COURT FILE NO.: CV-21-00663453-0000
DATE: 20230606
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: BANK OF NEVIS INTERNATIONAL LIMITED, Plaintiff
AND:
MARK KUCHER and BNI HOLDCORP LTD., Defendants
BEFORE: Dineen J.
COUNSEL: James Hardy and Rebekah O’Hare, for the Plaintiff/Responding Party
Robert Staley, Nathan Shaheen, and Mehak Kawatra, for the Defendants/Moving Parties
HEARD: May 16, 2023
ENDORSEMENT
[1] The plaintiff is suing the defendants for defamation and related causes of action, and for breaching a confidentiality term contained in an agreement for the purchase of shares. It contends that after the investment agreement fell through when regulatory authorities in Nevis would not approve the defendant Mr. Kucher as a shareholder, he made false statements and shared confidential information in order to harm the plaintiff’s business and cause regulatory and criminal investigations to be launched against it in Nevis.
[2] The defendants move for the dismissal of the action on jurisdictional grounds. They make three related arguments: Ontario lacks jurisdiction over this dispute; a forum selection clause in the investment agreement in favour of the courts of St. Kitts and Nevis should be enforced; and, that the doctrine of forum non conviens favours Nevis as the forum for this dispute.
[3] The defendants were noted in default. A preliminary issue is whether the noting in default should be set aside.
Factual Background
[4] The plaintiff is an international bank headquartered in Nevis. Under the laws of that jurisdiction, it is not able to do business with residents of Nevis and its clients are all international. There is no evidence however that it conducts business in Ontario or any other jurisdiction.
[5] The defendant Mr. Kucher is the plaintiff’s former Vice President of Investments and BNI Holdcorp is a corporation set up by Mr. Kucher to buy shares in the plaintiff. In 2019, all of the shares in the plaintiff were sold to Petrodel Investment Advisors (Nevis), a Nevis corporation owned by Michael Prest who also served as the CEO and a Director of the plaintiff by December 31, 2019 to June 2021.
[6] The dispute between the parties originated in an investment agreement negotiated between Mr. Kucher and Mr. Prest in December of 2019 under which BNI Holdcorp would buy shares in the plaintiff from Petrodel. The agreement was conditional on Mr. Kuchner receiving approval from Nevis’s Regulator of International Banking to become a beneficial shareholder, approval that he had sought but that was still outstanding at the time of the agreement.
[7] The agreement has the following confidentiality provisions:
Unless required by law, regulation, Court Order or regulatory body, the Parties agree that they shall not, at any time, disclose to any person or entity except accountants or attorneys of the Parties the contents of this Investment Agreement and shall by contract prohibit their directors, officers, employees or agents or any other person who under the terms of this Investment Agreement obtain any such information or knowledge from disclosing the same to any other person.
Neither Party shall make any public disclosures regarding this Investment Agreement or its subject matter without the prior written consent of the other Party. If at any time the Purchaser receives an unsolicited enquiry, proposal or offer in relation to the matters herein, the Purchaser undertakes to advise PIAN promptly of the contents of such enquiry, proposal or offer and to notify such third party (without revealing our identity) that the Purchaser is unable to enter into any discussions or negotiations with such third party due to being bound by an existing exclusivity agreement, as dated 02 April 2018 ("Exclusivity Agreement").
[8] The agreement also contained a choice of law and forum selection provision:
This Investment Agreement shall be governed by and interpreted under and pursuant to the laws of the Federation of St. Kitts and Nevis, disregarding its conflict of laws principles.
Any disputes arising out of this Investment Agreement will only be heard exclusively in the Courts which exercise jurisdiction in the Federation of St. Kitts and Nevis.
[9] The regulatory approval required for the investment to be completed never came through. Mr. Kuchner contends that Mr. Prest took his money and failed to obtain regulatory approval and deliver the shares. Mr. Prest denies this and says that Mr. Kuchner has made false reports to various criminal and regulatory authorities in Nevis leading to unwarranted investigations.
The statement of claim
[10] The plaintiff’s action has essentially two related components. First, it contends that the defendants breached the confidentiality clauses included in the investment agreement between BNI Holdcorp and the plaintiff that provided that neither party would disclose the contents of the agreement without the consent of the other party except to their accountants and lawyers. The statement of claim contends that the defendants disclosed details of the agreement to others including a former employee of the plaintiff.
[11] Second, the statement of claim alleges that Mr. Kucher made defamatory statements about the plaintiff to third parties, some of which relied on confidential information he obtained through the course of his duties as a director of the plaintiff, with the effect of damaging the plaintiff’s reputation and business and causing its chosen auditors to decline to serve in that role.
Issues and analysis
The defendants’ noting in default
[12] Mr. Kucher was served with the statement of claim in Nevis on June 30, 2021. He did not immediately respond and was noted in default. He has testified on this application that this was because he was told by a board member of the plaintiff that the action had been initiated by Mr. Prest without authority and that the board of directors would ensure that it did not proceed.
[13] When this board member resigned, Mr. Kucher retained Ontario counsel who wrote to the plaintiff on September 20, 2021, taking the position that he would move to dismiss the action on jurisdictional and other bases if the plaintiff did not withdraw it. The plaintiff’s counsel responded on December 10, 2021, advising that they had noted the defendants in default. Mr. Kucher testified that this was the first time he became aware of the noting in default and his counsel wrote back the same day requesting that the plaintiff set aside the noting in default, which the plaintiff’s counsel declined to do.
[14] I accept the position of the defendants that the noting in default should be set aside. They have provided a reasonable explanation for the relatively short delay in responding to the action and moved promptly when they learned of the noting in default. I reject the submission made in the plaintiff’s factum that the noting in default should be maintained because the defendants have yet to provide a draft statement of defence.
Jurisdiction and the forum selection clause
[15] The defendants contest jurisdiction on multiple bases. They rely on the term of the investment agreement providing that any dispute arising from the agreement should be litigated in St. Kitts and Nevis and ask that this term be enforced. They further argue that there exists no presumptive connecting factor nor any real and substantial connection between the dispute and Ontario that could ground jurisdiction.
[16] The plaintiff argues that jurisdiction exists by virtue of Mr. Kucher’s former residence in Ontario and invite me to infer that he made the allegedly defamatory statements from Ontario. It argues that the forum selection clause is inapplicable to its causes of action, does not apply to Mr. Kucher who was not a formal party to the investment agreement, or in the alternative should not be enforced due to fears that a fair hearing would not take place in Nevis given the regulatory enforcement efforts targeting the plaintiff there.
[17] Assuming without deciding that this court otherwise has jurisdiction over this claim, I accept the argument of the defendants that the forum selection clause applies and should be enforced.
[18] The applicable test was summarized as follows by Jamal J.A. in Loan Away v. Facebook Canada Ltd. 2021 ONCA 432:
At the first step, the party seeking a stay must establish that the forum selection clause is valid, clear, and enforceable, and that it applies to the cause of action before the court. The court makes this determination based on the principles of contract law. The plaintiff may resist the enforcement of the forum selection clause by raising defences such as, for example, unconscionability, undue influence, or fraud. If the party seeking the stay establishes the validity of the forum selection clause, the onus shifts to the plaintiff: Douez, at paras. 28-29; Pompey, at para. 39.
At the second step, the plaintiff must establish “strong cause” not to enforce the forum selection clause. A court exercising its discretion at this step must consider all the circumstances, including the convenience of the parties, fairness between the parties, the interests of justice, and public policy. The list of “strong cause” factors is not closed and provides a court with some flexibility in exercising its discretion. In the commercial context, the “strong cause” factors have been interpreted and applied restrictively. Forum selection clauses are encouraged and generally enforced because they promote order and fairness by providing stability and foreseeability to international commercial relations: Douez, at paras. 29-31; Pompey, at paras. 19, 30-31; and GreCon Dimter inc. v. J.R. Normand inc., 2005 SCC 46, [2005] 2 S.C.R. 401, at para. 22.
[19] Such a clause may capture an entire claim even where some defendants are not parties to the contract. In Novatrax International Inc. v. Hagele Landtechnik GmbH 2016 ONCA 771, Brown J.A. for the majority endorsed the following description of the law by the motion judge in that case:
[W]here the plaintiff itself takes a position in its claim, (and supports the position by advancing allegations of a nature that make its position clear), that the allegations against the parties not privy to the contract are so intertwined with the claims being asserted against a party that is a party to the contract that they should be heard and decided together, and where the allegations clearly all relate to and arise out of the dealings between the parties to the contract, that the choice of forum clause agreed to by the plaintiff should govern.
[20] In my view, there is no basis to doubt that the forum selection clause applies to the plaintiff’s allegation that the defendants breached the confidentiality provisions of the agreement. I also accept the defendant’s position that the clause should be applied to the claims against Mr. Kucher although he was not formally a party to the agreement.
[21] It is clear on the face of the pleadings that there is no meaningful distinction between Mr. Kucher and the corporate defendant which is simply a holding company for his benefit. The plaintiff expressly ties them together in the statement of claim, asserting that Mr. Kucher should be held personally liable for any damages against the corporate defendant and that he acted as its principal and agent. I accordingly find that the choice of forum clause should govern the claims against both defendants. I do not agree with the plaintiff that the third party beneficiary clause in the agreement precludes this conclusion.
[22] The broader allegations of defamatory statements are also entirely bound up in the dispute over the investment agreement and the alleged breach of its confidentiality provisions. It is apparent from the statement of claim that the same set of statements were alleged to be wrongful in both respects. This is made explicit at paragraph 44 of the statement of claim which alleges that the impugned statements by Mr. Kucher “were defamatory and a breach of the Investment Agreement.”
[23] I also disagree with the plaintiff that it can establish “strong cause” not to enforce the clause. The plaintiff notes the following list of factors set out by Juriansz J.A. in Expedition Helicopters Inc. v. Honeywell Inc. 2010 ONCA 351 at para 24:
A forum selection clause in a commercial contract should be given effect. The factors that may justify departure from that general principle are few. The few factors that might be considered include the plaintiff was induced to agree to the clause by fraud or improper inducement or the contract is otherwise unenforceable, the court in the selected forum does not accept jurisdiction or otherwise is unable to deal with the claim, the claim or the circumstances that have arisen are outside of what was reasonably contemplated by the parties when they agreed to the clause, the plaintiff can no longer expect a fair trial in the selected forum due to subsequent events that could not have been reasonably anticipated, or enforcing the clause in the particular case would frustrate some clear public policy. Apart from circumstances such as these, a forum selection clause in a commercial contract should be enforced. (Emphasis added)
[24] I do not accept the plaintiff’s submission that Mr. Kucher’s alleged conduct is not the sort of dispute that would have been contemplated when the parties agreed to the forum selection clause. An allegation that after the failure of the agreement, the principal of one of the parties breached the confidentiality clause in an effort to revive or enforce the agreement seems to me to be precisely the sort of dispute arising out of the agreement that the clause is meant to capture.
[25] I also do not agree that the ongoing regulatory and criminal proceedings involving the plaintiff or Mr. Prest mean that the plaintiff can no longer receive a fair trial in Nevis. I cannot conclude on the record before me that the plaintiff has been treated unfairly or that it would be unable to lead necessary evidence because Mr. Prest may be evading charges in that jurisdiction such that the plaintiff should be relieved of its obligations under the agreement.
Forum non conveniens
[26] If I am mistaken and the forum selection clause is not applicable to all of the causes of action or parties in this action, I find in any case that Nevis is the suitable forum under the doctrine of forum non conveniens.
[27] The relevant legal principles were recently summarized by the Court of Appeal in 778938 Ontario Limited v. EllisDon Corporation 2023 ONCA 182 as follows:
The court retains the residual discretion to displace a plaintiff’s right to choose the forum for the adjudication of its claim and decline jurisdiction if the defendant satisfies its burden of demonstrating that another jurisdiction is clearly the more appropriate forum: see, e.g., Vale Canada Limited v. Royal & Sun Alliance Insurance Company of Canada, 2022 ONCA 862, at para. 147. The Supreme Court of Canada in Van Breda, per LeBel J., at para. 109, described the defendant’s burden and the court’s correct approach as follows:
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 rules. 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.
Factors that a court may consider in deciding whether to apply forum non conveniens may vary depending on the context, but generally include the following:
i. the relative strengths of the parties’ connections to each forum;
ii. the interests of both parties: the comparative convenience and expense for the parties to the proceeding and for their witnesses in litigating in the court or in any alternative forum, including the domicile of the parties, and the locations of witnesses and of pieces of evidence;
iii. the law to be applied to issues in the proceeding;
iv. the desirability of avoiding a multiplicity of legal proceedings, and of avoiding conflicting decisions in different courts;
v. the enforcement of an eventual judgment;
vi. juridical advantage or disadvantage;
vii. the interests of justice, including the fair and efficient working of the Canadian legal system as a whole.
[28] In my view, many of these factors clearly favour Nevis as the preferable forum and none favour Ontario.
The relative strengths of the parties’ connections to each forum
[29] This factor strongly favours Nevis. The plaintiff and the defendant BNI Holdcorp are both incorporated and headquartered in Nevis. The only connection any party has to Ontario is that Mr. Kucher used to maintain a residence here.
The comparative convenience and expense for the parties
[30] This factor again favours Nevis. No witnesses or evidence are located in Ontario. It is a reasonable inference from the statement of claim that relevant witnesses however will be found in Nevis given that the claim relies on statements made to government officials in Nevis and members of the Nevis business community.
The law to be applied to issues in the proceeding
[31] The investment agreement that the plaintiff alleges was breached contains a clause expressly providing that the laws of St. Kitts and Nevis will apply to any dispute. There is no reason to apply Ontario law to any aspect of this dispute. The plaintiff acknowledges that this factor favours Nevis but submits that it should not receive great weight given that this Court is capable of interpreting and applying foreign law with the benefit of evidence. In my view, the need to refer to the laws of St. Kitts and Nevis would substantially increase the complexity of the case if heard in Ontario and is a strong reason to favour the courts of that jurisdiction who are expert in the applicable law.
The desirability of avoiding a multiplicity of proceedings and conflicting decisions
[32] To the extent that this factor applies, it favours Nevis insofar as regulatory and other proceedings that relate to this dispute are underway in that jurisdiction. There is also evidence of another proceeding in Nevis about the transfer of shares in the plaintiff to a third party. There is no related proceeding in Ontario. I generally agree with the plaintiff however that this factor is not helpful and that there is little reason to believe that any of the other proceedings could be consolidated with this action even if it were to be heard in Nevis.
The enforcement of an eventual judgment
[33] The plaintiff argues that this factor favours Ontario in that I should infer that the defendants have assets here. I see no basis to draw this conclusion. The corporate defendant is registered in Nevis and the only bank account of Mr. Kucher that the plaintiff has led evidence about was in British Columbia. While Mr. Kucher at one time owned a residence in Toronto, on cross-examination he stated that it was being sold and he was moving entirely to Arizona.
Juridical advantage and the interests of justice
[34] I find that Nevis is overwhelmingly the most suitable forum for the resolution of this dispute, and the fair and efficient administration of justice is best served if this action is litigated there rather than in Ontario. A central feature of this dispute is a contract between two Nevis corporations with forum selection and choice of law clauses favouring that jurisdiction.
Disposition
[35] Despite Mr. Hardy’s able argument, I conclude that this action must be dismissed. The defendants are entitled to their costs on a partial indemnity basis which I fix at $50,000.
Dineen J.
Date: June 6, 2023