In decision by Associate Chief Justice Hoy, which was unanimously endorsed, the Ontario Court of Appeal confirmed that the correct test for place of contract related to electronically transmitted agreements is in the jurisdiction where acceptance is received. The Court also confirmed that the principle that the party advancing the argument for a more appropriate or convenient forum bears the evidentiary burden, even when that jurisdiction is not Ontario.
Eco-Tec Inc. (hereafter the “respondent”), is an Ontario corporation which researched, developed and manufactured technology and products that are proprietary. The respondent brought an action in Ontario against Dr. Lu, three Chinese corporations and a British Virgin Island corporation (hereafter the “appellants”) for breach of confidence, breach of contract, breach of fiduciary duty, conspiracy, unjust enrichment and/or unlawful interference with economic interests after discovering clones being sold in the global market. The appellants brought a motion to stay the proceedings, arguing that the Ontario court did not have the requisite jurisdiction or in the alternative, should decline jurisdiction on the grounds that Ontario is not the most convenient forum for the proceedings.
The appellants acted as the respondent’s consultant, agent or distributor in China for twelve (12) years. A series of confidentiality and business agreements between the respondent and the appellants were signed in 2001, 2003 and 2008, which included a clause that the agreement would continue to be binding for ten (10) years after their termination. In 2012, the respondent terminated the relationship with the appellants after the aforementioned discovery of colons of its products. Certain agreements also included forum selection provisions, which allowed the respondent to select Ontario.
The motion judge held that the Ontario court had consent-based jurisdiction as well as jurisdiction on the basis that the dispute had a real and substantial connection to Ontario.
The motion judge further held that all of the agreements between the respondent and the appellants were made in Ontario.
In considering the appellants submission that China was a more appropriate jurisdiction for the dispute, the motion judge found that the appellants did not discharge their burden to demonstrate that China was more appropriate than Ontario.
The appellants submitted that:
- the motion judge erred in the decision that Ontario had both consent-based jurisdiction and jurisdiction by virtue of a real and substantial connection;
- the motion judge further erred in finding Ontario as the place the contracts were formed ; and
- the motion judge erred by placing the burden on the appellants to demonstrate that China was the more appropriate jurisdiction as compared to Ontario.
THE ONTARIO COURT OF APPEAL’S DECISION
The Court dismissed the appeal for the foregoing reasons.
First, the Court concluded that the motion judge did not err in her interpretation and application of Van Breda v. Village Resorts Ltd., 2012 SCC 17, which identified four (4) presumptive connecting factors to establish a real and substantial connection in a tort case. The motion judge found that two (2) of the four (4) factors were established on the fact that the alleged tort was committed in Ontario and with respect to the second issue on appeal, the agreements between the appellants and the respondent were made in Ontario.
Further, the Court found that the motion judge did not err in the determination that the place of contracts was Ontario. The Court endorsed the motion judge relying on what she described as the “traditional approach” from Trillium Motor World Ltd. V. General Motors of Canada Ltd., 2014 ONCA 497 which stated at para. 66 that “[w]hen acceptance of a contract is transmitted electronically and instantaneously, the contract is usually considered to be made in the jurisdiction where the acceptance is received.” In this case, the agreements were signed in Ontario, sent to China and signed, then emailed back to the respondent in Ontario, where upon receipt the contracts were formed. The Court rejected the appellants’ argument that the application of Trillium required “a broader, more contextual analysis when assessing the place of the contract for purposes of a jurisdictional determination.” (para 17).
Lastly, the Court dismissed the appellant’s submission that the evidentiary burden was on the respondent to establish that Ontario as compared to China, was a more convenient and appropriate forum to deal with the dispute. The Court rejected that the motion judge erred in applying the traditional evidentiary burden and found that her application of this principle was not unreasonable and within her discretionary powers. Further, the Court held “even if the burden were on the respondent, I am satisfied that order and fairness favour trying this action in Ontario” (para 20).
On May 5, 2016, the appellants’ application for leave to appeal from the above judgment was dismissed. As such, it is important to be cognisant of the place of contract principles confirmed in this case to prevent any unintended jurisdictional consequences. What’s more and perhaps the more impactful part of the decision, it is clear that if a more appropriate and convenient jurisdiction outside of Ontario is contemplated, the party which advances it has the burden to prove such a submission.