Ontario – court accommodates litigant in China impacted by coronavirus measures – #288

In his January 24, 2020 reasons Paul Sun v. Duc-Tho Ma, 2020 ONSC 505, Mr. Justice Calum MacLeod accommodated a litigant whose ability to attend in court in Ontario was constrained by now-familiar government measures to control the coronavirus.  Those measures impacted travel and communication for the litigant located in China, obliging the litigant to participate by conference call to finalize the terms of a November 2019 trial decision.  Despite flexibility in accommodating for the coronavirus, Macleod J. declined to engage further in requests made for intervention. He emphasized the “very narrow” scope of his intervention due to an earlier Superior Court determination that other disputes between the parties were subject to exclusive resolution by arbitration in Taipei.

MacLeond’s second decision in Paul Sun v. Duc-Tho Ma, 2020 ONSC 505 (“Form Decision”) followed his earlier, companion decision on the merits at trial in Paul Sun v. Duc-Tho Ma, 2019 ONSC 6659 (“Trial Decision”).   Macleod J.’s Form Decision followed a conference call set up to settle the form of judgment he had issued in that the Trial Decision.  The Trial Decision had issued subject to verification whether preconditions to its enforcement had been met.  Those conditions required Plaintiff, Mr. Sun, to provide certain records and proof of ownership to ensure Defendant, Mr. Ma, regarding key facts.  Those conditions were set out in Macleod J.’s Trial Decision and highlighted at para. 6 of the Form Decision.

The Form Decision raises two (2) points of interest. 

(i) The Form Decision is timely because it mentions that the hearing was held by conference call for reasons which, applicable in China in January 2020, now apply in North America in March 2020: coronavirus.

[4] Unfortunately, Mr. Ma had to call in from China.  He is in a small town with limited internet access and unable to travel easily because of the current situation involving the coronavirus and quarantines imposed by the government of China.  The documents and affidavits have been provided to Ms. Sutherland who is advising him but was not retained to represent him in the litigation.  He has not had an opportunity to review the documents with her.

(ii) Macleod J. resisted enlarging the scope of his intervention, despite having presided over the trial on the merits.  He underlined that certain requests made by Mr. Ma were beyond his jurisdiction.

[10] I draw to Mr. Ma’s attention the very narrow scope of this court’s continuing involvement. See paragraphs 19 – 21 of the November Decision.  All disputes under the founders’ agreement are to be arbitrated in Taiwan.  This court took jurisdiction only over the promissory note and the disclosure of certain documents which I ordered.  As stated above, the purpose of that was solely to ensure that Mr. Ma was given access to the corporate records of Ironyun relating to the shares which may be in dispute if he proceeds with the arbitration and with whatever information Mr. Sun or Ironyun had about the records of IZ Incorporated.

The “narrow scope” referred to by Macleod J. arose from an earlier determination by Master Alexandre Kaufman in Paul Sun v. Duc-Tho Ma, 2019 ONSC 4586.  In that decision, Master Kaufman denied Mr. Ma leave to amend his counterclaim because, inter alia, the proposed claim was subject to arbitration.  Master Kaufman held that a claim subject to arbitration effectively did not meet ‘a basic threshold of legal soundness’ and was ‘not tenable in law’ despite mandatory wording in the applicable Rules of Civil Procedure, RRO 1990, Reg 194 that a court shall grant leave to amend at any stage of an action.  See the related Arbitration Matters note “Amendment to pleading in court cannot include claim subject to arbitration”.

(iii) In the Trial Decision, Macleod J. abided by two (2) constraints on his jurisdiction.  First, the earlier decision by Master Kaufman was binding on the parties and would not be revisited.  Second, certain live disputes, though of interest, were not his to decide but would be decided in arbitration.  The combined effect of the decision to refer the parties to arbitration in Taipei was to limit the scope of the dispute subject to resolution at the trial before Macleod J.

[20] Of particular importance is the finding by Master Kaufman that all disputes under the Founders Shareholder Agreement are subject to a forum clause and an arbitration clause. As Master Kaufman points out, the defendant seeks to enforce that agreement and would be bound to pursue that dispute in Taipei.  The defendant states that he intends to do just that.  In fact he stated that he intends to sue the corporation and Mr. Sun in Taiwan and in the United States.

[21] As a consequence of the above, the only matter before this court is the validity and enforcement of the promissory note and whether or not any of the relief sought in the counterclaim can be granted.  The finding that there is a valid and binding arbitration clause relating to shareholder disputes is binding on the parties.  The finding that Mr. Ma does not have the right to pursue relief as a shareholder in his personal capacity is also binding. 

[22] Mr. Ma may or may not be the beneficial owner of the shares issued to IZ Incorporated and may or may not have control of that corporation.  But there is no question that all shares were vested in the name of IZ Incorporated at Mr. Ma’s own direction.  IZ Incorporated was the legal entity which owned the shares and would be a necessary party to any litigation about those shares.  Mr. Ma may also have rights against Ironyun as a former employee and may have rights in his personal capacity under the Founders Shareholder Agreement.  The latter is subject to the forum and arbitration clause and the former would have to be litigated in a forum where Ironyun carries on business or has its registered office.

See para. 27 as well in which Macleod J. reiterates that disputes under the Founders Shareholder Agreement and the validity of share forfeitures were subject to arbitration.

(iv) Macleod J. held that Mr. Sun had complied with the conditions stipulated in the Trial Decision.  While he was willing to temporarily stay enforcement due to the conditions and the current problems to communicate, Macleod J. reminded Mr. Ma that the judgment, pronounced in November 2019, accrued interest since that date.

urbitral note – First, the reasons issued on January 24, 2020 and record the court’s accommodation of the litigant located in China whose ability to circulate was impacted by the coronavirus.  The reasons reflect the Canadian court’s willingness to accommodate communication but also its obligation to alert litigants that certain consequences of the judicial process, including interest on trial decisions, continue to run.

Unbeknownst then to litigants located in Canada, those reasons foreshadow the same accommodations North American litigants would later seek locally. As the Canadian court determined, despite willingness to be flexible, some effects of the judicial process would not be suspended and reciprocity suggests that the same mix of measures will be applied elsewhere.