Québec – forum selection clause does not eliminate courts’ jurisdiction to issue provisional measures – #338

In Associated Foreign Exchange Inc. v. 9189-0921 Québec Inc. (MBM Trading), 2020 QCCS 1823, Mr. Justice Michel A. Pinsonnault determined that the courts of Québec had jurisdiction to issue a Mareva injunction over assets located in Québec despite the parties’ prior, uncontested agreement that the courts of Ontario had exclusive jurisdiction over the merits of their dispute.  Pinsonnault J. found support for that determination based on the clearer result, set out expressly in Québec’s substantive and procedural codes, confirming the Québec courts’ jurisdiction to issue provisional measures despite a final and binding agreement to arbitrate binding the parties and excluding the courts.

On May 27, 2020, Plaintiffs obtained an ex parte Mareva injunction against Defendants (excluding Emmeco Inc.) (“Mareva Defendants”) from the Ontario Superior Court (“Ontario Order”).  On May 29, 2020, Plaintiffs obtained an ex parte Mareva injunction against Mareva Defendants from the Québec Superior Court (“Québec Order”).  On June 8, 2020, the Ontario Superior Court renewed the May 27, 2020 Ontario Order until June 18, 2020 (“Second Ontario Order”). (None of those orders have yet to be posted online).

In the Québec Superior Court, before Pinsonnault J., Plaintiffs applied to extend the Québec Order and the Mareva Defendants presented a declinatory exception claiming that the Québec Superior Court had no jurisdiction to issue provisional or conservatory measures.

Plaintiffs recognized that Ontario was the court with jurisdiction to hear and decide the merits of the dispute based on the forum selection clause agreed to by the parties.  Pinsonnault J. reproduced an excerpt from Plaintiffs’ pleading in which they described the terms of the forum selection made by the parties and, in the following paragraph of their pleading, also asserted the Québec Superior Court’s jurisdiction to issue provisional or conservatory measures.

6. Ontario is the competent Court to hear the merits of this case and has jurisdiction over the dispute and the parties. Indeed, even though the Defendants are domiciled in Quebec, the contract between the parties provides that (i) the account agreement and the transactions contemplated within it shall be construed and interpreted in accordance with the laws of Ontario, (ii) each party agrees to attorn to the jurisdiction of the Courts in Ontario, and (iii) the parties agree that Toronto is a convenient forum to bring any action.

7. The Quebec Courts may order provisional or conservatory measures even if they have no jurisdiction over the merits of the dispute”.

The Mareva Defendants argued that the effect of the parties’ forum selection clause meant that the courts of Québec had no jurisdiction over the merits and no jurisdiction for any provisional or conservatory measures. Their argument rested on a combined reading of articles 3138 and 3148 para. 2 of Québec’s Civil Code of Québec, CQLR c CCQ-1991 (“C.C.Q.”) and the case law, in particular GreCon Dimter Inc. v. J. R. Normand Inc., 2005 SCC 46 (CanLII), [2005] 2 SCR 401.

3138 C.C.Q. A Québec authority may order provisional or conservatory measures even if it has no jurisdiction over the merits of the dispute.

3148 C.C.Q. In personal actions of a patrimonial nature, Québec authorities have jurisdiction in the following cases:

(1) the defendant has his domicile or his residence in Québec;

(2) the defendant is a legal person, is not domiciled in Québec but has an establishment in Québec, and the dispute relates to its activities in Québec;

(3) a fault was committed in Québec, injury was suffered in Québec, an injurious act or omission occurred in Québec or one of the obligations arising from a contract was to be performed in Québec;

(4) the parties have by agreement submitted to them the present or future disputes between themselves arising out of a specific legal relationship;

(5) the defendant has submitted to their jurisdiction.

However, Québec authorities have no jurisdiction where the parties have chosen by agreement to submit the present or future disputes between themselves relating to a specific legal relationship to a foreign authority or to an arbitrator, unless the defendant submits to the jurisdiction of the Québec authorities”.

The Mareva Defendants argued that article 3148 para. 2 C.C.Q. took precedence over article 3139 C.C.Q.

[17] In other words, given the presence of a forum selection clause granting exclusive jurisdiction to the Courts of Ontario, the provisions of article 3138 CCQ become inoperative to all intents and purposes. Under such circumstances, a Québec Court cannot assist an Ontario Court and issue a provisional or conservatory order in furtherance of or in assistance to the Ontario Court Order which specifically covers movable and immovable assets of the Defendants that are located in Québec”.

Pinsonnault J. disagreed.  By pursuing the Mareva Defendants’ reasoning, Pinsonnault J. observed that Plaintiffs would have made “a fatal error” by agreeing to a forum selection clause granting exclusive jurisdiction to the Ontario Courts with the Mareva Defendants owning assets in Québec.

To resolve the application before him challenging the Québec courts’ jurisdiction, Pinsonnault J. remarked that, had the parties agreed instead to arbitration, Plaintiffs would have been able to seek provisional or conservatory measures from a Québec Court pursuant to the express provisions of article 623 of Québec’s Code of Civil Procedure, CQLR c C-25.01 (“C.C.P.”).

Article 623 C.C.P. The court, on an application, may grant provisional measures or safeguard orders before or during arbitration proceedings”.

That article appears at the onset of the section of Québec’s C.C.P. devoted to arbitration, Title II articles 620 C.C.P. et seq. That Title II contains various provisions setting out the respective roles for arbitrators and courts.  Among other provisions, article 623 C.C.P. confirms that the court in Québec has jurisdiction to grant provisional measures or safeguard orders, either before or even during such proceedings.

Pinsonnault J. then narrowed in on the contradiction created by the Mareva Defendants’ argument.

[19] Based on the reasoning proposed by the Mareva Defendants and given that the wording of article 3148 para. 2 specifically covers arbitration (…relating to a specific legal relationship to a foreign authority or to an arbitrator…), the provisions article 623 CCP could never be implemented for provisional measures or safeguard orders in the presence of arbitration proceedings chosen by the parties”.

Pinsonnault J. disagreed with that result, pointing out the contradictory results between accepting the courts or arbitration in article 3148 C.C.Q.

[20] The fact that the parties would have agreed to resort to compulsory arbitration at the outset of their contractual relationship or whether they spontaneously decided to submit their dispute to arbitration as opposed to a court of law should not change the outcome with respect to the inapplicability of article 623 CCP. The provisions of article 623 CCP would not be of any assistance given those of article 3148 para. 2 CCQ”.  

Referring to GreCon Dimter Inc. v. J.R. Normand Inc., Pinsonnault J. rejected the Mareva Defendants’ inference that the Supreme Court had agreed that article 3148 C.C.Q. para. 2 had priority over article 3138 C.C.Q. 

To do so, he noted that doctrinal commentary published in 2013 (Gérald Goldstein, Droit international privé (DCQ) – Commentaire sur l’article 3138 C.c.Q., EYB2013DCQ1278) reasoned that article 3138 CCQ should not be automatically set aside where there is an arbitration clause excluding the competence of Québec Courts and thereby prevent the assistance for provisional or conservatory measures that could be offered by Québec Courts.  Having cited that reasoning from the doctrine, Pinsonnault J. determined that “[t]he same reasoning should apply to situations involving a forum selection clause excluding de facto the Courts of Québec to the benefit of another forum like in the present instance”.

See also Bombardier inc. v. General Directorate for Defense Armaments and Investments of the Hellenic Ministry of National Defense, 2013 QCCS 6892 paras 6-13 for more comment on the interaction of articles 3138 and 3148 C.C.Q. para. 2 in the context of an arbitration agreement.  In that case, the order had been renewed twice by separate judges over the defendants’ jurisdictional challenge made each time. 

To add further depth to the scope of article 3138 C.C.Q., Pinsonnault J. referred to two (2) cases.  First, SNC-Lavalin Polska SP. ZOO v. BNP Paris Canada, 2017 QCCS 3694 paras 7-16 in which the Superior Court had ruled that article 3138 C.C.Q. authorized it to issue a provisional injunction despite a forum selection clause granting competence to courts in Poland.  Second, Trudeau v. Thibert, 2015 QCCA 1486 paras 16 and 24 which invoked the principle of comity when denying leave to appeal decisions issuing and renewing a Mareva injunction seizing assets in Québec despite the action on the merits being instituted in Ontario.

Based on the above, Pinsonnault J. dismissed the Mareva Defendants’ declinatory exception, holding that the Québec courts had jurisdiction to issue provisional measures such as a Mareva injunction even though the parties had by agreement given exclusive jurisdiction to the Ontario courts.

urbitral note – First, Pinsonnault J.’s reasoning and result apply to disputes in which the parties have agreed to exclude the courts (of Québec and elsewhere) in favour of final and binding arbitration seated outside Québec.  Even without article 623 C.C.P., it appears from Pinsonnault J.’s handling of the other of the two (2) options in article 3148 C.C.Q. para. 2 (courts or arbitration) that he would have come to a similar result if the jurisdictional challenge had been based on an agreement to arbitrate.

Second, in regard to the exceptional nature of a Mareva injunction, see for example Marciano (Séquestre de), 2011 QCCS 7086 paras 50 and following in which the court focused on how a Mareva injunction must be justified and how it runs against “the simple proposition that in our jurisprudence, execution cannot be obtained prior to judgment and judgment cannot be obtained prior to trial”. Aetna Financial Services v. Feigelman, 1985 CanLII 55 (SCC), [1985] 1 SCR 2 para. 8.  Parties subject to such orders issuing ex parte are given the opportunity to challenge whether the order ought to have been issued. In the present case, the Québec Order was renewed on consent before Pinsonnautl J. but for a short period of seven (7) days and only challenged before Pinsonnault J. on the basis of jurisdiction.  The record does not disclose either way whether the Mareva Defendants had contested the merits of the ex parte application for the Mareva injunction or would do so imminently.

Third, the Mareva Defendants were ordered to provide a sworn statement describing the nature, value and location of their assets worldwide, whether in their own name or not and whether solely or jointly owned and to submit to examinations under oath, to be conducted by video conference.