Momentous.ca v. Can-Am Assn. of Professional Baseball: SCC’s Can-of-Corn Ruling on Attornment Still Leaves Questions Unanswered

The Supreme Court of Canada (“SCC”) has recently released its decision in Momentous.ca Corp. v. Canadian American Association of Professional Baseball Ltd., 2012 SCC 9 [Momentous.ca], which is only the first in a series of much awaited rulings of the SCC aimed at clarifying the question of jurisdiction Canadian courts have to hear private international law matters.  TheCourt.ca Editor Ajit Singh had previously previewed the SCC ruling here.

Specifically, Momentous.ca concerns the relationship between two bases of jurisdiction firmly anchored in private international law, namely attornment and choice of court agreements. The case raised the interesting question of whether a defendant would be precluded from challenging the jurisdiction of the domestic court after submitting a statement of defense on the merits, even if the statement also seeks to enforce the foreign forum clause.

While the court clearly upheld the defendants’ right to move for a dismissal of the proceedings based on a foreign forum clause, the ambiguous and often contradictory language of the decision leaves many questions raised by this case still unanswered.

Facts

The plaintiffs’ claims are based on a series of contracts regarding the operation of a professional baseball team (Rapidz Baseball) in the Can-Am League. The contracts included a forum selection clause in favour of North Carolina courts and an arbitration clause. Following financial hardship, Rapidz Baseball applied for a voluntary withdrawal from the League. The League’s Board of Directors rejected the application and drew a letter of credit, which Rapidz Baseball was obliged to post under the by-laws.

Procedural History

Rapidz Baseball and its related companies sued in Ontario both in contract and in tort. In reliance on the choice of court and arbitration clause, the defendants brought a motion under rule 21.01(3)(a) of the Ontario Rules of Civil Procedure, O Reg 575/07, s 6(1),  to dismiss the action, alleging that the Ontario court had no jurisdiction over the subject matter of the dispute. The motions judge found that the defendants did not attorn to the jurisdiction of the Ontario court because they had raised the jurisdictional challenge in their statement of defence. The motions judge concluded that

“with respect to the issue of attornment being able to usurp the chosen forum of the parties, it cannot amount to a “good reason” not to be bound by clear forum selection clauses to allow the plaintiffs to bring an action in another forum and then argue that the defendants have attorned by defending that action on its merits so that the forum selection clauses are thereby ousted. This is too tactical a procedure and too circular in its reasoning to be able to succeed as a good reason.” (emphasis added)

The motion judge’s determination on the inappropriateness of attornment as a “good reason” to depart from the forum selection clause makes reference to the strong cause test articulated in The “Eleftheria”, [1969] 1 Lloyd’s Rep. 237 (Adm. Div.) [Eleftheria], and adopted in Canada by Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27 [Pompey]. According to this greatly contested test, absent a “strong cause” shown by the plaintiff, courts will stay domestic proceedings and refer them to the chosen foreign court.

The Ontario Court of Appeal agreed with the motions judge that the plaintiff was unable to show a “strong cause” in spite of the court’s finding of attornment. The court thereby makes a distinction between the existence of jurisdiction based on the defendant’s attornment and the discretion that allows a court to decide whether or not to exercise such jurisdiction in the presence of a foreign forum clause. Such discretion would be exercised by staying domestic proceedings absent a “strong cause.”

The SCC Decision

Those who expected the Supreme Court to use this case as an opportunity to further concretize or even reduce the scope of application of the strong cause test are likely disappointed. The court not only did not address the strong cause test, beyond agreeing with the Court of Appeal that attornment is not a strong cause, but it also did not fully clarify when the strong cause test should be applied within the determination of jurisdiction.

On the one hand, by recognizing rule 21.01(3)(a) as the correct basis of the defendant’s motion for a dismissal based on the fact that the court “has no jurisdiction over the subject matter of the action”, the court seems to imply that a foreign forum clause takes away the jurisdiction of the domestic court. On the other hand, the SCC further explains that when another forum, here the chosen foreign forum, has exclusive jurisdiction, “the Ontario Superior Court of Justice will not take jurisdiction” (emphasis added), which it would presumably otherwise have done based on attornment. This seems to be more in line with the strong cause test in Eleftheria which provides courts with discretion to stay proceedings based on the foreign forum clause, “assuming the claim to be otherwise within the jurisdiction” of the domestic forum. (Eleftheria, at p. 242). Judging by the comments of Madam Chief Justice McLachlin at the hearings, this seems to be the court’s view as well, but the language of the decision remains ambiguous.

Another cause of confusion is the exact interpretation of the circumstances in which the defendant is deemed to have attorned to the jurisdiction of the domestic court. The comments the justices made during the hearings are a strong indication that the court does not consider the defendant’s action in this case to amount to an attornment to the jurisdiction of the Ontario court. Nevertheless, the court does not feel compelled to “comment on that issue” since the question of attornment was not on appeal.

However, the court notes that

“within the framework provided by the Ontario Rules of Civil Procedure, a statement of defence that specifically pleads a foreign forum selection clause does not amount to consent that Ontario assume jurisdiction so as to preclude consideration on the merits of whether to enforce the clause.”

On the one hand, this statement makes one wonder whether the decision of the court would have been different if the defendants had not pleaded the forum selection clause in their statement of defence. If the court’s statement, on the other hand, indicates that the defendants had not attorned to the jurisdiction of the Ontario court, one must wonder why the strong cause test would even become an issue since the matter clearly could not be heard in the domestic forum and would need to be heard in the chosen forum.

Overall, the vagueness of the decision coupled with the justices’ remarks during the hearings make it unclear whether the ruling was meant to bring the law on jurisdiction in common law provinces in line with art. 3148, para. 5 of the Québec Civil Code, in which “a Québec authority has no jurisdiction where the parties, by agreement, have chosen to submit all existing or future disputes between themselves relating to a specified legal relationship to a foreign authority or to an arbitrator, unless the defendant submits to the jurisdiction [of the Québec authority]” (emphasis added).

Roxana Banu is an Adjunct Professor at Osgoode Hall Law School, York University. She has assisted the Romanian delegation of the Permanent Mission to the EU on European Private International Law and has worked for several law firms in Berlin, Bucharest and New York on matters of Contract Law, International Business Transactions, and Trademark Law. Prof. Banu is currently pursuing an SJD degree at the University of Toronto Law School on the harmonization of Private International Law.