The SCC’s Latest Ruling about Forum Non Conveniens

           The Supreme Court of Canada’s decision in Haaretz v Goldhar  2018 SCC 28, a case about online defamation,  suggests a lighter burden than before for a defendant who seeks a stay of proceeding based on the principle of Forum Non Conveniens.  

Mitchell Goldhar, who is a Canadian resident, sued Haaretz Daily Newspaper, which is an Israeli newspaper for defamation after Haaretz published an article regarding his Canadian business practices as well as a professional sports team he owns in Israel. Haaretz published it in Israel and  also posted it online, which and which was seen online in Canada.  Haaretz moved for a stay of the action, asking the court to exercise its discretion to decline jurisdiction in favour of the Israeli courts.   The motion court and Ontario Court of Appeal ruled in Goldhar’s favour.  The Supreme Court ruled against him 6 – 3, in a splintered decision with five sets of reasons.

If a court has determined it has jurisdiction simpliciter, a defendant may ask the court to exercise its discretion to decline to exercise jurisdiction on the ground that a court elsewhere is “clearly more appropriate”.  As the Court confirmed in Club Resorts v Van Breda, 2012 SCC 17 (para. 109), “the normal state of affairs is that jurisdiction should be exercised once it is properly assumed”, and the onus is on the defendant to show that the foreign court is in a better position to dispose fairly and efficiently of the litigation, such that the plaintiff should be deprived of his choice of forum.    Haaretz arguably erodes that principle; I say this for several reasons. 

One   Among the factors the majority say pointed to Israel as the clearly more appropriate forum was the fact that Haaretz would want to call several witnesses who reside in Israel and who apparently would not testify voluntarily.  There is no way to compel them to come to Canada to testify.  Haaretz said it would be unfair to proceed in Canada without their evidence, but provided no evidence as to whether Israeli courts would uphold a letter of request/letters rogatory from the Ontario court to compel the testimony of those witnesses in Israel for use in Canada.   The majority held that Haaretz had met its burden, and that it was incumbent on Goldhar to prove that the Israeli courts would likely compel the testimony, insofar as expert evidence must be led by the party seeking to prove the content of foreign law (para. 61 – 65).  But why must it be Goldhar who proves whether the Israeli courts would compel the evidence?  This is an essential element in Haaretz’s claim that it would not have the testimony if the case proceeded in Ontario.  To require Goldhar to prove how the Israeli courts would respond to the letters rogatory is to shift the onus from Haaretz to Goldhar. 

Two  Although Goldhar originally sued for damage to his reputation in both Canada and Israel, he made clear at the motion that he would confine his claim to his reputation in Canada.  It appears he curtailed his claim so as to minimize the risk of the case being tried in Israel, so dearly did he want the case to be tried in Canada.   Yet the majority of the Supreme Court would not give weight to this.   The Court focussed on the wording of the statement of claim and the fact that Goldhar had not actually undertaken not to sue later for the damage to his reputation in Israel.  However, there is no indication that the motion court or Haaretz had asked for such an undertaking or that Goldhar would refuse it.    Plainly, protecting his reputation in Canada was more important to Goldhar than his reputation in Israel. Focussing the proceeding on the former makes the whole proceeding more efficient, which is to be encouraged.   For the Court to disregard this suggests the Court is backing away from the principle, described above, that the court will generally respect the plaintiff’s choice of forum.

Three   The motions judge gave weight to an undertaking Goldhar made to pay the travel and accommodation costs of Haaretz’s witnesses to come to Canada.    The majority said the judge ought not to have done so, saying the undertaking “is of no significant value”.  It added that “consideration of such an undertaking would allow a wealthy plaintiff to sway the forum non conveniens analysis, which would be inimical to the foundational principles of fairness and efficiency underlying this doctrine.”  (para. 66).  

Two concerns arise here.   First, the forum non conveniens analysis is a matter of the judge’s discretion.  The standard of appellate review for discretionary decisions does not allow the appeal court to substitute its judgment as to the weight to be given to an element of the analysis. 

Second, the undertaking can hardly be inimical to fairness if it helps the defendant conduct a trial here. Indeed such undertakings should be encouraged, as they help alleviate a burden that a defendant might face as a result of the principle that a plaintiff’s choice of forum is generally to be respected. The fact the Supreme Court rejected the undertaking as a factor suggests the plaintiff’s choice of forum will not carry as much weight as before. 

Chief Justice McLachlin was among the three judges dissenting (it was the last judgment for the recently retired judge). In other words, if the case were heard today, perhaps only two judges would rule for the plaintiff.    

It is to be hoped that a future ruling will reaffirm the principle that a plaintiff’s choice of forum is generally to be respected. 

In judgment enforcement cases, it may be possible to pierce the corporate veil: Dissent in Ont. C. A. Chevron ruling

            The Ontario Court of Appeal recently dismissed the Equadorian plaintiffs’ appeal in the Yaigauje v Chevron case.   To enforce their judgment against Chevron Corporation for environmental damage in Equador, the plaintiffs sought to pierce the corporate veil and enforce their judgment against the assets of Chevron Canada.   The majority firmly rejected the suggestion that if has power to do so on equitable grounds.  The plaintiffs sought to enforce the judgment here because a few years ago a U.S. court found the judgment was obtained by fraud, and barred enforcement in the United States.   

However, the minority held there exists a just and equitable ground for piercing the corporate veil, albeit a limited one, to enforce judgments including foreign judgments.  There is reason to believe the Supreme Court of Canada will hear this matter, and conceivably decide there is such a ground.

The majority in Chevron held that there is no independent just and equitable ground for piercing the corporate veil, not even for judgment enforcement cases.    The Court held that the restrictive approach in Transamerica Life Insurance v Canada Life (1996) 28 O.R. (3d) 423, affirmed [1997] O.J. No. 3754 governs.   Transamerica requires a finding that the corporation is “completely dominated and controlled and is being used as a shield for fraudulent or improper conduct”.  Further, Chevron held that the existence of a judgment makes no difference, even though the existence of a judgment means that liability has been determined.   To allow such an exception to corporate separateness for judgment enforcement cases would mean, the Court said, that the corporations against whom the judgment is enforced would “lose all of its protection as a natural person under the CBCA”. (para. 75). 

Hourigan J., writing for the majority, said two Supreme Court of Canada cases,  Sun Indalex v United Steelworkers [2013] 1 S.C.R. 271 and Commercial Bank Leasing v Canada  [1998] 2 S.C.R. 298, uphold corporate separateness.   However, in both cases, corporate separateness was only a peripheral issue -- in Sun Indalex the Court’s discussion of corporate separateness was less than three lines long.  Neither case discusses the question of an independent just and equitable ground, and it is not clear any party even argued for one.  

Justice Nordheimer, although concurring in the result, parted company with the majority. He held that “the court is prepared to recognize that there may be situations where equity would demand a departure from the strict application of the corporate separateness principle in the context of the enforceability of a valid judgment, whether foreign or domestic”.   He rejected the rigid approach espoused by the majority, and pointed to cases[i] subsequent to Transamerica where the Court of Appeal has pierced the corporate veil for equitable reasons.    The judge drew a distinction between “imposing liability on a party through the mechanism of lifting the corporate veil” and “the enforcement of a judgment debt”, i.e. where “liability has already been established”.  (para. 94)  He added that “the situations where such a remedy will be appropriate are likely to be rare and exceptional”.  (para.116).[ii]    He said this remedy may well be appropriate in this case, but for the U.S. courts’ finding that the Equadorian judgment was obtained by fraud, and the fact that Ontario courts have not yet been called on to make their own determination of the validity of the judgment.  

Hourigan J. was very dismissive of the notion of an independent just and equitable ground for piercing the corporate veil, describing it as “ill-defined” (para. 82), and “untethered to the jurisprudence, the statutory rights of corporations or any discernable principle” (para. 79).   He framed the issue as “whether this court is prepared to sacrifice certainty [the long-standing principle of corporate separateness] for the sake of expediency” (para. 72).   

Such an emphatic rejection of the just and equitable ground, despite the support for it in the case law,  indicates a significant change in corporate law, and a strong basis for appeal.    It is hoped that this very conservative ruling will be appealed to the Supreme Court of Canada. 

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[i] Parkland Plumbing  & Heating v Minaki Lodge Resort 2009 ONCA 256 and Downtown Eatery v Ontario (2001), 54 O.R. (3d) 161

[ii] Maybe even “very rare” (the wording in a quote Nordheimer J.A. adopted from Lord Mance in the U.K. Supreme Court’s 2013 decision in Prest v Petrodel). [2013 UKSC 34, [2013] 2 A.C. 415.

Enforceability of Arbitration Clauses that are also Forum Selection Clauses

        In the recent case of Heller v Uber, [2018] O.J. No. 502, an Uber driver commenced a proposed class action for a declaration that Uber drivers are employees and are thus entitled to the protection of the Employment Standards Act.  The contract between Uber and its drivers stipulates that disputes are to be resolved by arbitration, specifically in Amsterdam, the Netherlands,  under the Rules of Arbitration of the International Chamber of Commerce. The clause in Heller was in effect a combination of an arbitration clause and a forum selection clause.   The Ontario Superior Court of Justice stayed the proceeding after finding the arbitration clause is valid.   Unfortunately, the Court did not look closely at the forum selection aspect. 

         First, some background about the case.  After determining that the applicable statute is the International Commercial Arbitration Act, 2017 (as opposed to the Arbitration Act, 1991), Perell J. analyzed in some detail whether Heller was bound by the arbitration clause.  The Court observed that “absent legislative language to the contrary, courts must enforce arbitration agreements”  (para. 64).*   He also noted that the question of whether the arbitrator has jurisdiction over the dispute is itself to be decided, at first instance, by the arbitrator.   The Court then considered whether any exceptions to referral to arbitration apply, chiefly whether such referral is null and void on the ground of unconscionability.  Finding no exceptions were applicable, the Court found the clause was enforceable.   

          But what about the forum selection part of the clause?   The Supreme Court of Canada in Z. I. Pompey  v ECU Line  (2003), 224 D.L.R. (4^th) 577 held that courts have discretion to not enforce  an otherwise valid forum selection clause if “strong cause” is shown.  Strong cause factors include inequality of bargaining power and the impact of the clause on the parties.  Unconscionability is just one of several factors.    There was no denying that Uber’s contract was not negotiable.   Having to go to the Netherlands -- where Uber’s legal team is based – could cause financial hardship for drivers; Mr. Heller earns $400 -  $600 per week based on 40 -50 hours of work per week.  The hardship would be greater still if, as is likely, the driver must pay for a local lawyer to go to the Netherlands. Mr. Heller cited Douez v Facebook [2017] S.C.J. No.23, in which the Supreme Court of Canada held a forum selection clause requiring disputes to be litigated in California was unenforceable in light of, among other things, the significant imbalance in bargaining power between Facebook and its users.  

           Perell J. distinguished Douez, saying Heller “is not about a discretionary court jurisdiction where there is a forum selection clause to stay proceedings” (para. 77).    However, the fact the arbitration clause is enforceable does not automatically mean the forum selection aspect is also enforceable.  The statutes and cases the court cited in support of its ruling in favour of the referral to arbitration do not say that the law regarding arbitration clauses prevails over the law regarding forum selection clauses.     Novatrax International v. Hagele Landtechnik (2016) 132 O.R. 3d) 481 involved a clause that said the parties are to settle any disputes by binding arbitration in Frankfurt, Germany. The defendants had moved, successfully, to stay the action in light of the aforementioned forum selection clause.  The Court of Appeal treated the clause as a forum selection clause and considered the “strong cause” analysis as set out in Pompey.  In fact, both sides agreed that the governing principles are those set out in Pompey (para. 5).  The Court of Appeal upheld the motion court’s stay.

          Unfortunately for Heller,  it does not appear that he argued that the Uber clause was a forum selection clause as well as an arbitration clause, and that the Pompey strong cause test applies.  This test gives the court broader discretion to refuse to enforce the forum aspect of the clause and have the arbitration done in Ontario.  Incidentally, Uber indicated during argument that the arbitration could be arranged in Ontario (footnote 39).   Doing so would likely be very helpful to Heller.   However, the Court did not consider having the case arbitrated in Ontario.    It simply ruled that “the action is stayed in favour of arbitration”.    There will likely be an appeal. Let’s see if the forum selection strong cause argument comes up then. 

*As well, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which has the force of law in Ontario pursuant to s. 2 of the ICAA, states at Article II, para. 3:  “The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.”