Court File and Parties
COURT FILE NO.: CV-20‐00654027 MOTION HEARD: 20240417, 20240502, 20240514 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Miriam Merkur and Amalgo Corporation Inc., Plaintiffs AND: Jean-Pierre Devidal and Frédéric Menguy, Defendants
BEFORE: Associate Justice L. La Horey
COUNSEL: David Ziegler and Rachel Hung, Counsel for the Moving Parties / Defendants Marshall Reinhart, Counsel for the Responding Parties / Plaintiffs
HEARD: April 17, 2024, May 2, 2024 and written submissions May 14, 2024
Reasons for Decision
Overview
[1] In this action, the plaintiffs, an Ontario corporation and its sole shareholder, a resident of Ontario, claim against two residents of France in connection with the purchase of Medicamat S.A. (“Medicamat”), a medical device manufacturer based in Paris, France. They seek damages for negligent or fraudulent misrepresentations allegedly made by the defendants that induced them into entering into an agreement to purchase the shares of Medicamat. Specifically, it is alleged that the defendants made misrepresentations about Medicamat’s efforts to secure certifications in Canada and the United States that were a prerequisite to the legal sale of Medicamat’s products in those jurisdictions. The plaintiffs claim $16,000,000 in damages.
[2] The defendants bring this motion for an order staying this action because: (a) this court lacks jurisdiction simpliciter over this action and the defendants; and, (b) on the basis of forum non conveniens, France is a clearly more appropriate jurisdiction for the adjudication of the claims asserted. For the reasons below, the motion is granted.
Background
[3] The plaintiff Miriam Merkur, a resident of Ontario, was the sole shareholder and executive director of the plaintiff Amalgo Corporation Inc. (“Amalgo”). Amalgo has gone through a number of name changes and was previously known as Neograft Solutions Inc. (“Neograft”) and Medica Prime Solutions Inc. (“Medica Prime”). Although incorporated and headquartered in Ontario, Amalgo had employees in the United States, and, in the period 2015 to 2016, most of its customers and sales were in the United States. Amalgo was in the business of distributing medical devices. It did not manufacture any medical devices.
[4] The defendants, residents of France, were both shareholders of Medicamat. Before the sale, Jean-Pierre Devidal was the President and Chief Executive Officer of Medicamat. The defendant Frédéric Menguy was the Managing Director.
[5] Medicamat and Medica Prime entered into a distribution agreement dated July 25, 2008, involving the sale of the Safer 1 medical device, used in the treatment of baldness (the “Distribution Agreement”). The plaintiff corporation obtained the rights to distribute Medicamat product in North America. The Distribution Agreement was prepared by the plaintiffs’ lawyers in Canada and signed by Ms. Merkur in Toronto. It provided that disputes would be governed by French law and adjudicated in the courts of Nanterre, France.
[6] On April 13, 2015, Mr. Menguy sent a letter to Ms. Merkur advising her that Medicamat was terminating the Distribution Agreement because the shareholders were interested in selling the company. In the same correspondence, he advised Ms. Merkur that the shareholders would consider selling her the company.
[7] Neograft sent a letter dated June 4, 2015, prepared in Canada, in which Neograft expressed an interest in acquiring certain assets of Medicamat. The defendants did not sign back the letter and the transaction proceeded as a share purchase after negotiations between the parties.
[8] The parties and their lawyers met at Medicamat’s office in Paris on December 2, 2015, to negotiate the acquisition of Medicamat. By the end of the meeting, the parties had agreed on a purchase price for Medicamat (the final purchase price was marginally higher).
[9] Neograft and the shareholders of Medicamat (all French nationals) entered into a Term Sheet Agreement (“TSA”) in April 2016. It was signed in Paris by Mr. Devidal on behalf of the shareholders, then signed in Toronto by Ms. Merkur on behalf of Neograft and returned fully executed by email to Mr. Menguy in France.
[10] The parties then entered into a Share Purchase Agreement (“SPA”). It was signed on behalf of the shareholders in Paris on September 16, 2016. Ms. Merkur then signed on behalf of the corporate plaintiff in Toronto on September 20, 2016. The document was then sent by email from the plaintiffs’ French lawyer, Mr. Kenneth Weissberg, of Weissberg Avocats (whose office was in Paris) to the sellers’ lawyer (also located in France). The SPA was drafted in French and English, but contained a term that in the event of inconsistency, the French version would prevail.
[11] French legal counsel for the plaintiffs completed the due diligence for the transaction at Medicamat’s office in Paris. Ms. Merkur decided to complete the transaction after receiving her lawyer’s favourable due diligence report based on the information provided by Medicamat.
[12] The parties set up two escrow accounts in France to complete the transaction. Mr. Weissberg acted as escrow agent.
[13] The parties finalized the acquisition by signing a Reiterative Deed (“R-Deed”) on November 10, 2016. The R-Deed was drafted in French only. As required, it was signed in person in France. Mr. Weissberg signed the R-Deed in France on behalf of the purchaser, Neograft, pursuant to a power of attorney.
[14] Each of the TSA, SPA and R-Deed provided that disputes were to be determined by arbitration in Geneva pursuant to French substantive law and Swiss procedural law.
[15] On December 29, 2017, Amalgo commenced arbitration proceedings against the former shareholders of Medicamat including the defendants, alleging breach of contract. On consent of the parties the arbitration was held in Paris rather than Geneva. The arbitral tribunal issued an award on July 3, 2019, finding that the defendants had breached a term of the SPA and were liable to pay damages for breach of contract.
[16] Amalgo commenced a second arbitration on July 9, 2019. One of the issues related to the price of Medicamat’s building in France. On July 15, 2021, the arbitral tribunal issued a final award. The parties are engaged in litigation in France concerning issues relating to the enforcement of the second arbitration decision.
[17] Both parties were represented on the arbitrations by the same French lawyers that had acted on the transaction.
[18] The plaintiffs sold Medicamat to a third party in or about 2018.
[19] The plaintiffs commenced this action in 2020 based on alleged fraudulent and negligent misrepresentation. The plaintiffs plead that Ms. Merkur only learned of the fraud when witnesses testified at the arbitration hearing in Paris, France in November 2018.
Analysis
[20] The defendants bring this motion for a stay of proceedings under section 106 of the Courts of Justice Act which provides:
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 are considered just.
Test for Jurisdiction Simpliciter
[21] An Ontario court has jurisdiction over a foreign defendant when there is a “real and substantial connection” between Ontario and the subject matter of the litigation. [See Beijing Hehe Fengye Investment Co. Ltd. v. Fasken Martineau Dumoulin LLP, 2020 ONSC 934 at para 53; Club Resorts Ltd. v. Van Breda, 2012 SCC 17 (“Van Breda”)].
[22] The Supreme Court of Canada in Club Resorts Ltd. v. Van Breda, 2012 SCC 17 extensively reconsidered the law relating to the assumption of jurisdiction and forum non conveniens and provided an analytic framework for the common law real and substantial connection test. LeBel J., for the unanimous Court, provided the following list of presumptive connecting factors that, prima facie, entitle a court to assume jurisdiction over a dispute in a tort case:
(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.
[23] The plaintiffs rely on (c) tort committed in Ontario.
[24] The list of presumptive factors is not closed, [Van Breda at para 91] however the plaintiffs do not argue for the recognition of any new presumptive factors in this case.
[25] The onus is on the plaintiff to establish one or more of the presumptive connecting factors. In Beijing Hehe Fengye Investment Co. Ltd. v. Fasken Martineau Dumoulin LLP, 2020 ONSC 934, Justice Perell explained a plaintiff’s burden as follows:
To succeed in showing jurisdiction simpliciter, the plaintiff need only show that there is a "good arguable case" for an assumption of jurisdiction. On a jurisdiction motion, if unchallenged, the facts pleaded in the statement of claim are taken as true, and if they are sufficient to establish a good arguable case, the pleadings alone can satisfy the court that it has jurisdiction simpliciter over the claim. Where a defendant adduces evidence to challenge the allegations in the statement of claim, the plaintiff may respond with affidavit evidence and the good arguable case standard applies to the combination of the pleadings and the evidence adduced by the parties.
A good arguable case is not a high threshold and means no more than the plaintiff has shown a serious question to be tried or a genuine issue to be tried or that the case has some chance of success. [citations omitted]
[26] If the plaintiff has established one or more presumptive connecting factors, the defendant may rebut the presumption of jurisdiction. The defendant has the burden of establishing facts which demonstrate that the presumptive connecting factor does not point to any real relationship between the subject matter of the litigation and the forum or points only to a weak relationship between them. [Van Breda at para 95; Beijing at para 60].
No Tort Committed in Ontario
[27] In a fraudulent or negligent misrepresentation case, the tort occurs in the jurisdiction where the misinformation was received and acted or relied upon. [See Jacubovich v. Israel, 2021 ONSC 3558 at para 72; Beijing Hehe Fengye Investment Co. Ltd. at para 59; Central Sun Mining Inc. v Vector Engineering Inc., 2013 ONCA 601, leave to appeal to SCC dismissed, [2013] S.C.C.A. No 475].
[28] The defendants’ position is that the alleged tort was committed in France. They submit that the only possible occasions where misrepresentations could have been made and relied upon, based on the statement of claim and the evidence on this motion, is at the meeting in Paris on December 2, 2015, when a purchase price was agreed upon or during the due diligence process conducted by the plaintiffs’ French lawyer that took place at Medicamat’s office in Paris.
[29] The plaintiffs assert that the tort was committed in Ontario. Although they acknowledge that the alleged misrepresentations were made and received in France, they submit that it was in Canada that Ms. Merkur considered the representations in making the decision to proceed with the purchase of Medicamat. They argue that it was in Canada where the plaintiffs’ detrimental reliance on the misrepresentations occurred by signing two of the three transaction documents (the TSA and SPA), and it was in Canada and the United States where the adverse impact of that detrimental reliance was felt by the defendants.
[30] The plaintiffs rely on the decision of Central Sun Mining Inc. v Vector Engineering Inc., 2013 ONCA 601. In that case, the plaintiff Ontario company retained the defendants, American engineering consultants, to conduct certain studies relating to the plaintiff’s mine located in Costa Rica. The engineers’ work was done at the site in Costa Rica or at their American offices and the results forwarded to the plaintiff. The Court of Appeal held that a presumptive connecting factor existed as the tort of misrepresentation took place in Ontario. The defendants’ studies were forwarded to the plaintiff’s head office in Toronto, where they were relied on and acted on.
[31] In my view, Central Sun Mining is distinguishable from the case before me. In that case, that court found that the misrepresentations were received and acted upon in Ontario. Here, the alleged misrepresentations were received in France at the Paris meeting and / or during the due diligence process in Paris. The representations were relied upon when the plaintiffs closed the transaction by signing the R-Deed in Paris. The fact that the TSA and SPA were signed by Ms. Merkur in Toronto does not change this. Even if these contracts form part of the reliance element of this tort, the key events took place in France. Moreover, the plaintiffs agree that those contracts were made in France. The plaintiffs’ acceptance of the TSA and SPA was sent by email and received in France. When acceptance of a contract is transmitted electronically, the acceptance will be considered to have been made in the location where it is received. [See Touchup RX Canada Inc. v Dr. Colorchip, Corp., 2020 ONSC 3068 at paras 65 - 66; Lithium Royalty Corp. v Orion Resource Partners, 2021 ONSC 7686].
[32] This facts of the present case are closer to Glasford v Canadian Imperial Bank of Commerce, 2015 ONSC 197, than those in Central Sun Mining. Glasford was also a case involving an alleged misrepresentation. In Glasford, the plaintiffs’ action concerned an equitable mortgage made on the island of St. Kitts between the plaintiffs and the defendant FirstCaribbean International Bank (Barbados), a Barbados registered bank carrying on business in St. Kitts. The dispute concerned conversations and meetings that took place in St. Kitts leading up to the execution of the agreement in question. The bank signed the agreement at its office in the Caribbean and forwarded it for acceptance to the plaintiffs. One plaintiff signed the agreement at his residence in Barbados. The other plaintiff signed his copy of the agreement in Toronto and returned it to the bank’s office in St. Kitts. The court rejected the plaintiffs’ submission that the tort occurred in Ontario. Justice C.J. Brown dealt with this argument as follows:
It is necessary to briefly comment on the plaintiffs' submission that the defendants committed the tort of fraudulent misrepresentation in Ontario. In their statement of claim in the Ontario Action, the plaintiffs allege that they were induced by a representative of the defendant, FirstCaribbean into signing the Agreement. The representative, according to the plaintiffs, made misrepresentations during a meeting that took place in St. Kitts regarding how funds would be withdrawn from their account and whether commitment fees paid to CIBC Barbados would be transferred to CIBC St. Kitts. In their factum, the plaintiffs submit that these representations were "received and relied on in Ontario" insofar as they were reduced to writing and sent to Mr. Vinton in Ontario. Although he was present at the St. Kitts meeting, Mr. Vinton submits that he relied on these misrepresentations in Ontario when signing the memorandum of deposit of title to complete the equitable mortgage. This is why Mr. Vinton submits that the memorandum of deposit lay at the center of his action for fraudulent misrepresentation.
Without commenting on the merit of this claim, torts involving the transmission of information are held to occur in the place the information is received: C.B. Distribution Inc. v. BCB International Inc., 2003 CarswellOnt 1529, [2003] O.J. No. 1583 at paras. 13-14. In this case, the plaintiffs received the representations at the meeting in St. Kitts. Whether those representations were subsequently written down and then sent to Mr. Vinton in Ontario is irrelevant.
[33] Even if Ms. Merkur considered the alleged misrepresentations after she returned to Ontario, the important fact for the jurisdiction analysis is that the alleged misrepresentations were made and received in France by the plaintiffs and relied upon in France when the plaintiffs completed the acquisition in France.
[34] The plaintiffs also argue that the tort of negligent or fraudulent misrepresentation will be considered to have been committed in the jurisdiction in which the damages occurred, which they say is in Canada and the United States. This position is not supported by the authorities.
[35] As noted above, courts (including the Court of Appeal for Ontario) have held that in a fraudulent or negligent misrepresentation case, the tort occurs in the jurisdiction where the misinformation was received and acted or relied upon. In Central Sun Mining, the court did not consider where the damages were sustained as part of its analysis of the situs of the misrepresentation claim.
[36] In Van Breda, 2012 SCC 17, the Supreme Court said:
The use of damage sustained as a connecting factor may raise difficult issues. For torts like defamation, sustaining damage completes the commission of the tort and often tends to locate the tort in the jurisdiction where the damage is sustained. In other cases, the situation is less clear. The problem with accepting unreservedly that if damage is sustained at a particular place, the claim presumptively falls within the jurisdiction of the courts of the place, is that this risks sweeping into that jurisdiction claims that have only a limited relationship with the forum. An injury may happen in one place, but the pain and inconvenience resulting from it might be felt in another country and later in a third one. As a result, presumptive effect cannot be accorded to this connecting factor. [my emphasis]
[37] Chief Justice Strathy in Tamminga v Tamminga, 2014 ONCA 478 summarized the Van Breda decision on the issue of what factors are not presumptive factors as follows:
LeBel J. also identified certain factors that are not presumptively connecting. The presence of the plaintiff in the jurisdiction is not a presumptive connecting factor: para. 86. Nor is the fact that damages were sustained in the jurisdiction: para. 89. Nor is the combined effect of a number of non-connecting factors: para. 93 [my emphasis]
[38] The plaintiffs rely on Touchup RX Canada Inc. v Dr. Colorchip, Corp., 2020 ONSC 3068. However, that case is distinguishable. The case involved a different cause of action and is factually very different. It involved a claim for defamation and interference with economic interests. As explained in the passage from Van Breda quoted above, for the tort of defamation, sustaining damage completes the commission of the tort and often tends to locate the tort in the jurisdiction where the damage is sustained. In Touchup, it was alleged that the Florida-based defendants defamed an Ontario corporation and interfered with plaintiff’s economic interests in Ontario. The defamatory letter was sent by the Florida-based defendant to a group of Canadian sub-licensees. The individual Florida-based defendant also travelled to Ontario to meet with the Canadian sub-licensees to induce them to breach their agreements with the plaintiff. Although the court concluded that Ontario had jurisdiction, it stayed the action on the basis of forum non conveniens.
[39] The plaintiffs submit that misrepresentation cases are analogous to negligent manufacture cases. They rely on NTI Boilers Inc. v Muelink & Grol B.V., 2021 NBQB 241, where the New Brunswick court held that the tort of negligent manufacture is taken to have occurred where the damage was suffered, if the tortfeasor knew or ought to have known the defective product would be used in the place where the damage took place. The plaintiffs could not point me to any case where this analogy has been accepted, and in my view, it is precluded by the Ontario case law.
Combined effect of multiple non-presumptive connecting factors does not establish a real and substantial connection
[40] In their factum, the plaintiffs list 11 factors that they say establish a real and substantial connection between their claim and Ontario. A number of the factors listed relate to the presence in Ontario of the plaintiffs, which is not a presumptive connecting factor. Some of the factors relate to the Distribution Agreement. In my view the Distribution Agreement is not connected with the dispute and is part of the factual background. Other factors relate to the fact that the TSA and SPA that were signed by Ms. Merkur in Toronto.
[41] The Supreme Court in Van Breda, 2012 SCC 17, rejecting an ad hoc approach to the determination of jurisdiction simpliciter held:
If, however, no recognized presumptive connecting factor - whether listed or new - applies, the effect of the common law real and substantial connection test is that the court should not assume jurisdiction. In particular, a court should not assume jurisdiction on the basis of the combined effect of a number of non-presumptive connecting factors. That would open the door to assumptions of jurisdiction based largely on the case-by-case exercise of discretion and would undermine the objectives of order, certainty and predictability that lie at the heart of a fair and principled private international law system.
[42] I conclude that as the plaintiffs do not have a good arguable case that the tort was committed in Ontario, there is no real and substantial connection with Ontario and this court should not assume jurisdiction.
In the alternative, the presumption is rebutted
[43] In the event that I am wrong, I will consider whether the defendants have rebutted the presumption.
[44] The plaintiffs refer to the following passage from Van Breda, 2012 SCC 17:
Some examples drawn from the list of presumptive connecting factors applicable in tort matters can assist in illustrating how the presumption of jurisdiction can be rebutted. … On the other hand, where the presumptive connecting factor is the commission of a tort in the province, rebutting the presumption of jurisdiction would appear to be difficult, although it may be possible to do so in a case involving a multi-jurisdictional tort where only a relatively minor element of the tort has occurred in the province.
In each of the above examples, it is arguable that the presumptive connecting factor points to a weak relationship between the forum and the subject matter of the litigation and that it would accordingly not be reasonable to expect that the defendant would be called to answer proceedings in that jurisdiction. In such circumstances, the real and substantial connection test would not be satisfied and the court would lack jurisdiction to hear the dispute.
[45] The plaintiffs submit that that it was reasonable for the defendants to expect that they would be answerable to an Ontario court. I disagree. Even if the tort can be said to have been committed in Ontario, reliance on the representations in Ontario is a weak connection between the dispute and the forum given that the alleged misrepresentations were received in France and the underlying acquisition was completed in France. It would not be reasonable to expect that the defendants would be called to answer proceedings in Ontario.
Forum Non Conveniens
[46] In the event that I am wrong in my conclusion that Ontario lacks jurisdiction simpliciter, I turn to a forum non conveniens analysis.
[47] A party applying for a stay on the basis of forum non conveniens has the burden of establishing that the alternative forum, in this case France, is clearly more appropriate. The court must find that the alternative forum is in a better position to fairly and efficiently dispose of the litigation 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. [Van Breda at paras 108 - 109]. The court in Van Breda, 2012 SCC 17 commented on the factors that a court may have regard to as follows:
…the factors that a court may consider in deciding whether to apply forum non conveniens may vary depending on the context and might include the locations of parties and witnesses, the cost of transferring the case to another jurisdiction or of declining the stay, the impact of a transfer on the conduct of the litigation or on related or parallel proceedings, the possibility of conflicting judgments, problems related to the recognition and enforcement of judgments, and the relative strengths of the connections of the two parties.
[48] This case involves the purchase of a French corporation from French shareholders in a transaction concluded in France with both parties represented by France-based lawyers. Ms. Merkur travelled to France for negotiations. The defendants did not travel to Ontario. The underlying contracts all provided for French substantive law and the procedural laws of Switzerland. The alleged misrepresentations occurred in France.
[49] Litigation in Ontario is likely to result in a multiplicity of proceedings since any judgment in the plaintiffs’ favour would probably give rise to recognition and enforcement proceedings in France given that the defendants do not have assets or business activities in Ontario which could be subject to enforcement. This factor favours France as an appropriate forum. [See Jacubovich v. Israel, 2021 ONSC 3558 at paras 146 - 147].
[50] The parties have engaged in two arbitrations in connection with the acquisition with their France-based counsel who were also involved with the acquisition. Both sets of counsel have familiarity with the issues, the documents and the witnesses. It will therefore likely be more expensive and inefficient for all parties if the plaintiffs’ claims are litigated in Ontario as both sides will need to retain new Ontario counsel who will have to spend significant time getting up to speed by reviewing documents and interviewing witnesses.
[51] The plaintiffs rely on the decision of Kore Meals LLC v Freshii Development LLC, 2021 ONSC 2896, a case involving a motion for a stay of proceedings because of an arbitration clause. In considering the issues of forum non conveniens in that context, Justice Morgan said:
[31] It is by now an obvious point, but it bears repeating that a digital-based adjudicative system with a videoconference hearing is as distant and as nearby as the World Wide Web. With this in mind, the considerable legal learning that has gone into contests of competing forums over the years is now all but obsolete. Judges cannot say forum non conveniens we hardly knew you, but they can now say farewell to what was until recently a familiar doctrinal presence in the courthouse.
[32] And what is true for forum non conveniens is equally true for the access to justice approach to the arbitration question. Chicago and Toronto are all on the same cyber street. They are accessed in the identical way with a voice command or the click of a finger. No one venue is more or less unfair or impractical than another.
[52] While it may be true that the location of witnesses is not as important given modern technology, the location of witnesses is still considered in the forum non conveniens analysis. [For example see Bank of Nevis International Ltd. v Kucher, 2024 ONCA 240; Rieder v Plista Gmbh, 2021 ONSC 4458 at para 33, aff’d 2022 ONCA 281, leave to appeal to SCC dismissed 2022 S.C.C.A. No 204].
[53] In my opinion, in the circumstances of this case, the most convenient forum for the litigation is clearly France.
Disposition
[54] The defendants’ motion is granted and the plaintiffs’ action is stayed.
Costs
[55] The parties have agreed that the successful party is entitled to their partial indemnity costs. As the defendants were successful, they are entitled to their partial indemnity costs. The parties are encouraged to agree to the quantum. If they cannot, the defendants may submit costs submissions by June 11, 2024. The plaintiffs may deliver responding submissions by June 25, 2024. Submissions are limited to three double-spaced pages.