Newsletter > September 2007
- Rui Fernandes and Gordon Hearn were recently listed in the International Who’s of Shipping & Maritime Lawyers.
- Rui and Gordon have also been listed in Woodward/White’s “Best Lawyers in Canada” 2008 edition in the areas of Transportation and Maritime law.
Seminar Schedule for 2008:
January 18: Maritime and Transportation Conference – Full Day – $75 for lunch and CD – Royal & SunAlliance Theatre. The seminar is scheduled for the same day as the Marine Club Annual Dinner that evening at the Royal York Hotel.
April 17th: Dealing with Personal Injury Claims – 2 Hours Mini Seminar
June 19th: Trucking and Logistics – 2 Hours Mini Seminar
October 16th: Insurance and Commercial Litigation Strategies – 2 Hours Mini Seminar
Keep an eye on our website for registration and location.
The Ontario Court of Appeal Reviews the Guidelines Governing when Ontario Courts are to “Hear” International Disputes
Where should disputes arising from international commercial agreements be resolved?
The logistics and resulting expense related to sorting out which country or “forum” should play host to a dispute can often leave litigants wondering why they pursued their rights in the first place. Significant sums of money can be expended and resources tapped in simply arguing over the “forum” for a dispute.
The Ontario Courts have over the years articulated guidelines concerning when they will accept jurisdiction over an international contract dispute. These guidelines, or rules, confirm that a) the parties may proactively enter into an agreement as to which forum would have jurisdiction over a dispute and that b) in the event of such a ‘prenuptial’ agreement our courts will, as a rule, give effect to an agreement as to forum. Failing such an agreement, these guidelines provide a list of factors to be taken into consideration by an Ontario court being asked to ‘assume’ jurisdiction as to whether it may hear a certain case or whether the battle should be waged in another forum.
The recently published decision of the Ontario Court of Appeal in Red Seal Tours Inc. v. Occidental Hotels Management [2007 ONCA 620 (CanLII] illustrates the application of these guidelines.
Red Seal Tours Inc. (“Red Seal”) is a tour operator based in Ontario. During 2003, Red Seal negotiated certain “Guarantee Agreements” with Ontario-based Vox Travel Management, the latter acting as an agent for six hotels in various locations in the Caribbean operated by Occidental Hotels & Resorts (“Occidental”). Occidental is a conglomerate of separately incorporated entities that facilitate the management and marketing of resort properties. Vox negotiates with Ontario tour operators such as Red Seal in the negotiation of tour operator agreements for room allotments and pricing at the conglomerate (Occidental) hotels.
The Guarantee Agreements deal with various financial terms, as well as various service related issues such as guarantees that Red Seal clients would not be “bumped” from the subject hotels during their peak periods of overbooking, that there would be no blackout periods in respect of Red Seal clients with respect to the hotels, together with a guarantee that no other Canadian tour operator would be offered more attractive contractual terms without such terms being offered to Red Seal.
Red Seal also entered into separate Hotel Operations Agreements with each of the six hotels (the “Hotel Agreements”). Each of the Hotel Agreements contained a clause providing that:
Such Agreement will be governed by the laws of the State of Florida, excluding its conflict of law provisions, subject to the proviso that any claim based upon acts, omissions or occurrences at the hotel will be governed by the laws of the place where the hotel is located.
The parties also agreeing that the Courts of Aruba would have jurisdiction over any matters or disputes arising out of such agreement.[emphasis added]
Red Seal alleged that the Guarantee Agreements were breached in that Red Seal clients were “bumped” and met with blackout periods when attempting to book vacations. It did not have a dispute as concerns the individual hotels under the Hotel Agreements. Red Seal brought an action in the Ontario Superior Court of Justice against Vox Travel Management, the Occidental Hotels and others. The defendants did not want this claim to proceed in the Ontario court.
The defendants argued that the Ontario court should not hear the matter, as the parties had contracted that the courts of Aruba had jurisdiction by virtue of the above contract wording. The defendants argued that the conflicts of law and forum clause in the Hotel Agreements also governed the Guarantee Agreements: their position was that the Guarantee Agreements would necessarily exist “hand-in-hand” with the Hotel Agreements and that the two should be read together so as to have the above conflicts of law provision govern. As such, the defendants wanted the matter litigated in Aruba.
Red Seal responded arguing that the Guarantee Agreements were an independent and standalone set of agreements from the Hotel Agreements. Red Seal argued that none of the hotels were being sued, there being no issue concerning any of the terms of the Hotel Agreements.
This forum dispute was heard by a judge of the Ontario court. There being a question as to whether there was a binding contract term as to forum, the court had to initially determine whether there was a contractual agreement in that regard. If there was no such agreement, the court then had to consider the ‘guidelines’ as to whether it should ‘take jurisdiction’ over this international dispute – bearing in mind that the hotels being the subject of the Guarantee Agreements were located in Mexico, and on certain Caribbean Islands – but not on the island of Aruba.
At First Instance Before the Ontario Superior Court of Justice
The Court agreed with Red Seal and concluded that the Guarantee Agreements were independent and standalone from the Hotel Agreements. Accordingly, the defendants could not “piggy back” on the choice of forum clause in the Hotel Agreements and apply that clause to the Guarantee Agreements: different parties and different issues were involved between these contracts.
The “Aruba clause” not governing, the Court then embarked on an analysis as to whether, the nature of the action rendered it appropriate for the Ontario Courts to assume jurisdiction over the dispute.
While the facts of this case are somewhat convoluted the analysis thereafter following is important as being of general application. Where there is no governing contractual agreement for the litigation “forum” for a dispute, in order for the Ontario Court to assume jurisdiction in a case that is international in nature, there must be a “real and substantial connection” to Ontario. This is as outlined, and set forth in the Ontario Court of Appeal decision of Muscatt v. Courcelles (2002) Can. LII 44957 (On. C.A.) with regard to the following factors:
1. The connection between the plaintiff’s claim in Ontario; [if there is a connection this would underscore Ontario as being a reasonable ‘choice’]
2. The connection between the forum and the defendant; [if there is a connection this would underscore Ontario as being a reasonable ‘choice’]
3. Unfairness to the defendant in the Ontario Court assuming jurisdiction; [if there is unfairness an Ontario court would give more credence to the ‘foreign’ court] 4. Unfairness to the plaintiff in the Ontario Court not assuming jurisdiction; [if there is unfairness in depriving the plaintiff of its choice of Ontario as the forum this will be weighed heavily]
5. The involvement of other parties to the suit; [where are they based? What is the relative fairness or unfairness of the Ontario forum to them?]
6. The Ontario Court’s willingness to recognize and enforce an extra-provincial judgment rendered on the same jurisdictional basis; [if the other proposed forum has credibility in terms of fairness and ability to adjudicate the matter, the Ontario court may be more inclined to refuse jurisdiction in light of the fact that a foreign judgment may be readily enforced, in due course, against an Ontario based defendant]
7. Whether the case is intra-provincial or international in nature; and
8. Comity and the standards of jurisdiction, recognition and enforcement prevailing elsewhere [that is, the court must heed factors such as the likelihood of a foreign court in a similar situation giving reciprocal regard to the interest of Ontario and of parties wanting to block a ‘foreign’ action in favour of a referral to the courts of Ontario].
The Ontario judge found that the “real and substantial test” linking this case to Ontario was easily met. For example:
- The Guarantee Agreements were negotiated in Toronto between Red Seal and Vox as the Canadian agent for Occidental. As such there was a strong connection between Ontario and the claim.
- The defendants continued to have Vox as their Canadian agent, there thereby being a real connection between the defendants in Ontario. Further, Vox was seen to be doing significant business in Ontario with both the plaintiff and other tour operators.
- There was no unfairness to the defendants in the Ontario Court assuming jurisdiction and as an Ontario Court would fairly and neutrally assess the claim.
- There were no parties or potential witnesses involved in the suit in having a connection to Aruba.
- Ontario law would be relevant to the adjudication of the dispute, there being certain regulations governing the travel industry that would have to be addressed concerning Red Seal’s obligation as a tour operator. (For example, the alleged last minute bumping may have breached Red Seal’s regulatory obligation to notify customers of changes to their travel arrangements).
Finding that there was no ‘forum clause’, and that Ontario could accept jurisdiction on the basis of connecting factors to Ontario, the court proceeded to consider whether Aruba was in any event a substantially more appropriate forum than Ontario so as to warrant the court exercising its discretion to ‘bump’ the action from the Ontario to Aruba. In this regard the court considered the following established factors: (as articulated in the earlier case of Incorporated Broadcasters Limited et al v. Canwest Global Communications Corp. et al (2003) Can LII 52135 (On. C.A.)):
- the location of the majority of the parties;
- the location of the key witnesses and evidence;
- contractual provisions that specify the applicable law or accord a jurisdiction;
- the avoidance of a multiplicity of proceedings;
- the jurisdiction in which the factual matters arose;
- the residence or place of business of a party; and
- any loss of judicial advantage to a party.
In this regard, the Court noted that the following facts in this case:
- None of the hotels are located in Aruba. They were in Mexico, the Dominican Republic and Cuba.
- There was no evidence of any precedent that the Aruba courts had been used as a forum to determine international disputes involving the Caribbean or Mexican hotels.
- Several witnesses for both parties directly involved in negotiating the Guarantee Agreements reside and work in Toronto. One aspect of the claim is the loss of reputation that Red Seal has suffered with clients. This breach affects clients of Red Seal for Ontario and these witnesses are all residents in Ontario.
- Instructions with respect to the negotiation of the Guarantee Agreements and alleged breaches would potentially involve testimony witnesses from Florida and Spain but they have no connection to Aruba. It was possible that Aruba might be more convenient for potential witnesses from the Caribbean, but there was no clear evidence before the court in that regard.
- The Court ultimately found that the location of the majority of the parties and key witnesses were mostly connected with Ontario.
- The Guarantee Agreements were negotiated in Ontario, by Ontario parties, and affected sales to Ontario residents. As such, Ontario law would apply to the case.
- The defendants would not suffer a juridical or a legal “disadvantage” with the proceeding in Ontario, given that their agent (Vox) carries on a substantial business in Toronto. Accordingly, the judge ruled that the overriding balance of convenience and other factors pointed to Ontario as the most convenient jurisdiction.
The Appeal The defendants appealed to the Ontario Court of Appeal. They still wanted the Red Seal claim “stayed” in favour of the courts of Aruba.
The Court of Appeal concluded that the motions judge erred on the ‘forum clause’ issue, and that the “Guarantee Agreements” in fact form part and parcel of the so-called “Hotel Agreements”. Accordingly, the Aruba forum selection clause would govern. The Court of Appeal found a relationship between the two different contracts. On a close review of the agreements the Guarantee Agreements in fact referred to and incorporated obligations that were in fact part and parcel of the Hotel Agreements. Further, one could not simply read the Guarantee Agreement as a standalone document, its terms dealing with specific aspects of matters governed by the Hotel Agreements. In light of these features, the contracts did in fact interrelate.
Finding that the Guarantee Agreements then did in fact incorporate the ‘forum clause’ calling for suit to be heard in Aruba, the Court of Appeal then reiterated and relied upon well established case law in Canada that a ‘forum clause’, being a contractual bargain struck between the parties, should be followed unless the party resisting the prescribed forum from hearing the dispute can show a ‘strong cause’ or reason why the clause should not be enforced. The Court confirmed that it is a well-established law in Canada that “special deference” is owed to forum clauses when found in international agreements involving sophisticated parties.
The Court of Appeal did not accept that on the facts of this case there was “strong cause” to displace the forum chosen by the parties (Aruba) or for that matter that Ontario was the more convenient forum. As the Supreme Court of Canada has put it, “It is essential that the courts give full weight to the desirability of holding contracting parties to their agreements“. The “strong cause” test imposes a burden on the plaintiff to satisfy the Court that there is good reason that it should not be bound by the forum selection clause. In effect, the parties’ Agreements should be enforced as to where the litigation should proceed “in all but exceptional circumstances“. While undoubtedly it might be more convenient for the plaintiff to be able to pursue its claims in Ontario, there were no “exceptional circumstances” to justify a departure from the forum selected in the Agreements – notwithstanding that this dispute could potentially involve at trial many parties from different jurisdictions.
In conclusion, the intent behind this article was not so much to showcase the facts of this dispute, but to illustrate the weight given to a ‘forum clause’ in an international agreement, and, absent same, the analysis that an Ontario court will go through in deciding whether or not to hear a dispute. While the Court of Appeal reversed the result imposed by the judge in first instance in this case, that judge did accurately set forth the factors involved in the two step analysis to be followed by an Ontario court where there is in fact no forum clause: 1) the jurisdiction simpliciter test, and 2) where the defendant alleges that Ontario is not a proper forum, there existing a better forum for the purpose, the forum non conveniens test.
CANADA SHIPPING ACT, 2001 BECOMES LAW JULY 1, 2007
On July 1st, 2007 the long anticipated Canada Shipping Act, 2001 S.C. 2001, c. 26 finally came into force. The coming into force of this piece of legislation culminates the federal government’s decade old revision of statutory Canadian maritime law.
The Canada Shipping Act, 2001 has been broken down into a number of parts:
Part 1 General: Powers of Ministers, Inspectors, Canadian Maritime Documents Part 2 Registration, Listing and Recording of Ships Part 3 Personnel Part 4 Safety Part 5 Navigation Services Part 6 Incidents, Accidents and Casualties Part 7 Wreck Part 8 Pollution Prevention and Response Part 9 Pollution Prevention Part 10 Pleasure Craft Part 11 Enforcement
The new Act is streamlined and modernized. For example, the former Board of Steamship Inspection has become the Marine Technical Review Board: new name, slightly less responsibility (the new Board does not have the power to resolve disputes), and more transparency. Many of the principles of the old Canada Shipping Act have been carried over into 2001 Act. Many provisions in the old CSA no longer appear in the 2001 Act because much of the detail has been moved to regulations, standards or other appropriate instruments. Hence, the 2001 Act is much smaller than the previous legislation.
Some highlights of the new legislation:
- Under the previous legislation commercial vessels smaller than 15 tonnes were licensed by the Customs and Excise Division of the Canada Customs and Revenue Agency (CCRA) on behalf of Transport Canada. Under the new 2001 Act all non-pleasure craft have to be registered with Transport Canada (clause 46). Hence, the CCRA is no longer involved in licensing small commercial vessels. As well, the new 2001 Act allows the creation of small vessel register to accommodate those commercial vessels that are currently licensed (clause 43(1)).
- Previously, Transport Canada kept sea service records of crew members of Canadian vessels. Under the new 2001 Act, this responsibility has been shifted to the authorized representative of the vessel and every crew member (clause 93)
- A new section (116) allows the industry to deal with persons boarding or disembarking a vessel if safe means are not available or without the permission of the master or person responsible for embarkation or disembarkation.
- Part 7 allows the Minister of Fisheries and Oceans to appoint receivers of wreck, and sets out the procedures for finding and disposal of wrecks. Section 160 makes it easier for the receiver to dispose of the wreck.
- Part 10 is a new Part which has no counterpart in the previous legislation. It outlines the responsibilities of Fisheries and Oceans Canada for pleasure craft, covering such matters as inspections, investigations, enforcement and licensing. The requirements for pleasure craft are not new but were previously scattered throughout the old legislation.
- Part 11 introduces a new administrative enforcement scheme to encourage and promote compliance with regulatory requirements (clauses 228-243). The concept of administrative penalties is designed to streamline the enforcement process and initiate the use of a modern compliance tool rather than the court system. According to departmental sources, administrative penalties were introduced because the court system is not cost or result effective for regulatory violations.
Part 3 establishes and coordinates the maritime labour standards for working conditions of seafarers onboard a vessel in order to protect their health and well-being. The CSA 2001 regulations update and align the occupational health and safety working conditions of seafarers with other legislative requirements. They now comply with the STCW as well as part of the Maritime Labour Convention, 2006.Some highlights of the new maritime labour standards for working conditions under Part 3 include:
- Crew members must now be at least 16 years of age.
- The duration of hours worked for employees under 18 years of age will be limited.
- Seafarer recruitment and placement services operating in Canada must meet new requirements to apply for, issue, hold, and maintain a licence.
- Conditions of employment related to hours of work and rest now depend on the voyage classification and food being served.
- With the coming into force in 2007 of Maritime Labour Convention, the introduction of the Maritime Labour Certificate and Document of Compliance fully harmonizes the labour framework in the maritime sector.
- Arctic Waters Pollution Prevention Act and Regulations
- Canada Labour Code (Part II) and Regulations
- Canada Marine Act and Regulations
- Canada Transportation Act and Regulations
- Canadian Transportation Accident Investigation and Safety Board Act and Regulations
- Coasting Trade Act
- Department of Transport Act and Regulations
- Government Property Traffic Act and Regulations
- Marine Liability Act and Regulations
- Marine Transportation Security Act and Regulations
- Navigable Waters Protection Act and Regulations
- Northumberland Strait Crossing Act
- Pilotage Act and Regulations
- Safe Containers Convention Act and Regulations
- Shipping Conferences Exemption Act, 1987 and Order
- Transportation Appeal Tribunal of Canada Act
- Transportation of Dangerous Goods Act and Regulations
This newsletter is published to keep our clients and friends informed of new and important legal developments. It is intended for information purposes only and does not constitute legal advice. You should not act or fail to act on anything based on any of the material contained herein without first consulting with a lawyer. The reading, sending or receiving of information from or via the newsletter does not create a lawyer-client relationship. Unless otherwise noted, all content on this newsletter (the “Content”) including images, illustrations, designs, icons, photographs, and written and other materials are copyrights, trade-marks and/or other intellectual properties owned, controlled or licensed by Fernandes Hearn LLP. The Content may not be otherwise used, reproduced, broadcast, published,or retransmitted without the prior written permission of Fernandes Hearn LLP.
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