Jumping Through the Jurisdictional Hula Hoop: Ruloff Capital Corporation v. Hula (BCSC)

Balancing a guitar & hula hoop at the Pike Pla...

Balancing a guitar & hula hoop at the Pike Place market in Seattle (Photo credit: Wikipedia)

The recent BC Supreme Court decision in Ruloff Capital Corporation v. Hula, 2013 BCSC 322 (CanLII) poses the following question on forum non conveniens and parallel proceedings:

[65]        Does a finding that one party can acquire representation in another jurisdiction, coupled with the fact that the other jurisdiction, for reasons not articulated, has accepted jurisdiction over the parties, trump the objective in Teck to ensure the action is tried in the jurisdiction that has the closest connection to it?

The defendants, Hulavision Inc. and Errol Hula (“Hula”) initially sued NBC Universal (“NBCU”) in California for breach of a Non-Disclosure Agreement (NDA) and intellectual property infringement, relating to negotiations for the sale of its technology it developed for the delivery of streaming video having potential commercial value. The plaintiff,  Ruloff Capital Corporation (“Ruloff”) commenced the BC litigation for breach of a July 2009 litigation agreement, whereby Ruloff agreed to provide litigation funding to Hula for the California lawsuit. During due diligence for an unrelated transaction,  Ruloff learned of NBCU’s alleged breach of the NDA, which included an arbitration clause  governed by a limitation period which expired in December 2009.

The  defendants sought a declaration that the BC Supreme Court: (1) had no territorial competence over the plaintiff’s action or, alternatively, (2) the court ought to decline jurisdiction over the action under the Court Jurisdiction and Proceedings Transfer Act, S.B.C. 2003, c. 28 [CJPTA].

Hula alleged that Ruloff failed to provide proper funding to the BC solicitors, Fasken Martineau, who were retained to prosecute the claims against NBCU; and failing to make required payments to Hula under the terms of the litigation agreement.

Ruloff countered stating that Hula covertly went to California in December 2009 in search of lawyers willing to take the case on a contingency basis, thereby obviating the need for the litigation agreement with Ruloff and squeezing out Ruloff from the share of any proceeds required under the agreement beyond the terms of the California lawyer’s retainer.

The termination clauses in the litigation agreement reads as follows:

5.03     This Agreement may be terminated by either party upon 12 months written notice if, once formally commenced, the intended action is not actively prosecuted by Ruloff Capital or supported by Hulavision.

5.04     Upon the expiry or termination of this Agreement in accordance with the terms, the parties shall have no further obligation to each other, including no obligation of Hulavision to repay or reimburse Ruloff Capital or any third party investors that Ruloff Capital secures in accordance with article 3 of this agreement in respect of the Hulavision advance or any other funding provided to Hulavision hereunder. This section does not apply, however, if this agreement is terminated by Ruloff Capital pursuant to s. 5.03 for good cause due to Hulavision’s material failure to support or cooperate in the prosecution of the intended action.

The crux of the dispute is who controls the litigation and can make the other jump through the Hula hoop (pun shamelessly intended):

[16] Ruloff asserts that Hulavision is in breach of the litigation agreement by unilaterally retaining California counsel to replace Fasken Martineau as litigation counsel in the NBCU litigation. The retention of Mr. Vantress, Hula’s California counsel, obviated the need and motive for Hulavision to require Ruloff’s financial support in the litigation. Ruloff says that all of Hula’s subsequent actions should be seen as an effort to ‘jettison’ the burdensome provisions of the litigation agreement once a cheaper alternative was secured by Hula.

[17] Hula, for its part, suggests that Ruloff actively delayed the preparation of the paperwork relating to its investment in Hula and payments of funds to Fasken Martineau in an effort to “squeeze” Hula so as to allow Ruloff and/or a nominee to require equity participation in Hula at a bargain price.

[18] Neither of these cross-assertions is capable of resolution in this application. I note them only by way of background to give some flavour to the litigation ultimately commenced by Ruloff in this jurisdiction. All the events which transpired from the formation of the litigation agreement to its purported termination will be the focal point of the B.C. litigation. All of the events took place in B.C. All the relevant ‘actors’ reside in B.C.

Hula pleads impecuniosity; in that it can neither fund the California litigation, nor defend the BC litigation. On August 16, 2012, Ruloff moved in the California Action for a stay on forum non conveniens grounds, which was dismissed without reasons. Ruloff also successfully moved to strike a portion of the pleadings, but its motion to have one of the California lawyers removed as counsel was denied.

Hula did not challenge jurisdiction simpliciter (“territorial competence” under BC’s CJPTA).

Applying the Supreme Court of Canada decision in Teck Cominco Metals Ltd. v. Lloyd’s Underwriters, 2009 SCC 11 (CanLII)2009 SCC 11 (S.C.C.), Justice Harvey found a myriad of connections between BC and the parties and the subject-matter of the litigation; namely the litigation agreement (at paras. 29-33).

With respect to forum non conveniens factors under s. 11 of the CJPTA , sub-paragraph “(c) the desirability of avoiding multiplicity of legal proceedings” would arguably be problematic, in light of the ongoing California proceedings.  Not so for Harvey, J.:

[56]        While acknowledging the merit of that position, I agree here with counsel for Ruloff when he stated: “the prior positive assertion of jurisdiction by a foreign court does not oust the s.11 inquiry. Comity is not served by the automatic deferral to the first court that asserts jurisdiction.”

[57]        As was stated in Teck:

[21] The first argument is that s. 11 of the CJPTA does not apply where a foreign court has asserted jurisdiction. I cannot agree. The CJPTA creates a comprehensive regime that applies to all cases where a stay of proceedings is sought on the ground that the action should be pursued in a different jurisdiction (forumnon conveniens). It requires that in every case, including cases where a foreign judge has asserted jurisdiction in parallel proceedings, all the relevant factors listed in s. 11 be considered in order to determine if a stay of proceedings is warranted. This includes the desirability of avoiding multiplicity of legal proceedings. But the prior assertion of jurisdiction by a foreign court does not oust the s. 11 inquiry.

[24] Alternatively, it is argued that if s. 11 applies, the assertion of jurisdiction by the foreign court is an overriding and determinative factor in the s. 11 analysis. This argument also must be rejected.

[25] First, had actual assertion of jurisdiction by a foreign court been seen as a factor that should override all others, one would have expected the legislature to have stated this expressly. Rather, avoidance of multiplicity of proceedings is simply listed along with other factors. This suggests that the existence of foreign proceedings is only one factor, among many, to be considered in a forum non conveniens analysis.

[58]        Further, at para. 38. McLachlin, C.J.C. said:

[38] Teck argues that a refusal to stay the B.C. Coverage Action places the parties in the difficult position of having legal proceedings on the issue of insurance coverage in two separate jurisdictions. While I am sympathetic to the difficulties presented by parallel proceedings, the desire to avoid them cannot overshadow the objective of the forum non conveniens analysis, which is “to ensure, if possible, that the action is tried in the jurisdiction that has the closest connection with the action and the parties” (Amchem Products Inc. v. British Columbia (Workers’ Compensation Board),1993 CanLII 124 (SCC), 1993 CanLII 124 (SCC), [1993] 1 S.C.R. 897, at p. 912).

[59]        I am informed by those passages, delivered after the judgment in Ingenium, in concluding that the overriding objective in determining forum non conviensis to ensure the action is tried in the jurisdiction that has the closest connection with the action and the parties.

In summary: where a foreign court fails to provide reasons for assuming jurisdiction over a dispute, a Canadian court will not slavishly defer or extend judicial comity, unless the defendant meets the burden of showing why the Canadian court is forum non conveniens.

 

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