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PRIL - Forum Venue Selection Clauses (2)

. Pesorama Inc. v. Borden Ladner Gervais LLP.

In Pesorama Inc. v. Borden Ladner Gervais LLP. (Div Court, 2024) the Divisional Court considered an appeal from a associate-judge issued stay order [under CJA s.106], here of an action alleging "solicitor-client negligence, breach of fiduciary duty and other wrongs".

The primary issue was the effectiveness of a forum selection clause that required proceedings to be conducted in Alberta. Here the court considers the nature of a CJA 106 stay:

[10] Section 106 of the CJA reads:

Stay of proceedings

106 A court, on its own initiative or on motion by any person, whether or not a party, may stay any proceeding in the court on such terms as are considered just. R.S.O. 1990, c. C.43, s. 106.

[11] There is no limit on the law or circumstances that can support a stay of proceedings under s 106 of the CJA. In Momentous.ca Corp. v. Canadian American Association of Professional Baseball Ltd., 2010 ONCA 722 at para. 45, Laskin J.A. refers to the fact that parties may move to challenge the jurisdiction of Ontario courts under “s. 106 of the Courts of Justice Act R.S.O. 1990, c. C. 43, rules 17.06 and 21.01(3)(a) of the Rules of Civil Procedure.”

[12] That is what the Respondents did in their motion. They moved to challenge the jurisdiction of the Ontario courts on the basis of forum non conviens and relied on the forum selection clause in the retainer agreement.

[13] In his June 20, 2023 reasons staying the Ontario action, the Associate Justice cited Novatrax International Inc. v. Hagele Landtechnik GmbH, 2016 ONCA 771, which in turn referred to the Supreme Court of Canada decision in Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27. He cited these principles from Novatrax International:

. The law favours the enforcement of forum selection clauses in commercial contracts;

. Where a forum selection clause exists, that is the starting point for the forum non conviens analysis;

. A stay of an action should be granted unless there is “strong cause” the case is exceptional, and the forum selection clause should not be enforced;

. A forum selection clause pervades the forum non conviens analysis and must be given full weight in consideration of other factors.

....

[17] In the case at bar, the Associate Justice defined the issue as “not whether the plaintiff can sue [the] defendants,” but as “where the plaintiff can sue these defendants.” He grounded his analysis in the issue defined by the parties, that is, by applying the doctrine of forum non conviens. He correctly identified the leading authorities applied the two-step test, including Douez v. Facebook Inc. 2017 SCC 33, [2017] 1 SCR 751. This two-step test applies to instances of valid forum selection clauses, as differentiated from the “ordinary” cases which apply the forum non conviens doctrine in the absence of such a clause: see Pompey at para. 21.

[18] Under the test for forum selection clauses, at step one, the party seeking a stay of proceedings must establish that there was a valid, clear, and enforceable forum selection clause in the contract that applies to the cause of action before the court: Douez at para. 28; Pompey at para. 30. The enforceability of the contract at this first stage is limited to defences of undue influence, fraud, or unconscionability: Douez at para. 28; Pompey at para. 31.

[19] At step two of the test, once the party seeking to stay the proceedings establishes there is a valid forum selection clause, the onus shifts to the plaintiff. The plaintiff must then show “strong cause” why the parties should not be held to their agreement: Douez at para. 29; Pompey at para. 19, 30-31. At this stage, the court is to exercise its discretion by considering all the circumstances, including fairness, convenience, public policy, and the interests of justice: Douez at para. 29; Pompey at para. 19 and 30-31.

[20] The Associate Justice applied the correct test as articulated in Douez and Pompey. He found:

In my view, the conclusions of the Supreme Court support the forum and law selection clause in this within case being upheld. The agreement, and the clause, is “valid, clear and enforceable” and I find that it applies to the cause of action which the plaintiff brings. The parties in this matter are, moreover, sophisticated. Mr. Bhaloo was not a vulnerable individual retaining a lawyer for the first time on, for example, a family law matter or to make a simple will. Again the evidence is clear he was a business-person consulting counsel for high level business purposes, including to eventually have his company “go public”.

[21] The Appellants have provided no authority for their submission that a stay under s. 106 is not available where the issue involves the specialized subset of a forum non conviens analysis involving a forum selection clause, and the two-step test with its shifting onus. The agreement of the parties to a forum for the resolution of disputes does not affect the jurisdiction of the courts over the subject matter of a dispute simply by virtue of their private agreement: see Douez at para 27.

[22] In its brief endorsement upholding the Ontario Court of Appeal in Momentous.ca the Supreme Court of Canada agreed that applying a forum selection clause is discretionary, writing:

In Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27, [2003] 1 S.C.R. 450, this Court confirmed that, in the absence of specific legislation, the proper test in determining whether to enforce a forum selection clause is discretionary in nature. It provides that unless there is a “strong cause” as to why a domestic court should exercise jurisdiction, order and fairness are better achieved when parties are held to their bargains.

See Momentous.ca 2012 SCC 9 (CanLII), [2012] 1 SCR 359 at para. 9.

[23] The Associate Judge exercised his discretion under s. 106 of the CJA to determine whether a stay of proceedings should be entered based on the applicable jurisprudence relative to a specific subset of the forum non conviens equitable doctrine where forum selection clauses are in play. He did not purport to exercise jurisdiction under Rule 21 of the Rules. The fact that such a clause might form the basis of a motion under Rule 21 (or Rule 17 for that matter) does not mean that it cannot or does not apply to a motion to stay a proceeding under s. 106 of the CJA.

[24] I conclude that the Associate Justice did not err in either citing the principles in Novatrax or in adjudicating the question of whether Ontario was a forum non conviens based on the applicable test where the retainer agreement signed by the parties included a forum selection clause.