sept. 2. 2020

Taking Jurisdiction: the latest ONCA case overturning a forum selection clause

Forbes Energy Group Inc. v. Parsian Energy Rad Gas, 2019 ONCA 372 (CanLII)

Should an Ontario court take jurisdiction over a dispute where there are foreign parties and, (to some extent), foreign subject matter.

In Forbes v. Parisian, we have the following facts connecting the dispute to Ontario:

  1. Forbes Energy was incorporated in Alberta with a registered office in Toronto. (ONSC 3)
  2. Forbes Energy is wholly-owned subsidiary of an Ontario corporation, with head office in Toronto. (ONSC 3)
  3. The parties entered into an agreement that called for the incorporation of an Ontario company the corporate purpose of which was to absorb all the rights and interests of all the parties in an Iranian oil project. (ONSC 8)
  4. After what appeared to be an attempted shake-down by the Iranian party (Pergas) (ONSC para 13) Forbes filed statement of claim in Ontario. (ONSC 15)

Here are the facts disconnecting the dispute from Ontario:

The most important fact disconnecting the dispute from Ontario is the fact that the parties twice executed a forum selection clause which stated:

This term sheet shall be governed by and construed in accordance with the laws of England and the Parties agree to attorn to the courts of England.

My Note: Ontario courts are usually quick to take jurisdiction (in questionable cases). In this case the Court of Appeal pretended that this forum-selection clause was not exclusive to the England (ONCA para 6). Canadian law should generally give aid to Canadian claimants at every available occasion. But was this jurisdiction-taking occasion really available to the Court of Appeal?

The subject matter could be said to be an oil project in Iran. In other words, the property which is the ultimate subject matter of the dispute has no connection qua property to Canada.

My Note: But the subject matter of the dispute can perhaps better be characterized as a breach of a UK contract to transfer shares of an Iranian company and a Dubai company to a Canadian company (Parentco)(ONSC 8), so is this a Canadian connection or a disconnection? (ONSC 23)

Nishikawa J. (ONSC) applied Van Breda v. Village Resorts Ltd., 2012 SCC 17, [2012] 1 S.C.R. 572, to find the presumptive connecting factor: a contract connected to the dispute was made in the province. (ONSC 19). This was precisely the van Breda ratio.

Acceptance of the contract in Ontario makes it an Ontario contract (ONSC 24), the presumptive factor for taking jurisdiction simpliciter in Van Breda.

My Note: But doesn't the attornment clause deem it to be an English contract not an Ontario contract or a Bermuda contract or any other acceptance-location-based contract?

A fact disconnecting the dispute from Ontario is the fact that it was not proved that any of the parties were in Canada when they executed the agreement (ONSC 45). Nishikawa finds this fact disconnecting the dispute from Canada. Nishikawa does not comment upon this Bermuda-fact destabilizing her previous finding of contract acceptance in Ontario. In a sense this is a resiling from the ‘contract-formation in Ontario’ fact (para 25). If contract formation was Ontario, this Bermuda-signature fact should play no role. If signature-geography is important at all, then email acceptance geography should not have dictated the contact-in-Ontario result.

My Note: lawyers recall the postal acceptance rule from law school. If I mail my acceptance of an offer from a Bermuda mailbox, then the contract was formed in Bermuda. But ‘instantaneous communications’ (email) has effectively killed the postal acceptance rule (McCamus (2d) at 79). But, Nishikawa finds some relevance in diverse signature geography as supporting the logic of the England forum clause.

The defendants then had the (Van Breda) onus to rebut the presumption of jurisdiction which they could not do since the contract was an Ontario contract. The parties would have become Ontario shareholders of an Ontario corporation under Ontario legislation. The onus was not rebutted.

But Nishikawa find that Ontario is not the convenient forum

Nishikawa J. properly found (on a fair reading of the attornment clause) that England was the chosen forum and chosen law. Nishikawa thus properly switched onus to the Ontario plaintiff to explain why the court should maintain jurisdiction and not decline jurisdiction. (ONSC 33).

My note: Then comes the truly ridiculous piece of legal reasoning (that the ONCA adopted). The attornment clause described above is not an ‘exclusive’ clause. ‘Yeah, maybe it says England, but that doesn’t mean we can’t read Ontario into the clause as well. A true attornment clause would say England and no other place’.

Nishikawa did good service to the English language by imposing ‘strong cause’ onus upon the defendant to say why it should still be Ontario, which the defendants failed to achieve.

Nishikawa went through the forum non conveniens factors and agrees that Ontario is not the convenient forum largely on the strength of the forum selection clause.

The ONCA overturned Nishikawa without much analysis, relying upon the doctrine that the forum selection clause did not explicitly rule out every other place on Earth, it merely said that England was the chosen forum and chosen law. Not good enough apparently.

My Note: As with Uber v. Heller, Canadian courts degrading of forum selection clauses is good fun until the mathematical logic of having to give words meaning, forces courts (who first degrade the forum selection clause for the purpose of giving Ontario jurisdiction), subsequently to further degrade the forum selection clause by imposing Ontario law on this Ontario contract.

Or will the Ontario court, after taking jurisdiction, then default back to calling it a UK contract applying UK law, pretending not to see that Nishikawa already determined it to be an Ontario contract.

One wrong move on the common law chess board then requires another wrong move to maintain any semblance of consistency.

More likely, a new judge will breezily pass over the inconsistency sub silentio.