Two Important Ontario Attornment Decisions

The first decision is from the Court of Appeal for Ontario in Van Damme v. Gelber2013 ONCA 388  (Ont. C.A.) per  Doherty, J.A. (Cronk and Lauwers JJ.A. concurring). In Van Damme, the plaintiff, a successful businessman and philanthropist obtained judgment in the Supreme Court of New York against the defendant, Nahum Gelber (“Gelber”), relating to Van Damme’s purchase of a painting from Gelber. The painting was being held in Ontario pursuant to an Ontario court order.  Van Damme successfully moved in the Ontario proceeding for an order of recognition and enforcement New York judgment in Ontario and a variation of the earlier Ontario order directing that the painting be released to him, with costs on a substantial indemnity basis.

Gelber appealed, including the costs order.

Justice Doherty dismissed the appeal, concluding that Gelber had attorned to the New York court’s jurisdiction by litigating the merits of the claim there and finding that the motion judge did not err by exercising his discretion in favour of enforcing the New York non-monetary judgment qua order for specific performance. On attornment, the Court of Appeal justice writes:

[22] Attornment by participation in court proceedings was recently addressed in Wolfe v. Pickar, 2011 ONCA 347 (CanLII), 2011 ONCA 347 332 D.L.R. (4th) 157, at para. 44, where Goudge J.A. said:

[W]hen a party to an action appears in court and goes beyond challenging the jurisdiction of the court based on jurisdiction simpliciter and forum non conveniens, the party will be regarded as appearing voluntarily, thus giving the court consent-based jurisdiction. That is what happened here.

[23] There is also authority for the proposition that, if a party appears in a court to challenge jurisdiction or seek a stay on the basis of forum non conveniens, any additional steps taken by the party pursuant to an order of the court will also not amount to attornment: see Gourmet Resources International Inc. (Trustee of) v. Paramount Capital Corp. (1991), 5 C.P.C. (3d) 140 (Ont. C.A.); M.J. Jones Inc. v. Kingsway General Insurance Co. 2004 CanLII 6211 (ON CA), (2004), 72 O.R. (3d) 68 (C.A.), at paras. 18-31 (per Lang J.A., in chambers). Giving these cases their widest reasonable reading, Gelber’s motion challenging the jurisdiction of the New York court, his filing of a defence, and his conduct of depositions and discoveries did not amount to attornment.

[24] Gelber’s conduct in advancing a motion for summary judgment dismissing Van Damme’s claims, however, went far beyond his jurisdictional challenge. Nor was that motion precipitated by any court order. Gelber chose to advance substantive defences on the merits. In doing so, he implicitly accepted that the New York court had jurisdiction to decide those issues. That is attornment: see Clinton v. Ford (1982), 37 O.R. (2d) 448 at 452 (C.A.).

The second decision is Brown v. Spagnuolo, 2013 ONSC 5178 (CanLII) (Ont. S.C.J.) per Firestone J. (“Brown”). In Brown, the defendant, Lawrence Brady (“Brady”), brought a motion pursuant to rules 21.01(3)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and section 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43, for an order dismissing, or, staying the action against him based upon state immunity under the State Immunity Act, R.S.C. 1985, c. S-18, (“SIA”)  as an employee of the Government of Bermuda acting in the course of employment, or, alternatively, for a stay or dismissal based upon lack of jurisdiction simpliciter or forum non conveniens grounds.

Mr. Justice Firestone rejected Brady’s state immunity argument,  He found that the “commercial activity “exception in s. 5 of the SIA applied in respect of the plaintiff’s conspiracy claim against the co-defendants,  based upon the alleged alteration and planting of two false cheques in Government of Bermuda files, implicating the plaintiffs in a “kickback” scheme on construction project for a new courthouse in Hamilton, Bermuda. Firestone J. writes:

[44]      In the matter before me, the acts to which these proceedings relate are the creation and dissemination of the false cheques. These acts occurred in the context of commercial activity, namely, a payment approval process related to a construction project.

[45]      Brady’s alleged acts for which relief is sought are of a “commercial character” given he was carrying out a task related to a commercial activity of his government office. Alleged acts that may be illegal or malicious do not change the commercial nature of those acts. The plaintiffs’ tortious allegations relate directly to commercial activity.

Justice Firestone further held that Brady had not attorned to the Ontario court’s jurisdiction:

[48]      The totality of the evidence in this case is that Brady has not gone beyond challenging the jurisdiction of this court and, therefore, has not attorned to the jurisdiction.

[49]      At the cross-examination on his affidavit, sworn June 8, 2011, in support of this motion, Brady’s counsel stated:

I haven’t objected so far, but I just want to remind you this is not an examination for discovery, we’re here on a motion regarding the jurisdiction of the Ontario Court and your questions seem to me to be tending towards the merits of the action. I’m going to allow Mr. Brady to answer that last question but just be advised that it’s subject to our position as I’ve stated that this motion is limited to the issues of jurisdiction.

[50]      Counsel made his intentions known that the cross-examination related to the jurisdiction motion only and not the merits of the action.

[51]       Brady’s challenge of the plaintiffs’ allegations in the context of a jurisdiction motion does not constitute attornment to the jurisdiction. A defendant who challenges jurisdiction may put allegations of fact in issue: see Ontario v. Rothmans et. al.2012 ONSC 22 (CanLII), 2012 ONSC 22, 28 C.P.C. (7th) 68, at para. 36. That is what has occurred here.

[52]      In Sauer v. Canada (Attorney General)2006 CanLII 74 (ON SC), (2006), 79 O.R. (3d) 19 (S.C.), at para. 88, Winkler J. states that “a foreign defendant is precluded from contemporaneously disputing jurisdiction while at the same time engaging jurisdiction by seeking a ruling in its favour on the merits.”

[53]      In M.J. Jones Inc. v. Kingsway General Insurance Co2004 CanLII 6211 (ON CA), (2004), 72 O.R. (3d) 68 (C.A.), at para. 20, the Court of Appeal states that “[a] foreign defendant is also precluded from contemporaneously disputing jurisdiction simpliciter and defending on the merits.”

[54]      In order to engage in the merits, the defendant must do more than simply mention a fact in his or her favour or make a general statement that the case against him or her is “without merit.” Brady has not sought a ruling in his favor. Brady’s Notice of Motion specifically states that his challenge is “without waiver of or attornment to” the jurisdiction of Ontario.

The motion judge ultimately dismissed the action against Brady, concluding that the plaintiff had failed to meet the threshold under Club Resorts Ltd. v. Van Breda2012 SCC 17 (CanLII), 2012 SCC 17, [2012] 1 S.C.R. 572 (S.C.C.) for establishing any of the presumptive factors for establishing jurisdiction simpliciter: the tort of conspiracy was committed in Bermuda; Brady did not carry on business in Ontario; Brady was domiciled in Bermuda, not Ontario;  there was no evidence of a contract formed or to be performed in Ontario; the presence of the co-defendant in Ontario did not equate to making Brady a “necessary and proper party” under Rule 17.02(o), the latter of which the Court of Appeal in Van Breda had expressly excluded as a presumptive factor for asserting jurisdiction over a foreign defendant.

Implications

1.  If your client instructs you to challenge the Ontario court’s jurisdiction for lack of subject-matter or personal jurisdiction, DO NOT ATTORN by engaging on the merits.

2.  Do what counsel for Brady in Brown v. Spagnuolo did: make it clear to plaintiff’s counsel that any step taken in the motion challenging jurisdiction, including challenging jurisdictional facts, does not relate to defending on the merits;

3.  Consider the following pronoucement of the Court of Appeal in Zhang v. Hua Hai Li Steel Pipe Co. Ltd.2013 ONCA 103 (CanLII):

[5]         In our view, the appeal should be dismissed but for reasons different from those given by the motion judge.

[6]         This is not a jurisdictional case.  The respondents live and were served in Ontario and the Ontario courts accordingly have jurisdiction.  It is also significant that before the respondents brought the motion challenging the jurisdiction of the court, the appellants filed a statement of defence and took other steps in connection with the action.  Even if the appellants had not been served within Ontario, they have attorned to the jurisdiction.

[7]         The forum non conveniens issue is not relevant.

[8]         We see no merit in this appeal and it is therefore dismissed.

4.  Do not confuse consent-based jurisdiction principles. Attornment by delivery of a notice of intent to defend or statement of defence, which includes a defence of lack of jurisdiction or forum non conveniens, may still be available if your client is relying on a forum selection clause. In other words, the “strong cause” test for staying an action based upon an exclusive jurisdiction or forum selection clause (or arbitration clause) may avail your client, See my previous post:  A Triumph of Form Over Substance: Momentous.ca Corp. v. Canadian American Association of Professional Baseball Ltd. (where I criticize the Supreme Court of Canada’s conflation of presence-based jurisdiction by admission of service by counsel with consent-based jurisdiction by defending the action on the merits).

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