SCC Allows Proceedings in Multiple Jurisdictions, Leaves Problem of Multiple Judgments

Last Friday, the Supreme Court of Canada (“SCC”) delivered their decision in Teck Cominco Metals v Lloyd’s Underwriter’s, 2009 SCC 11. The private international law decision dealt with Teck Cominco’s attempt to have proceedings in British Columbia stayed because of an assertion of jurisdiction over the same matter in a U.S. Court.

In a unanimous decision penned by McLachlin C.J., the SCC made it clear that comity should not act as the sole determinant of jurisdiction. Instead, a holistic test taking into account all the factors in s. 11 of the Court Jurisdiction and Proceedings Transfer Act, SBC 2003, c 28 [CJPTA], is appropriate.

Facts

Teck runs mining and smelting operations in British Columbia. Lloyd’s Underwriters is an insurer who, amongst other insurers, provided Teck with coverage for environmental damage.

A claim arose in the U.S. against Teck because its discharge of waste material into the Columbia River in B.C. allegedly accumulated in bodies of water in Washington State. The suit sought to hold Teck liable under American legislation for environmental property damage allegedly caused by the contamination. Teck was of the opinion that the alleged contaminations were included in the policies it purchased from its insurers such that the insurers were to defend and indemnify Teck. The insurers deny this.

On November 23, 2005, both Teck and Lloyd’s sought declaratory orders regarding the insurers’ obligations to defend and indemnify (in the affirmative and in the negative respectively). Teck commenced their action in Washington State, whereas Lloyd’s pursued their action in British Columbia Supreme Court. Each party then took steps to obtain jurisdictional rulings. On May 1, 2006, the U.S. District Court for the Eastern District of Washington asserted jurisdiction over the matter by denying the insurers’ applications to dismiss Teck’s claims against them. They did so on the basis of forum non conveniens.

In BC, Teck was denied their application for stay of the proceedings against them in the BC Supreme Court. Teck’s appeal to the BC Court of Appeal failed, and the case was further appealed to the SCC.

Analysis

S. 11 of the CJPTA states the following:

11. (1) After considering the interests of the parties to a proceeding and the ends of justice, a court may decline to exercise its territorial competence in the proceeding on the ground that a court of another state is a more appropriate forum in which to hear the proceeding.

(2) A court, in deciding the question of whether it or a court outside British Columbia is the more appropriate forum in which to hear a proceeding, must consider the circumstances relevant to the proceeding, including

(a) the comparative convenience and expense for the parties to the proceeding and for their witnesses, in litigating in the court or in any alternative forum,

(b) the law to be applied to issues in the proceeding,

(c) the desirability of avoiding multiplicity of legal proceedings,

(d) the desirability of avoiding conflicting decisions in different courts,

(e) the enforcement of an eventual judgment, and

(f) the fair and efficient working of the Canadian legal system as a whole.

Teck advanced two arguments before the SCC: (1) that the multifactored test under s. 11 must give way to a ‘comity-based’ test that respects foreign courts’ decision to take jurisdiction, and (2) that even if the s.11(2) factors are to remain in contemplation, that “the assertion of jurisdiction by the foreign court is a factor of overwhelming significance in the determination of whether the local forum is appropriate (forum conveniens)” (para 19). The SCC rejected both arguments.

In rejecting the first argument, the court notes that not only does a comity-based test not supersede the s.11(2) factors, but also, that each of the factors must always be considered. At para 21, the court states,

The CJPTA creates a comprehensive regime that applies to all cases where a stay of proceedings is sought on the ground that the action should be pursued in a different jurisdiction (forum non conveniens). It requires that in every case, including cases where a foreign judge has asserted jurisdiction in parallel proceedings, all the relevant factors listed in s. 11 be considered in order to determine if a stay of proceedings is warranted. (emphasis mine)

Further, the court closed the door on the introduction of any additional factors in the forum non conveniens determination. After noting that the CJPTA emanated from the Uniform Law Conference of Canada, the court states the following at para 22:

[s]ection 11 of the CJPTA thus constitutes a complete codification of the common law test for forum non conveniens. It admits no exceptions. (emphasis mine)

In rejecting Teck’s second argument, the court advances two points. First, McLachlin C.J. notes that the legislature’s mention of the avoidance of a multiplicity of proceedings is one amongst many factors in s. 11(2). Specifically, that factor was not given any special preference by the legislature. As such, the court determines that the assertion of jurisdiction by a foreign court should not be made an overriding and determinative factor in the s. 11 analysis as Teck suggested.

Second, the court distinguishes several authorities put forward by Teck. In short, the court notes that the cited cases all took into account the several factors mentioned in s. 11(2) without elevating the factor of the existence of parallel proceedings above all other factors.

After rejecting Teck’s two arguments, the court went on to further articulate policy reasons for rejecting Teck’s position. At para 29, McLachlin C.J. writes,

To adopt this approach would be to encourage a first-to-file system, where each party would rush to commence proceedings in the jurisdiction which it thinks will be most favourable to it and try to delay the proceedings in the other jurisdiction in order to secure a prior assertion in their preferred jurisdiction. Technicalities, such as how long it takes a particular judge to assert jurisdiction, might be determinative of the outcome. In short, considerations that have little or nothing to do with where an action is most conveniently or appropriately heard, would carry the day. Such a result is undesirable and inconsistent with the language and purpose of s. 11, discussed above.

Moreover, the court comments on dangers emanating from a potential difference between different conceptions of jurisdiction:

A distinction should be made between situations that involve a uniform and shared approach to the exercise of jurisdiction (e.g. inter-provincial conflicts) and those, such as the present, that do not. In the latter, blind acceptance of a foreign court’s prior assertion of jurisdiction carries with it the risk of declining jurisdiction in favour of a jurisdiction that is not more appropriate. (emphasis mine, para 30)

In the end, the court advocates “[a] holistic approach, in which the avoidance of a multiplicity of proceedings is one factor among others to be considered, [because it] better serves the purpose of fair resolution of the forum non conveniens issue with due comity to foreign courts” (para 30).

Applying this law to the facts, the court concluded that the chambers judge took into account the appropriate factors when denying Teck’s initial claim. That is, the central issues in determining whether there was insurance coverage (disclosure, risk assessment, and policy interpretation) “weighted in favor of British Columbia, and that the only coverage issues properly the substance of the U.S. Environmental Action are inconsequential” (para 34).

Enforceability of Potential Conflicting Judgments

While it is clear that a strict comity-based test with regards to asserting jurisdiction is rejected, comity remains a valid doctrine when enforcing judgments. A possibility emanating from this decision is that parties may have to deal with multiple conflicting judgments from different jurisdictions. While the court was aware of this consequence, it did not specify the exact response.

However, the court did supply a brief outline of potential solutions: (1) a race where the first judgment handed down prevails; (2) an absolute preference for local proceedings; or (3) a middle ground that adopts a general first-to-judgment rule but affords additional defences to enforcement that may be engaged in some circumstances (para 39).

Commentary

In an era of ever-increasing global trade, this case makes real the possibility that international Canadian businesses could be exposed to simultaneous proceedings in both foreign and local jurisdictions for the same matter. While the court’s reasons for refusing to elevate the factor of parallel proceedings seem cogent, the prospect of multiple legal proceedings stemming from a single cause of action (the reality for Teck now) is an immensely cumbersome one. Moreover, the uncertainty stemming from the court’s reluctance to pronounce on what happens in the face of potential conflicting judgments is problematic. Each of the proposed responses offered by the court presents problems.

If solution 1, “a race where the first judgment handed down prevails,” is adopted, it will create the possibility that after a local court has asserted jurisdiction, the case is nevertheless decided in a foreign court. Such an outcome is wasteful of judicial resources, and reduces the legitimacy of the original assertion of jurisdiction by the local court.

If solution 2, “an absolute preference for local proceedings,” is adopted, the principle of comity will be reduced to an impotent doctrine. In the SCC’s recent decision in Pro Swing Inc v Elta Golf Inc, [2006] 2 SCR 612, the majority opinion spoke about the need to balance comity with the protection of the judicial system of the enforcing state (para 27). Considering that the court ultimately held that foreign non-monetary judgments could be enforced (with certain preconditions), it seems that a strict preference for local proceedings would seem to give comity too limited a role.

Thus, the third solution, “a middle ground that adopts a general first-to-judgment rule but affords additional defences to enforcement…,” is arguably the best approach to resolving the issue of conflicting judgments. Presumably, defences that are required to preserve the legal legitimacy of any domestic decision (and the accompanying judicial system) would fall into this category. Nevertheless, questions remain about these defences would be shaped remain.

The uncertainty emanating from this decision makes it difficult for companies put in such a situation to plan. Not only are they now subject to the expenses of having to partake in multiple proceedings, they are further faced with not knowing whether the judgments that they are seeking to obtain will be enforceable. Such a situation seems to fly in the face of the principles of rule of law and predictability.

In the final analysis, given that the potential for conflicting judgments is also a factor in the determination of whether to assert jurisdiction, it seems that courts are hopeful that such a situation will not arise. If it ever does, it will be interesting to see how the difficult tension between comity and the preservation of local rulings is resolved.