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Whether Ontario courts have jurisdiction to entertain a claim is an issue that comes up from time to time in employment law even when the employee and employer agree in their written contract that Ontario law applies to the contract.

I’ve written about this in 2004 at my blog (Thoughts from a Management Lawyer at this post).

The Court of Appeal in the recent case of  Dundee Precious Metals Inc. v. Marsland weighed in on this issue.  In this case, Dundee Precious Metals Inc.sued its former Chief Operating Officer for breach of contractual and fiduciary duties.  The contract between Dundee and the COO expressly provided that Ontario law would govern.  According to the Court:

[The COO], an Australian national, has never lived in Canada. Pursuant to his employment agreement with Dundee, Marsland moved to Bulgaria to work on a mining project in Serbia. [The COO] frequently visited Ontario and was in daily contact with Dundee while employed as the Chief Operating Officer. The conduct giving rise to Dundee’s claim took place in Bulgaria and Serbia.

The COO brought a motion to have the action dismissed because Ontario courts did not have jurisdiction to entertain the claim and forum non conveniens.  The motions judge agreed that the action should be stayed on the basis of forum non conveniens.

Dundee appealed.

The Court of Appeal reversed the motions judges ruling and found that Ontario had jurisdiction and Ontario was the appropriate forum for the litigation.

Rule 17.02(f) of the Rules of Civil Procedure provide that there is presumption that Ontario courts will have jurisdiction where the the contract provides that it is to be governed by or interpreted in accordance with the law of Ontario.  The party seeking to get out from under this presumption must show that there’s no “real and substantial connection” with Ontario.

In Van Breda v. Village Resorts Limited, the Court of Appeal stated that the:

The core of the real and substantial connection test is the connection that the plaintiff’s claim has to the forum and the connection of the defendant to the forum, respectively.

The Court of Appeal in Dundee found both a “strong connection” between Dundee’s claim and Ontario and a “significant connection” between the COO and Ontario.  Accordingly, Ontario has jurisdiction to entertain Dundee’s claim.

In terms of forum non conveniens the issue rests in deciding whether “whether there clearly is a more appropriate jurisdiction than the domestic forum chosen by the plaintiff in which the case should be tried”.  This requires the Court to determine that another forum is “clearly” more appropriate than Ontario.  In the Dundee case, the motions judge mentioned a couple of other jurisdictions (Bulgaria and Serbia), but did not decide the fundamental question.

The Court of Appeal found that the COO had “ failed to demonstrate that there was another jurisdiction clearly more appropriate than Ontario to try this action and it follows that this was not a case for a stay on grounds of forum non conveniens.”

Why is this Case Important

For employers, it is important to include a contractual provision dealing with the applicable law.  It is also important to include a provision in the contract regarding the appropriate forum.  This is more complicated than you might think – will Ontario be the exclusive forum to hear the dispute or the non-exclusive forum?

In any event, it is clear that including, up front, contractual provisions specifically dealing with applicable law and appropriate forum can go a long way in reducing the risk of a jurisdictional challenge should a dispute arises and a lawsuit ensues.  The challenge might still be brought, but the party challenging the forum would be arguing from a defensive posture.