decision or direction.
[14] Subsequent to the taxation process being initiated by BLG, on July 5, 2021, Pesorama issued a Notice of Action in this within matter. On August 4, 2021, the within Statement of Claim issued. On July 13, 2021, after issuing the Notice of Action, Pesorama’s counsel wrote to the Taxation officer of the Alberta Court, enclosing the Notice of Action and submitting as follows:
…I understand that pursuant to rule 10.18(1), the dispute as to the terms of the retainer must be referred to the Court. As the Ontario Superior Court will now adjudicate the existence of a valid retainer between BLG and Pesorama, I request that no further steps be taken in the assessment pending the determination of Pesorama’s action.
[15] In response, the BLG lawyer in Calgary pursuing the taxation of the accounts did not consent to have the assessment adjourned pending the Ontario court action being determined. It was asserted that Alberta Rule 10.18 requires any referral to be to the Alberta Court of Queen’s Bench [ now King’s Bench ], to which referral BLG would not object.
[16] Following receipt of both submissions, the Taxation officer wrote the following Endorsement:
Gentlemen,
Under the circumstances and in view of the fact that 5 days have been scheduled for this hearing, the Review Officer has directed the issue as to whether BLG and Mr. McNaughton have a valid retainer agreement with PesoRama, and if so, the terms of the agreement be referred to the court for a determination and direction pursuant to R 10.18. Counsel are at liberty to include any additional issues regarding the retainer agreement to the court.
The hearing dated August 16-23 inclusive is adjourned sine die.
[17] During the Bhaloo cross examination of May 23, 2023, Mr. van Zandvoort, counsel for Pesorama acknowledged, at questions 186-187 during an exchange with BLG counsel Mr. Tighe, that what the Taxation Officer provided was an “Endorsement”. I agree that, on its face, that is what this was—an Endorsement. I return to what I find is the significance of that subsequently in these reasons.
[18] The Pesorama Ontario action seeks significant damages from BLG for negligence in its representation, asserting inter alia that by being on the Board of Directors, McNaughton was conflicted in his roles. Clearly, the allegations are serious. BLG and McNaughton defended the action, asserting at paragraph six of the Statement of Defence as follows:
- PesoRama owes BLG approximately $702,000 in accounts receivable. Prior to the issuance of this action in Ontario, BLG had commenced an application for a taxation of its accounts rendered to PesoRama before the courts in the Province of Alberta. After BLG had commenced the application for a taxation of its accounts, PesoRama commenced the within proceeding. BLG pleads that the within proceeding is a wholly tactical attempt to seek to avoid payment of accounts due and owing to the Defendants by the Plaintiff.
Applying the Law to the Facts:
[19] My task in coming to my conclusions in this matter has been made easier by the comprehensive factums, records, and hyperlinked compendiums which each side uploaded to Caselines in a timely fashion, allowing me ample opportunity to prepare. The thorough and detailed oral advocacy by both counsel is also appreciated.
[20] In these reasons I will not address all the arguments in all the factums (original and responding); nor will I address all of what counsel stated in their well-made submissions. While I assure both sides that I have considered all relevant materials and all arguments made, to try to go through everything would unduly elongate these reasons and delay the issuance of them, to no real benefit. Thus, I only address the facts and law as necessary for these reasons to be sufficiently complete and comprehensible, including by any reviewing Court.
[21] It is a well understood premise that the plaintiff in an action is the “dominus litus”; the “master of the suit”, who typically may choose where the action is brought. Yet that beginning premise is not absolute, nor is it the end of the analysis. The 2016 decision of the Ontario Court of Appeal in Novatrax International Inc. v. Hägele Landtechnik GmbH, 2016 ONCA 771 provides a helpful summary of the law, especially given the facts of this case, including where, in Novatrax, as is also in this within matter, there is a forum selection clause. Justice of Appeal Brown concluded as follows:
[5] The parties agree that the motion judge correctly identified the governing principles as those set out by the Supreme Court of Canada in Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27, [2003] 1 S.C.R. 450, and by this court in Expedition Helicopters Inc. v. Honeywell Inc., 2010 ONCA 351, 100 O.R. (3d) 241, leave to appeal refused, [2010] 3 S.C.R. v (note), and 2249659 Ontario Ltd. v. Sparkasse Siegen, 2013 ONCA 354, 115 O.R. (3d) 241:
(i) The law favours the enforcement of forum selection clauses in commercial contracts. Where the parties have agreed to a forum selection clause, the starting point of the forum non conveniens analysis is that the parties should be held to their bargain;
(ii) A stay of an action should be granted unless the plaintiff shows "strong cause" that the case is exceptional and the forum selection clause should not be enforced;
(iii) The requirement that the plaintiff show "strong cause" presumes that there is an agreement containing a clear forum selection clause and that clause, by its terms, applies to the claims the plaintiff seeks to bring in Ontario; and
(iv) The forum selection clause pervades the forum non conveniens analysis and must be given full weight in the consideration of other factors.
[22] In this case, the agreement between BLG and Bhaloo, undisputedly signed by Bhaloo even if he has no memory of doing so, has at paragraph 10 what I find is clear language identifying “the laws of the province of Alberta [govern]…[and] any dispute between us will be dealt with exclusively in the courts of that province”.
[23] Plaintiff’s counsel submits that in the relationship between solicitor and client, the solicitor must, in essence, take special care to ensure that the client understands the scope of and all terms pertaining to the retainer. Certainly, I agree that it is necessary that parties in a lawyer-client relationship have solid communication and good understanding, including understanding the terms of the retainer. Yet in making his point Mr. van Zaandvoort relies upon the Supreme Court of Canada decision in Douez v. Facebook Inc, 2017 SCC 33, [2017] SCR 751. In my view, the facts of Douez are quite different from the facts that are before me in this within matter.
[24] In Douez, the Court addressed a forum selection clause for a user of the behemoth Facebook. The clause was in essence a contract entered into by all users when they “clicked” to accept the Facebook terms of use, a pre-condition necessary for all Facebook users. Thus, this is a contract of adhesion. Ms. Douez wanted to bring a class action claim in the British Columbia courts asserting a breach of her privacy rights. In relying on its forum selection clause, Facebook sought to impose onerous terms on how and where her case could continue. The SCC found that this was contrary to public policy, as well as would fail to take into account the “quasi-constitutional privacy rights”, which the Court described as “compelling” (paragraph 4 of reasons of Karakatsanis, Wagner and Gascon JJ). The Court thus found that the forum selection clause in this case to be not enforceable.
[25] When discussing forum selection clauses, generally, the Supreme Court in Douez provided the following useful guidance:
[28] … courts apply a two-step approach to determine whether to enforce a forum selection clause and stay an action brought contrary to it (Pompey, at para. 39). At the first step, the party seeking a stay based on the forum selection clause must establish that the clause is “valid, clear and enforceable and that it applies to the cause of action before the court” (Preymann v. Ayus Technology Corp., 2012 BCCA 30, 32 B.C.L.R. (5th) 391, at para. 43; see also Hudye Farms, at para. 12, and Pompey, at para. 39). At this step of the analysis, the court applies the principles of contract law to determine the validity of the forum selection clause. As with any contract claim, the plaintiff may resist the enforceability of the contract by raising defences such as, for example, unconscionability, undue influence, and fraud.
[29] Once the party seeking the stay establishes the validity of the forum selection clause, the onus shifts to the plaintiff. At this second step of the test, the plaintiff must show strong reasons why the court should not enforce the forum selection clause and stay the action. In Pompey, this Court adopted the “strong cause” test from the English court’s decision in The “Eleftheria”, [1969] 1 Lloyd’s Rep. 237 (Adm. Div.). 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” (Pompey, at paras. 19 and 30-31). Public policy may also be a relevant factor at this step (Holt Cargo Systems Inc. v. ABC Containerline N.V. (Trustees of), 2001 SCC 90, [2001] 3 S.C.R. 907, at para. 91, referred to in Pompey, at para. 39; Frey, at para. 115).
[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) [ my underlining ].
[26] In my view, the conclusions of the Supreme Court support the forum and law selection clause in this within case being upheld. The agreement, and the clause, is “valid, clear and enforceable” and I find that it applies to the cause of action which the plaintiff brings. The parties in this matter are, moreover, sophisticated. Mr. Bhaloo was not a vulnerable individual retaining a lawyer for the first time on, for example, a family law matter or to make a simple will. Again, the evidence is clear that he was a business-person consulting counsel for high level business purposes, including to eventually have his company “go public”.
[27] In that context, again, I find the agreement to be a clear and readable document. There is no evidence from Bhaloo that he did not understand it; only that he has no recall whether he read it or not and if he signed it. Yet, again, to that latter point, the evidence is clear that he signed it.
[28] Bhaloo in fact had the agreement for some time before he signed and returned it. Even if he chose to sign it without reading it, and without calling McNaughton as the agreement itself clearly invited him to do if he had any questions then, as an adult, as a sophisticated businessman who was then contemplating strategic business ventures, that is a risk which Mr. Bhaloo was obviously prepared to run. As an adult who chose to sign what was obviously a legal document, without calling his lawyer to discuss it if he had questions or doubts (and since this was near the beginning of their relationship, Bhaloo was then on good terms with his chosen lawyer), Mr. Bhaloo is not excused from his obligations because he made a choice to sign the agreement without reading it, if in fact that is the case. There is, again, no reliable evidence that he did not read it. In any event, as an adult he is held to his bargain absent evidence of unconscionability, manifest unfairness, or unequal bargaining power, as discussed in Douez, with no reliable evidence of any of that in this within case.
[29] Ahead, I elaborate further on the commercial context of this case. Yet succinctly, given that Bhaloo was engaging a lawyer for a sophisticated commercial purpose, there is no “strong cause” to justify the agreement not being enforced, including its forum selection clause.
[30] As to the applicability of the agreement throughout the relationship, initially the retainer was for a specific purpose as Mr. van Zandvoort submitted. Yet pursuant to the excerpt from the agreement which discussed the scope of the retainer, found just above clause ten, clearly, it allowed the parties sufficient flexibility as their relationship evolved. Thus, I find that the agreement continually covered the parties as they addressed other matters beyond its initial scope.
[31] Returning to the issue flagged in paragraph seven, above, Bhaloo asserted that McNaughton “…at no time discussed the terms of it with me.” I disagree, however, that the onus was on McNaughton, on the facts of this case, to in essence, hold Bhaloo’s hand. McNaughton, again, sent him the agreement. Pursuant to the opening paragraph of it, McNaughton’s contact information which, by then, Bhaloo likely well knew, was clearly set out. The document discusses the need for clarity and communication. If Bhaloo genuinely had any questions or concerns, all he had to do was pick up the phone or send an email. That he did not do so in my view undermines the submission in that regard made by his counsel, and Bhaloo’s subsequent, after-the-fact evidence, that he had doubts or concerns about this document.
[32] Further addressing the specific nature of this case, in my view it can be described as a dispute, with different sub-issues, between the lawyer, law firm, and the former client. Yet at its heart, it is a high-stakes commercial and financial dispute, including with the requisite “board games” (proxy disputes and the like). In such circumstances of a commercial context, even within a solicitor-client relationship, as the Ontario Court of Appeal and the Supreme Court of Canada have held, forum selection clauses will be upheld given such sophisticated parties. In this case, the evidence is clear that the parties deliberately chose Alberta law to apply, and the Alberta courts to govern. It is not for this Court to interfere with their freely made choice and bargain.
[33] If the Ontario Court had to interpret Alberta law, an expert on Alberta law would likely be required to testify—indeed, each side may well seek to bring their own expert to disagree about Alberta law, which an Ontario Justice would then have to sort out. While no doubt an Ontario Justice could do so, it strikes me as an inefficient and cumbersome process when the readily available alternative is that the plaintiff proceeds with its litigation, along with all the other cases from the fallout and disputes involving Pesorama and, inter alia, its Directors in Alberta (where the other actions are proceeding). An Alberta Justice will not need evidence on Alberta law, rendering a trial in the plaintiff’s action far more efficient (using less court time and costing the parties less, given no need for legal experts).
[34] Moreover, different proceedings in Ontario and Alberta essentially addressing similar if not the same facts will be avoided. Avoiding a multiplicity of proceedings, with the risk of different results, in my view is an important factor not to be ignored.
[35] Finally, that BLG delivered a Statement of Defence in the Ontario action is not dispositive of its motion. Pursuant to the case-law, what is more likely to be dispositive is a forum selection clause. As discussed in Momentous.ca Corp. v. Canadian American Assn. of Professional Baseball Ltd., 2010 ONCA 722, by delivering its pleading the non-Ontario defendants “attorned to the jurisdiction of the Ontario Court…an Ontario court has jurisdiction over the plaintiff’s claim. But that does not end the matter” [underlining added, from paragraph 35 of Momentous]. The Court of Appeal in Momentous ultimately upheld the motions Judge, who found that there was no “strong cause” to displace the forum selection clause, notwithstanding the attornment.
[36] I also do not find that BLG delayed in bringing its motion in the context of this case and these facts. In Momentous, the Court of Appeal did not find an eight-month delay to bring the motion inordinate. Waiting to raise forum non conveniens until the case would be listed for trial, after completing discoveries in Ontario would, however, be inordinate delay, pursuant to Mobile Mini Inc. v. Centreline Equipment Rentals Ltd., leading to the motion being dismissed. Yet the facts in Mobile Mini are not at all similar to the facts before me, as pertaining to modest and explainable delay in this within case.
[37] The above is sufficient to be dispositive of the motion. Yet, if I am incorrect in how I have interpreted this matter in context, I turn to the Endorsement of the Taxation officer who applied the Alberta Rules of Court. In my view, it is plain and obvious that the Alberta Taxation officer could not defer to an Ontario Justice. The Alberta Rules at Rule 1.1 makes clear that these apply to the Alberta Courts, just as the Ontario Rules of Civil Procedure apply to the Ontario Superior Court. This, I would hope, is common sense.
[38] Accordingly, Rule 10.18, when providing for a referral to “the Court”, must mean to the Alberta Court. That is what the Taxation officer did—her Endorsement referred the matter to an Alberta Judge pursuant to the Rules which govern. Her decision was not appealed. It is thus a final, and binding, decision. It would be an abuse of process to attempt to ignore it or to try an end-run around it (both of which is what the plaintiff seeks to do) and bring the matter to Ontario.
[39] Given, also, the clear connection to Alberta, and the lack of a genuine connection to Ontario (using law firms boardrooms from time-to-time for meetings is not equivalent to owning or leasing premises in Ontario or having premises where one actually conducts one’s business in Ontario), it is also my view that Alberta is the most convenient, and most appropriate forum for this matter. I find that Ontario is not the convenient forum for this action. It is, indeed, forum non conveniens.
Conclusion:
[40] For all these reasons, the defendant’s motion is granted. This within action is stayed on the basis of forum non conveniens. The plaintiff is, pursuant to the terms of the tolling agreement, free to assert its claim against these defendants in Alberta.
Costs and Order:
[41] Counsel and I agreed that, upon receipt of this decision, they will attempt to agree on costs. If they cannot, a tele-case-conference may be scheduled through ATC Ms. Sharma. Costs submissions of up to three pages each, using normal font and headings, may be submitted via Ms. Sharma. Such is in addition to any Cost Outlines already uploaded to Caselines.
[42] If the parties agree on costs and on the terms of an Order, such may be sent via Ms. Sharma.