Saskatchewan – court considers arbitration undertaking as part of reasons to refer parties to Ontario courts – #019

Despite Plaintiff basing its claims on an unsigned 2003 agreement, Saskatchewan’s Queen’s Bench relied on the parties’ earlier, more detailed 2001 signed agreement to tip the balance and grant Defendant’s application to decline jurisdiction in favour of the Ontario courts.   Mr. Justice D.H. Layh in JCP Conservation Systems Ltd. v Convenience Group Inc., 2017 SKQB 309 considered evidence from Defendant including the parties’ earlier agreement which applied Ontario law and subjected any disputes under that agreement to arbitration under Ontario’s Arbitration Act, 1991, SO 1991, c 17

Defendant, Convenience Group Inc. (“CGI”), applied for an order that the action instituted by Plaintiff, JCP Conservation Systems Ltd. (“JCP”), be heard in Ontario, not Saskatchewan where JCP had instituted its action and where JCP argued it should remain.  To decide the application, Layh J. identified three provisions of Saskatchewan’s The Court Jurisdiction and Proceedings Transfer Act, SS 1997, c C-41.1 applicable to the application: sections 4, 9 and 10. 

Section 4 contained five distinct circumstances in which the Saskatchewan courts might have jurisdiction. Only the fifth applied directly to JCP’s litigation: ‘is there is a real and substantial connection between Saskatchewan and the facts on which the proceeding is based.’  Section 9 also invites the party invoking Saskatchewan’s territorial jurisdiction to adduce evidence of any circumstance that might constitute a real and substantial connection to Saskatchewan.  The application of the criteria need not lead the court to conclude that Saskatchewan has the exclusive or greatest connection but merely “a” connection. 

Layh J. began his analysis by referring to a leading case on the legislation which outlined the courts’ sequential approach to The Court Jurisdiction and Proceedings Transfer Act analysis : 

[12]  As summarized by Justice Popescul (as he then was) in Wall Estate v GlaxoSmithKline Inc., 2010 SKQB 351 (CanLII), 367 Sask R 21, in the first instance the court will look to the pleadings to see if there is a sufficient link between Saskatchewan and the facts as pled to determine if Saskatchewan has territorial competence. If the pleadings establish this link, a rebuttal presumption of jurisdiction comes into operation and the foreign defendant [CGI] may adduce evidence to prove facts fatal to the plaintiff’s [JCP’s] claim. If the foreign defendant rebuts this presumption, the court ought to review the plaintiff’s evidence in order to assess whether the plaintiff has “made out an arguable case such that it would constitute a triable issue.” Finally, as Justice Popescul stated, “If the Court concludes that there is not a ‘real and substantial connection’ … the Court ought to declare that it does not have territorial competence and dismiss the action against the foreign defendants.” 

Layh J.’s reasons for judgment include a careful analysis of all the key criteria pointing to or away from either of the competing jurisdictions.  Issues such as residence of either party, location of damages alleged conveniences of a hearing for the anticipated witnesses were canvassed.  Layh J. concluded that, based on the facts provided to the court by both Plaintiff and Defendant, the Saskatchewan courts had jurisdiction under sections 4 and 9.   

If the courts do have territorial jurisdiction after the sections 4 and 9 analysis, the court then proceeds onto section 10 to decide if the court should nonetheless decline the litigation on the ground that a court of another state is a more appropriate forum in which to try the proceeding. 

What makes the case of particular interest to commercial arbitration practitioners is the role of the arbitration clause in one of the two contracts entered into by the parties but not invoked by Plaintiff in its litigation.  Their arbitration clause played a determinative role in referring the matter to the Ontario courts. 

As Plaintiff, JCP did not invoke the 2001 agreement and relied upon a one page, six clause document entitled ‘Letter of Understanding’ which Layh J. referred to as the “2003 Agreement”.  In contrast, Defendant CGI provided the court with a six page contract signed by both litigants in 2001 which Layh J. referred to as the “2001 Agreement”. 

 [32] CGI also looks to ss. 10(2)(b) – “the law to be applied to issues in the proceeding”. At this point another issue rears its head. In its statement of claim JCP refers only to an agreement of December 2003 and bases its claim solely on this agreement to allege that CGI breached an implied duty of good faith. However, CGI’s director, George Turjanica, has attached to his affidavit a six page contract entitled “Authorized Dealer/Applicator Agreement” executed by George Turjanica on behalf of CGI on March 20, 2001 and by James Currie on behalf of JCP on March 12, 2001 [2001 Agreement]. CGI looks to two clauses in the 2001 Agreement, suggesting they are germane in determining whether Saskatchewan is the most appropriate forum under s. 10 of the Act. 

[33] Of the two clauses, CGI looks first to clause 10 of the 2001 Agreement which reads as follows:  Arbitration/Mediation.  All disputes and questions whatever which shall arise between the parties touching this agreement or the construction or application of it or any clause or thing contained in it shall be referred to mediation or arbitration, as the parties to this Agreement may agree. The parties agree that in the event that they are not able to reach a solution of all matters in dispute during mediation, then the matters remaining in dispute shall be finally determined by arbitration in accordance with the provisions of the Arbitration Act, 1991 (Ontario) as amended from time to time.  

[34] CGI also looks to clause 12E of the 2001 Agreement, the governing laws clause. It reads as follows:  General E.  This agreement is governed by the laws of the Province of Ontario.

The parties’ competing reliance on either of the two agreements presented a dilemma for the court. 

[40] I must decide whether the 2001 Agreement has any bearing on the within application. JCP says the 2001 Agreement is simply not in play in this application because it is not in play in the claim. I, too, agree that no claim is based upon on the 2001 Agreement. Counsel for JCP quite candidly stated at the hearing that if the 2001 Agreement governs the relationship between the parties, the arbitration clause and the designation of Ontario’s laws in the 2001 Agreement may be determinative of this application and, indeed, the claim. 

Layh J. held that JCP can choose which of the two agreements it will rely on for its litigation but section 10 allows CGI to provide the other agreement as part of its evidence to urge the court to decline jurisdiction.  Layh J. held that nothing in sections 4, 9 or 10 restricted the court’s analysis to only the facts alleged by Plaintiff.  The 2001 Agreement influenced Layh J.’s analysis for two reasons.  First, under section 10(2)(b), the 2001 Agreement invoked the laws of Ontario as “the law to be applied to the issues in the proceeding.”  Second, Layh J. found that arbitration clause “implicitly augurs for an Ontario forum because specific reference is made to the Arbitration Act of Ontario.”

Despite concluding the courts of Saskatchewan had jurisdiction, Layh J. relied on the factors in section 10(2) and declined that jurisdiction in favour of Ontario’s courts.  

Layh J. was cautious to add that his use of the 2001 Agreement was not a determination on the merits of which of the two agreements applied to the dispute but a determination he acknowledged would be for the trial judge. Layh J. had only to consider whether Saskatchewan or Ontario was the most appropriate forum and not whether the parties should be referred to arbitration under their 2001 agreement.  That latter issue may well arise in the Ontario courts at a later date.