In Expedition Helicopters Inc v Honeywell Inc (2010 ONCA) the Ontario Court of Appeal confirmed that a forum selection clause in a commercial contract should generally be given effect and that any departure from this principle will be rare.

Facts

Expedition Helicopters Inc - an Ontario, Canada company - leased a helicopter engine from Honeywell Inc, a US company with worldwide operations. The engine was originally built in Pennsylvania and converted to Expedition's specifications at Honeywell's South Carolina facility, managed by a Honeywell division based in Arizona. The contract contained the following forum clause:

"CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED, CONTROLLED AND INTERPRETED UNDER THE LAW OF THE STATE OF ARIZONA, EXCLUDING ITS CONFLICT OR CHOICE OF LAW PROVISIONS. The parties (i) agree that any state or federal court located in Phoenix, Arizona shall have exclusive jurisdiction to hear any suit, action or proceeding arising out of or in connection with this Agreement, and consent and submit to the exclusive jurisdiction of any such court in any such suit, action or proceeding, and (ii) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding to the extent permitted by the applicable law, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper, or that this Agreement or any of the transactions contemplated hereby may not be enforced in or by such courts."

Unfortunately, the helicopter in which the engine was installed crashed in northern Saskatchewan, Canada, killing the pilot and a passenger. The aircraft was a complete loss. Expedition brought an action in Ontario for damages against Honeywell. Honeywell brought a motion to stay the action on the basis of the forum clause. The motion was dismissed. On appeal, the Ontario Court of Appeal reversed that decision and ordered a stay of proceedings, with costs of the appeal fixed at C$25,000 and costs of the motion in the lower court payable by Expedition to Honeywell.  

Court of Appeal decision

In Canada, the governing authority regarding the enforcement of a forum selection clause is the Supreme Court of Canada's decision in ZI Pompey Industrie v ECU-Line NV ([2003] 1 SCR 450), which in turn adopted the 'strong cause' test first articulated in the UK case The Eleftheria ([1969] 1 Lloyd's Rep 237 (Adm Div)):

"(1) Where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign Court, and the defendants apply for a stay, the English Court, assuming the claim to be otherwise within the jurisdiction, is not bound to grant a stay but has a discretion whether to do so or not. (2) The discretion should be exercised by granting a stay unless strong cause for not doing so is shown. (3) The burden of proving such strong cause is on the plaintiffs. (4) In exercising its discretion the Court should take into account all the circumstances of the particular case. (5) In particular, but without prejudice to (4), the following matters, where they arise, may be properly regarded: Litigation - Canada Author Michael D Schafler (a) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign Courts. (b) Whether the law of the foreign Court applies and, if so, whether it differs from English law in any material respects. (c) With what country either party is connected, and how closely. (d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages. (e) Whether the plaintiffs would be prejudiced by having to sue in the foreign Court because they would: (i) be deprived of security for that claim; (ii) be unable to enforce any judgment obtained; (iii) be faced with a time-bar not applicable in England; or (iv) for political, racial, religious or other reasons be unlikely to get a fair trial."

The Ontario Court of Appeal stressed that even though the literal wording of the Eleftheria test may imply a conventional forum non conveniens test (ie, whether the court is not, in fact, the most appropriate forum), the Supreme Court in Pompey made clear that this is not the case. Instead, the forum selection clause pervades the analysis and "must be given full weight in the consideration of other factors". It is insufficient for the plaintiff to show a "strong case" that Ontario is the more convenient forum. Rather, the plaintiff must show "strong cause" that the case is exceptional and the form selection clause should not be enforced. The presumption is that a forum clause in a commercial contract should be enforced. That presumption may be refuted only where:

  • the plaintiff was induced to agree to the clause by fraud or improper inducement;
  • the contract is otherwise unenforceable;
  • the court in the selected forum does not accept jurisdiction or is otherwise unable to deal with the claim;
  • the claim or circumstances that have arisen are outside what was reasonably contemplated by the parties when they agreed to the clause;
  • the plaintiff can no longer expect to receive a fair trial in the selected forum due to subsequent events that could not have been reasonably anticipated; or
  • enforcement of the clause would frustrate some clear public policy.

In this case, it was determined that no such factors were present and that the motions court judge had erred in applying the traditional forum non conveniens test, rather than the stricter Eleftheria test.

Comment

To the extent that clarification had been necessary, the court has confirmed that a forum clause in a commercial contract will be strictly enforced. The court's clear direction will be welcomed by business people and solicitors drafting forum clauses. However, the court has also left the door open for potential exceptions and, therefore, future litigation in this context.