



COURT OF APPEAL FOR ONTARIO

CITATION:  Eco-Tec Inc. v. Lu, 2015 ONCA 818

DATE: 20151127

DOCKET: C60540

Hoy A.C.J.O., Gillese and Lauwers

JJ.A.

BETWEEN

Eco-Tec Inc.

Plaintiff (Respondent)

and

George Lu, Golden Maple Leaf (Hangzhou) Financial
    Consulting Co., Ltd. (formerly known as Golden Maple Leaf (Hangzhou) Technology
    Consulting Co. Ltd.), Golden Maple Leaf Technology Corporation, Everrise Group Holdings
    Ltd. and Zhejiang Highnew Environmental Technology Co. Ltd.

Defendants (Appellants)

Rebecca Huang, for the plaintiff (respondent)

D. Lynne Watt, for the defendants (appellants)

Heard:  November 16, 2015

On appeal from the order of Justice Jane Ferguson of the Superior
    Court of Justice, dated April 29, 2015.

Hoy A.C.J.O.:

[1]

The appellants  Dr. Lu, three Chinese corporations and a corporation
    incorporated in the British Virgin Islands (BVI)  unsuccessfully moved to
    stay the action commenced against them in the Superior Court of Justice of
    Ontario by the respondent, Eco-Tec Inc. They asserted that the Ontario court
    does not have jurisdiction over the matter or, if it does, it should decline to
    assume jurisdiction because Ontario is not the most convenient forum for the
    action.

[2]

They appeal the dismissal of their motion to stay. For the reasons that
    follow, I would dismiss the appeal.

Background

[3]

The respondent is an Ontario company that researched, developed and
    manufactured proprietary technology and products. For twelve years, Dr. Lu, who
    is a Canadian citizen, his BVI company, and three Chinese companies owned by
    Dr. Lu or his parents were the respondents consultant, agent or distributor in
    China. They signed a series of confidentiality agreements and business
    agreements with the respondent between 2000 and 2008. Confidentiality
    agreements signed in 2001 and 2003 contained provisions stating that the
    agreements would continue to be binding for a period of ten years after their
    termination.

[4]

The respondent terminated its relationship with the appellants in 2012
    when it says it discovered clones of its products made by the Chinese
    companies and a website promoting the cloned products in the global market.

[5]

The respondent brought this action against the appellants in Ontario. It
    alleges that they unlawfully misappropriated its confidential and proprietary
    information for their own benefit and manufactured/supplied products to compete
    with the respondent in China and elsewhere. It sues for breach of confidence,
    breach of contract, breach of fiduciary duty, conspiracy, unjust enrichment
    and/or unlawful interference with its economic interests.

The Motion Judges Decision

[6]

Based on forum selection clauses in certain of the agreements, the
    motion judge found that the Ontario court has consent-based jurisdiction over
    three of the five appellants. In coming to this conclusion, the motion judge
    determined that the respondent was not precluded from relying on those forum
    selection clauses by a Whole Agreement clause contained in a 2008 Distributor
    Agreement between the respondent and Dr. Lus BVI company. That clause provided
    that the 2008 Distributor Agreement superseded all previous agreements. The
    clause also stipulated that it applied to agreements between the respondent and
    one of Dr. Lus Chinese companies.

[7]

The motion judge also found that the Ontario court has jurisdiction
    because the dispute has a real and substantial connection to Ontario. In
    particular, she found that two of the four presumptive connecting factors
    identified in
Club Resorts Ltd. v. Van Breda
, 2012 SCC 17, [2012] 1
    S.C.R. 572, at paras. 90 and 100, as grounding a real and substantial
    connection in a tort case were present. First, all of the agreements between
    the parties were made in Ontario and, second, the alleged tort of
    misappropriation of the respondents proprietary information was committed in
    Ontario.

[8]

In finding that all of the agreements between the parties were made in
    Ontario, the motion judge relied on this courts decision in
Trillium Motor
    World Ltd. v. General Motors of Canada Limited
,
2014 ONCA 497, 120 O.R. (3d) 598. The court held in that
    case, at para. 66, that [w]hen acceptance of a contract is transmitted
    electronically and instantaneously, the contract is usually considered to be
    made in the jurisdiction where the acceptance is received. The motion judge adopted
    this approach, which she termed the traditional approach, and accordingly
    found that all of the agreements between the parties were made in Ontario: they
    were signed in Ontario by the respondent and sent to China where they were
    signed by Dr. Lu and emailed back to the respondent in Ontario.

[9]

The motion judge then considered whether the appellants had met their
    evidentiary burden of establishing that, despite the Ontario court having
    jurisdiction
simpliciter
, China was a more appropriate forum. She
    considered the traditional list of factors considered by courts in Ontario in
    making this determination. She found that two were neutral, four favoured
    Ontario, and one probably favoured China. She concluded that the appellants
    failed to discharge the burden of demonstrating that China was a more appropriate
    forum than Ontario.

Issues on Appeal

[10]

The
    appellants make several arguments relating to jurisdiction:

1.

The motion judge erred in finding that the Whole Agreement clause in the
    2008 Distributor Agreement did not preclude the respondent from relying on forum
    selection clauses in the earlier agreements. They say her finding of
    consent-based jurisdiction over three of the appellants rested on this and
    therefore cannot stand.

2.

In finding that the place of contract presumptive connecting factor
    was established, the motion judge erred by relying on the traditional
    approach to determining the place of contract formation. This case called for
    the broader, more contextual approach to determining the place of contract
    adverted to by this court in
Trillium
.
If that approach were
    applied, the motion judge would not have found that the place of contract was
    Ontario.

3.

Only a relatively minor element of the tort of misappropriation of
    proprietary information may have been committed in Ontario and the motion judge
    therefore erred in finding that the presumptive connecting factor of a tort
    committed in Ontario was established.

[11]

They
    also argue that the motion judge erred in placing the burden on the appellants
    in the
forum non conveniens
analysis. The appellants acknowledge that
    the burden usually falls on the defendant in an action to satisfy the court
    that another forum is more appropriate. However, they rely on this courts
    decision in
BNP Paribas (Canada) v. BCE Inc.
, 2007 ONCA 559, 227
    O.A.C. 102, at paras. 20-21, to argue that, because some of the agreements
    provided for a forum other than Ontario, the burden in the
forum non
    conveniens
analysis in this case is reversed, such that the onus is on the
    respondent to establish that Ontario is the more convenient forum. In any
    event, they say, the relevant factors favour China.

Jurisdiction

[12]

An
    Ontario court can assume jurisdiction if the defendant consents to its
    jurisdiction or is present in Ontario or if it is satisfied there is a real
    and substantial connection to Ontario. In turn, the real and substantial
    connection test is met in a case concerning a tort if any one of the four
    presumptive connecting factors established in
Van Breda

is
    present.

[13]

I
    conclude below that the motion judge correctly found that the place of
    contract presumptive connecting factor was established. It is therefore
    unnecessary for me to consider the appellants other two arguments on the
    question of jurisdiction. Moreover, I am not to be taken as necessarily
    agreeing with the motion judges interpretation of the Whole Agreement clause
    in the 2008 Distributor Agreement. The interrelationship of the various
    agreements signed by the parties and the interpretation and effect of the Whole
    Agreement clause in the 2008 Distributor Agreement are complex issues that are
    ill-suited for resolution at this very preliminary stage of the proceeding.

[14]

I
    turn, then, to the appellants argument regarding the place of the contract,
    arising out of

Trillium
. They argue that
Trillium
,
    properly understood, requires a broader, more contextual analysis in
    determining the place of the contract for purposes of determining whether the
    real and substantial connection test has been met. They say that the motion
    judge failed to conduct such an analysis and that, had she done so, she would
    not have concluded that the contracts were made in Ontario.

[15]

I
    reject this argument. The issue in
Trillium
was whether the general
    rule that a contract transmitted instantaneously is made in the jurisdiction
    where the acceptance is received should apply. The court agreed with the
    motions judge that, in the circumstances of that case, it should not. The offer
    at issue provided that acceptance by the offeree would not be effective until
    further steps were taken by the offeror. The act of acceptance by the offeree
    did not constitute the last act essential to contract formation.

[16]

In
    this case, the appellants point to nothing in the agreements indicating that
    acceptance would not be the last act essential to contract formation. The
    motion judge correctly applied the general rule that a contract transmitted
    instantaneously is made in the jurisdiction where the acceptance is received.

[17]

Trillium
does not require a broader, more contextual analysis when assessing the place
    of the contract for purposes of a jurisdictional determination. At para. 70,
    Lauwers J.A., writing for the court, questioned whether the traditional rules
    for determining the place of the contract should be determinative in applying
    the presumptive connecting factor at issue. However, he wrote that, [t]his is
    perhaps an issue for another case.  As he explained, such an analysis would
    inevitably engage the same considerations as the real and substantial
    connection test itself. He observed that there were contextual factors present
    in that case that supported the motion judges conclusion that the contracts in
    question were Ontario contracts.

[18]

While
    this court has not required a broader, more contextual analysis, here, too,
    there are contextual factors that support the conclusion that the contracts at
    issue are Ontario contracts. The contracts seek to protect Ontario-based trade secrets
    and other confidential information and authorized the appellants to distribute
    products incorporating that Ontario-based proprietary information.

[19]

A
    presumptive connecting factor has been established and the appellants have not
    demonstrated the absence of a real and substantial connection. The motion judge
    correctly concluded that it was open to the Ontario court to assume
    jurisdiction.

Forum Non Conveniens

[20]

As
    I explain below, I also reject the appellants argument that the burden was on
    the respondent to establish that Ontario is a more convenient and appropriate
    forum to hear the dispute than China. The motion judge did not err in
    proceeding on the basis that the onus was on the appellants and her decision is
    entitled to deference. However, even if the burden were on the respondent, I am
    satisfied that order and fairness favour trying this action in Ontario.

[21]

In
BNP Paribas
, there was a dispute as to whether a clause in a lending
    agreement granting exclusive jurisdiction over any disputes to courts in the
    State of New York or in the Province of Quebec applied. Rosenberg J.A., writing
    for the court, accepted, at para. 20 that, if it did, the principle from
Z.I.
    Pompey Industrie v. ECU-Line N.V.
,
[2003] 1 S.C.R. 450 would apply: where a forum selection clause is present, the
    starting point is that the parties should be held to their bargain and the
    plaintiff has the burden of showing why a stay should not be granted. But, he
    concluded, at para. 22, even if that principle applied and the trial judge
    erred by failing to require the plaintiff to establish that there was good
    cause that the action should not be stayed, the error was of no consequence. The
    trial judges reasons showed that order and fairness overwhelmingly favoured
    Ontario as the place for the trial.

[22]

This
    case is different from
BNP Paribas
.
Here, there are multiple
    agreements and multiple parties. Some agreements provide that Ontario is the
    forum for resolution of any disputes between the parties. As the appellants
    submit, the respondent and the BVI company attorned to the jurisdiction of the
    Peoples Republic of China in the 2008 Distributor Agreement. However, more
    importantly, given the nature of the respondents claim, the respondent and the
    BVI company attorned to the jurisdiction of the BVI in the Joint
    Confidentiality Agreement signed in 2008. It is not at all clear that holding
    the parties to their bargain would result in the action being tried in China.

[23]

In
    these circumstances, the motion judge did not err in principle in concluding
    that the normal rule as to onus should apply. Because jurisdiction was
    established, the burden rested on the appellants to demonstrate that the
    proposed court of alternative jurisdiction  China  was a more appropriate
    forum than Ontario:
Van Breda
, at paras. 103, 108-109.

[24]

The
    appellants also argue that the motion judge made several errors in determining
    that they had not established that China is the more appropriate forum.

[25]

Specifically,
    they say that the motion judge did not explain why she found one factor (the
    jurisdiction in which the factual matters arose or other geographical factors
    suggesting the natural forum) favoured Ontario. They argue that she should have
    characterized another factor (the applicable law and its weight in comparison
    to the factual questions to be decided) as neutral and not as favouring
    Ontario. Finally, they argue that the motion judge erred in concluding that
    declining jurisdiction would deprive the respondent of a legitimate juridical
    advantage available in an Ontario court.

[26]

In
    my view, the appellants seek to re-argue the issue of
forum non conveniens
.
    In concluding that the appellants had not discharged their onus of establishing
    that China was a more appropriate forum for the resolution of this dispute, the
    motion judge applied the correct test and considered the relevant factors. She
    did not err in law or principle and the appellants identify no clear and
    serious factual error. Her allocation of weight among the relevant factors
    cannot be said to be unreasonable. Her decision is entitled to deference:
2249659
    Ontario Ltd. v. Sparkasse Siegen
, 2013 ONCA 354, 115 O.R. (3d) 241, at
    para. 49.

[27]

However,
    given the argument that the appellants have made regarding onus, I add that I
    am satisfied that, if the respondent bore the onus of establishing that Ontario
    is the more appropriate forum, it has discharged that onus. The motion judge
    explained why she concluded that declining jurisdiction would deprive the
    respondent of a juridical advantage. There is an additional, significant
    advantage that she did not advert to. Breach of fiduciary duty is an important
    aspect of the respondents claim. The appellants own witness testified that
    China does not recognize breach of fiduciary duty as a cause of action. It is
    difficult to understand how China could be the more appropriate forum when it
    does not recognize a significant cause of action that has been pleaded. This
    court has recognized that, although a forum selection clause in a commercial
    contract should be given effect, there are circumstances that may justify a
    departure from that general principle, including where the forum selected is
    unable to deal with the claim:
Momentous.ca Corp. v. Canadian American
    Association of Professional Baseball Ltd.
,
2010 ONCA 722, 103 O.R.
    (3d) 467, at para. 41.

Disposition and Costs

[28]

I
    would dismiss the appeal. I would award the respondent its costs of the appeal,
    fixed in the amount of $15,000, inclusive of HST and disbursements.

Released:  AH  NOV 27 2015

Alexandra Hoy
    A.C.J.O.

I agree E.E. Gillese
    J.A.

I agree P. Lauwers
    J.A.


