How Momentous is This? New SCC Ruling on Forum Selection and Arbitration Clauses
In twelve short paragraphs, the Supreme Court of Canada’s new judgment in Momentous provides helpful guidance on the question of whether a motion to dismiss on jurisdictional grounds may be brought after the delivery of a Statement of Defence. The Court also reaffirms the centrality and uniqueness of the “strong cause” test where a jurisdictional challenge is based on the existence of a forum selection or arbitration clause.
Background and Decisions Below
The dispute at issue in Momentous, which was previously addressed on Canadian Appeals Monitor, arose in the context of claims brought in Ontario by parties affiliated with the short-lived Ottawa Rapidz professional baseball club, which operated for one season in 2008. Following the termination of the club from the Can-Am League, the club and related entities commenced litigation against the League, its principals, and the City of Ottawa. Almost all defendants delivered Statements of Defence which pleaded the existence of forum selection and arbitration clauses as well as defending the action on its merits.
Notwithstanding having defended the action, one set of defendants brought a motion to dismiss the claim under Rule 21.01(3)(a), which permits a stay or dismissal on the basis that the court has “no jurisdiction over the subject matter of the action." The basis of the motion was the existence of the forum selection and arbitration clauses. The motion was brought eight months after the action had been commenced.
The motion judge granted the motion, finding that the plaintiff had failed to show a “strong cause” to decline to enforce the contract. On appeal, the Court of Appeal agreed, finding that while Ontario had jurisdiction, it was right to decline to exercise it in light of the existence of the forum selection and arbitration clauses and the absence of a “strong cause” not to enforce them. The Court adopted the “strong cause” factors described by Juriansz J.A. in Expedition Helicopters, but also noted that inordinate delay in bringing a jurisdiction motion may also qualify.
The Supreme Court of Canada dismissed the appeal, affirming that the “strong cause” test was correctly applied and that the delivery of a Statement of Defence did not preclude a jurisdiction motion under Rule 21. The Court found that:
“…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.”
Consistent with its position in Z.I. Pompey Industrie, the Court found that unless there is a “strong cause” to exercise jurisdiction notwithstanding a forum selection clause, courts should respect the bargain of the parties and enforce the clause. Although it recognized the discretionary nature of the question of enforcement, the Court specifically noted that ordinarily:
“order and fairness are better achieved when parties are held to their bargains.”
The appellants had not argued that there was a “strong cause” to displace the forum specified in the agreement except the delivery of a Statement of Defence, which they argued amount to a waiver of the forum selection clause. In their factum, they argued that the “strong cause” test should not be applied in cases where jurisdiction simpliciter has already been determined, in this case by the attornment of the defendants.
The Court’s judgment, however, confirms that a party challenging jurisdiction need not rely on Rule 17.06, which permits a preliminary motion to set aside service of an originating process. Rule 21.01(3)(a), which unlike Rule 17 can be relied upon even after delivery of a Defence, may be used in such circumstances to seek a dismissal on the basis that another forum has exclusive jurisdiction, as long as the motion is brought promptly.
Momentous reaffirms the considerable weight that Courts are expected to give to forum selection and arbitration clauses. The Supreme Court of Canada, as it had in Z.I. Pompey Industrie, has refused to subsume the question of their enforcement into a broader multi-factorial forum analysis, instead emphasizing the centrality of the “strong cause” test and the importance of enforcing the bargain previously struck by the parties.
The judgment makes clear that discretionary decisions about jurisdiction are to be analysed differently, depending on whether the challenge to jurisdiction is based on forum non conveniens or the enforcement of a forum selection clause. Notably, Laskin J.A.’s judgment at the Court of Appeal in Momentous noted that each of these “different classes of cases” has “its own onus, test and rationale.” The Supreme Court judgment appears to endorse this distinction, and confirms Rule 21 as a vehicle for the enforcement of forum selection clauses in Ontario even where jurisdiction simpliciter has been conceded. It will be interesting to see whether these features of Momentous reflect any broader re-conceptualization of jurisdictional issues that may be yet to come when the Supreme Court releases its decision in the Van Breda appeal.
SCC Docket No. 33999
Date of Decision: March 15, 2012
arbitration arbitration clauses attornment choice of forum jurisdiction leave to appeal subject matter Supreme Court of Canada