An Alberta court decision this June directly disagreed with recent Ontario decisions regarding the appropriate factors to consider when a non-resident defendant challenges the jurisdiction of a Canadian court in a contract dispute.
In Bansal v Ferrara Pan Candy Co.,1 Madam Justice Veit of Alberta’s Court of Queen’s Bench sheds light on appropriate factors to consider when a party challenges the jurisdiction of a Canadian court in a contract dispute. This decision also provides guidance regarding what steps by a defendant prior to a challenge can constitute submission to the jurisdiction so as to preclude a successful challenge.
In Ferrara Pan Candy, the Alberta judge directly disagreed with two recent Ontario Superior Court of Justice decisions that seem to suggest an expanded set of factors may connect a contract dispute and the court’s jurisdiction. Staying true to the Supreme Court of Canada’s leading decision in Club Resorts Ltd. v Van Breda,2 the Alberta court declined to follow the Ontario decisions and looked no further than Alberta’s Rules of Court for the factors that would allow it to find jurisdiction.
In Ferrara Pan Candy, the judge had to decide whether the courts of the province of Alberta had jurisdiction to hear a dispute over an alleged breach of contract and the commission of various non-contractual wrongs. If jurisdiction were found to exist, the court then had to decide if Alberta was the most appropriate forum to adjudicate the dispute. The plaintiffs’ claim essentially alleged that the defendants had breached contracts, conspired against the plaintiffs, and intentionally interfered with their economic interests regarding their exclusive rights to distribute the defendants’ confectionary in Canada.
Early in the proceeding, the defendants brought an application to have the plaintiffs’ solicitors disqualified from prosecuting the claim because an affiliated firm had previously acted for minority shareholders of the defendant Ferrara Pan Candy and, as corporate lawyers for the company, had investigated and researched some of the very allegations made in the plaintiffs’ claim. The plaintiffs’ solicitors subsequently gave notice of ceasing to act in the proceeding, so the application to remove them did not need to be heard.
The defendants then challenged the jurisdiction of the Alberta courts to hear the dispute.
Resisting the jurisdiction challenge, the plaintiffs argued that the defendants had submitted to Alberta’s jurisdiction when they brought their application to disqualify the plaintiffs’ solicitors. The judge found that the defendants had not submitted to the court’s jurisdiction by bringing their application for the removal of the plaintiffs’ solicitors.
Ultimately, while the judge found that the Alberta courts did indeed have jurisdiction over the subject matter of the dispute, she determined that Alberta was not the most appropriate forum for the adjudication of the matter. She declined jurisdiction in favour of the courts of the province of Ontario or, alternatively, the state of Illinois in the United States.
No submission to the jurisdiction of the Alberta courts
Neither counsel nor the court was able to find a decision directly on point regarding whether the defendants, in bringing their disqualification motion, had submitted to the jurisdiction of the court.3
The judge relied on Norex Petroleum Ltd. v Chubb Insurance Co. of Canada4 to find that it would have been possible for the defendants to submit to the Alberta courts’ jurisdiction because, where a court already has jurisdiction over the subject matter of a dispute, a defendant’s consent—express or implied—can constitute submission.
However, the defendants had not submitted by bringing the removal application. That application raised a professional conduct issue and not an issue on the merits of the claim; attempting to disqualify the solicitors did not go to the merits of the dispute between the parties. While the circumstances of each case must be examined to determine whether a party has submitted to the jurisdiction of the court with respect to the merits of that case, the judge found that in this dispute the merits were not engaged.
Procedurally, it was necessary for the defendants to bring the removal application prior to the jurisdiction challenge because the firm had the potential to breach its duties of loyalty and confidentiality. The confidential information, which the plaintiffs’ lawyers had presumably acquired, related directly to the plaintiffs’ allegations and they might have been able to use the information in not only prosecuting the claim, but also in resisting the jurisdiction challenge. Effectively, the defendants had no choice but to bring the disqualification application first because they perceived that the plaintiff had an unfair advantage.
Alberta has jurisdiction by formation of the contract
The judge noted there have been relatively few post-Van Breda appellate cases identifying the factors in contract cases that allow a court to take jurisdiction over a dispute. These factors, called “presumptive connecting factors,” are indicators that a jurisdiction has a “real and substantial connection” to a contract and a court therefore has jurisdiction over disputes about that contract. Following the lead of the Supreme Court, Madam Justice Veit looked to the Alberta Rules of Court5 for guidance as to what the presumptive connecting factors are in Alberta for contracts and what constitutes a real and substantial connection between a contract and the province.
The judge found four presumptive connecting factors for contracts cases, in a manner consistent with the Supreme Court’s directions in Van Breda regarding how presumptive connecting factors for tort cases should be determined. The four presumptive connecting factors that may ground jurisdiction in contract cases in Alberta are:
- the defendant is resident in Alberta;
- the defendant carries on business in Alberta;
- a contract or alleged contract is made, performed or breached in Alberta; and
- a tort connected with the contract was committed in Alberta.
Any one of these connecting factors can furnish the Alberta court with jurisdiction over a contract claim.
The contract was found to have been made in Alberta and the province’s courts therefore had jurisdiction over the subject matter of the dispute.
Alberta not the most appropriate forum
The court found that, despite the Alberta courts’ jurisdiction, the province was clearly not the most appropriate forum in which to adjudicate the plaintiffs’ claim. The court cited many factors in support of its finding, including that: the defendants were resident in Ontario and Illinois and their alleged wrongdoing would have been committed in those jurisdictions; the contract was varied several times outside of Alberta; few Albertan witnesses were required; and most records relating to the claim were probably in Ontario. Further, there was no evidence the plaintiffs would suffer any legal disadvantage if the proceeding were brought in Ontario or Illinois, and there would be no difficulty having an Ontario judgment recognized in Alberta. Either forum was found to be more appropriate than Alberta.
Presumptive connecting factors in contracts cases: where to from here?
The post-Van Breda jurisprudence on presumptive connecting factors in contracts cases is sparse. Ferrara Pan Candy clearly reflects that while Van Breda was a tort case, it represents a clear direction from the Supreme Court on how new presumptive connecting factors should be established for contract cases as well. The judge in Ferrara Pan Candy properly recognized the factors that connect a contract to the jurisdiction of Alberta in a manner consistent with the method set out for recognizing new factors for tort claims in Van Breda.
This case comes on the heels of two Ontario decisions6 that seem to depart from Van Breda’s values of promoting clarity, predictability and consistency in jurisdiction cases—decisions Madam Justice Veit disagreed with and rejected.
The Ontario cases seem to suggest (but do not decide) that other factors—such as where the subject matter of a contract is generally located, where witnesses are located, and where actions were taken on the contract—might also be new presumptive connecting factors. As Her Ladyship pointedly remarked in Ferrara Pan Candy, these factors are not presumptive connecting factors and do not establish the presumption of a real and substantial connection with Alberta. These factors are solely for determining whether another forum is clearly more appropriate to hear a dispute rather than whether a court has jurisdiction over a contract dispute in the first place.
It remains to be seen whether other Canadian courts will stay true to the Supreme Court’s Van Breda directive and strive to maintain clear tests and predictability in jurisdiction decisions, or whether judges will once again wade into the murky waters of allowing factors that should not create the presumption of a real and substantial connection to influence jurisdiction findings, instead of considering them in the appropriate forum analysis where they are properly relevant.