



COURT OF APPEAL FOR ONTARIO

CITATION: Aldo Group Inc. v. Moneris Solutions Corporation, 2013
    ONCA 725

DATE:
20131129

DOCKET: C55533

Blair, Juriansz and Tulloch JJ.A.

BETWEEN

The Aldo Group Inc.

Plaintiff (Respondent)

and

Moneris Solutions Corporation and
MasterCard International Inc.

Defendants (Respondent/
Appellant
)

Chris G. Paliare and Robert A. Centa, for the appellant

George J. Pollack and Michael H. Lubetsky, for the
    respondent The Aldo Group Inc.

Peter H. Griffin and Melanie K. Baird, for the
    respondent Moneris Solutions Corporation

Heard: April 11-12, 2013

On appeal from the order of Justice David M. Brown of the
    Superior Court of Justice, dated May 1, 2012, with reasons reported at 2012
    ONSC 2581.

Tulloch J.A.:

OVERVIEW

[1]

It is a well-established principle that a contract binds only the
    parties to the bargain. Yet in this appeal, the appellant MasterCard
    International Inc. asks that the respondent The Aldo Group Inc.s claim against
    it be stayed pursuant to s. 106 of the
Courts of Justice Act
, R.S.O.
    1990, c. C.43, on account of forum selection clauses in agreements to which
    Aldo was not a party. Given the nature of Aldos claim and the existing
    jurisprudence in Canada and the United States on the application of forum
    selection clauses to non-signatories, is the non-signatory Aldo bound by forum
    selection clauses in favour of New York? For the reasons that follow, I would
    not bind Aldo to MasterCards forum selection clauses and would accordingly
    dismiss the appeal.

II

FACTS

(1)

The Contractual Matrix

[2]

This appeal concerns several parties governed by multiple agreements.
    Together, these contracts support the way in which customers at Aldo stores
    conduct credit card transactions and govern the consequences of credit card
    transactions that give rise to fraud. Given the significance of the contractual
    relationships to the disposition of the appeal, it is necessary to review them
    in some detail.

[3]

MasterCard is a credit card association incorporated in Delaware with
    its principal place of business in the State of New York and an office in
    Toronto. It is at the top of the contractual chain implicated in this appeal.
    MasterCard transacts with financial institutions which issue its credit cards
    (Issuing Banks) and which acquire merchants willing to accept MasterCards
    credit cards as a method of payment (Acquiring Banks). MasterCard enters into
    licence agreements with financial institutions (Members), pursuant to which
    these institutions are entitled to use MasterCard trademarks and service marks
    provided they comply with MasterCards standards.

[4]

In this case, MasterCard entered into licence agreements with the Bank
    of Montreal (BMO) and Harris National Association (Harris) (Licence
    Agreements). The Licence Agreements require that BMO and Harris, as Acquiring
    Banks, comply with certain standards established by MasterCard, including the
    MasterCard Rules. The MasterCard Rules include the following choice of law and
    choice of forum provision in section 3.4:

The substantive laws of the State of New York govern all
    disputes involving the Corporation, the Standards, and/or the Members and
    Activity without regard to conflicts. Any action initiated by a Member
    regarding and/or involving the Corporation, the Standards and/or any Member and
    Activity must be brought, if at all, only in the United States District Court
    for the Southern District of New York or the New York Supreme Court for the
    County of Westchester, and any Member involved in any action hereby submits to
    the jurisdiction of such courts and waives any claim of lack of personal
    jurisdiction, improper venue, and
forum non conveniens
.

[5]

BMO and Harris, as Acquiring Banks, entered into agreements with a third
    party processor, Moneris Solutions Corporation, to support their MasterCard
    activity. BMO and Harris effectively used Moneris as their service provider for
    processing MasterCard credit card transactions. MasterCard permits such
    arrangements provided the third party processor agrees to comply with
    MasterCards standards. In this case, Moneris agreed, in a third party
    processing agreement with MasterCard (Third Party Processing Agreement or
    TPP Agreement), to comply with all applicable MasterCard standards. The TPP
    Agreement between Moneris and MasterCard contained the following choice of law
    and choice of forum clause in section 10:

This Agreement shall be governed by, and construed in
    accordance with, the laws of the State of New York, United States of America.
    Any dispute between MasterCard and Processor arising in connection with this
    Agreement shall be resolved in federal or state court in New York court, or
    Westchester county, New York.

[6]

Moneris entered into a contract with Aldo, an international footwear
    retailer with its head office in Montreal and a substantial retail presence in
    Ontario (the Merchant Agreement). Moneris entered into the Merchant Agreement
    for itself and on behalf of BMO. MasterCard was not a party to the Merchant
    Agreement, but MasterCard required that agreements between Acquiring Banks and
    merchants incorporate certain terms, including compliance with data security
    standards called the Payment Card Industry Data Security Standards (PCI DSS).
    The terms which MasterCard required to be included in the Merchant Agreement
    did not include a forum selection clause. The Merchant Agreement nevertheless
    contained, in section 11.9 of Schedule A, the following choice of forum and
    choice of law clause in favour of Ontario:

This Agreement will be governed by the laws of the province of
    Ontario. The parties agree that the courts of the province of Ontario will have
    exclusive jurisdiction over any matters arising from this agreement.

[7]

The contractual network can be summarized as follows. MasterCard signed
    Licence Agreements with BMO and Harris, and these incorporated a choice of law
    and choice of forum clause in favour of New York. BMO and Harris contracted
    with Moneris; Moneris agreed to comply with MasterCards standards and
    expressly agreed to a choice of law and choice of forum clause in favour of New
    York. Aldo was not a party to the Licence Agreements or Third Party Processing
    Agreement. Finally, Moneris and BMO contracted with Aldo, and their Merchant
    Agreement included a choice of law and choice of forum clause in favour of
    Ontario.

(2)

The Underlying Dispute

[8]

The Merchant Agreement between BMO, Moneris and Aldo imposed on Aldo the
    following data security obligations, which form the basis of the dispute:

3.6 Data Security, Protection of Cardholder Information
    and Card Association Rules and Regulations

You are responsible for complying with the Data Security
    Standards and all applicable laws related to Cardholder and Transaction
    Information. It is your responsibility to ensure that you obtain and are in
    compliance with the most recent version of the PCI DSS...

You and any of your third party service providers will adhere
    to the Card Association Rules and Regulations from time to time in effect. You
    must obtain all publicly available Card Association Rules and Regulations...

You are responsible for any fines, fees, assessments, costs,
    including Card re-issuing costs and charges levied by the Card Associations,
    the Bank and/or us as a result of your non-compliance with the Data Security
    Standards and all other Card Association Rules and Regulations applicable to
    you.

[9]

According to Aldo, the objective of the data security obligations is the
    prevention of theft of account data, which can be used to facilitate fraudulent
    transactions. Also according to Aldo, merchants must undergo annual PCI DSS compliance
    assessments by an independent party. When a merchant breaches the PCI DSS, the
    Acquiring Bank is accountable to MasterCard. In the event of unauthorized
    access to, or disclosure of, account data, which is classified as an Account
    Data Compromise Event (ADC Event), the MasterCard Security Rules provide that
    an Acquiring Bank responsible for the ADC Event may have to reimburse the
    issuer of MasterCards credit cards for their resulting costs and fraud losses.
    MasterCards security rules therefore appear to be directed at preventing the
    compromise of account data, which may in turn result in fraudulent
    transactions.

[10]

Aldos
    claim against Moneris and MasterCard arises from transactions at Aldo stores
    which allegedly resulted in fraudulent transactions. According to Aldo, it
    successfully completed PCI DSS compliance assessments in 2007 and 2008. It was
    alerted by Moneris in April 2010 that Visa and MasterCard had identified a
    potential breach of its computer system that allegedly led to fraudulent
    transactions. An initial report by Verizon Business found that Aldo had been
    the victim of a cybercrime attack on its computer system. The report also found
    that Aldo had failed to comply with one of its data security obligations.
    Subsequent versions of the report found that Aldo had failed to comply with
    multiple of its obligations. In March 2011, despite Aldos objections,
    MasterCard confirmed its preliminary position that it considered the security
    breach an ADC Event. The banks financial liability was approximately US $4.87
    million (the Assessments). On April 4, 2011, Moneris informed Aldo that it
    intended to debit Aldos account to reimburse the banks the amounts to be
    debited by MasterCard. On April 17, 2011, MasterCard debited the banks
    accounts in the amount of the Assessments and, two days later, Moneris debited
    Aldos account in the amount of US $4.929 million.

(3)

The Pleadings

[11]

Aldo
    initiated an action against MasterCard and Moneris. The motion judge summarized
    Aldos allegations, at para. 33, as essentially falling into two categories of
    complaint:

First, Aldo alleges that MasterCard wrongfully imposed and
    collected from the Banks assessments in connection with the Intrusion. Aldo
    contends that the Assessments were illegal, invalid and directly violated the
    MasterCard Standards and were not authorized by the MasterCard 2010 Security
    Rules. Second, the plaintiff contends that Moneris, acting as processor,
    wrongfully imposed and collected from Aldo such assessments allegedly
    pursuant to terms of the [Merchant Agreement] and that Moneris was not
    entitled under the [Merchant Agreement] to debit Aldo That is to say, in its
    claim as pleaded, Aldo seeks a judicial determination of the legality of the
    conduct of MasterCard in imposing the Assessments and the conduct of Moneris in
    collecting them. The primary thrust of Aldos claim is that both MasterCard and
    Moneris acted wrongfully in imposing and collecting the Assessments.

[12]

The
    nature of Aldos claims against MasterCard is critical to the outcome of this
    appeal. Aldo pleads multiple tort claims against MasterCard, including claims
    in negligence, interference with contractual relations and conspiracy. In its
    fresh as amended statement of claim served after the motion judges decision,
    Aldo also pleads unlawful interference with economic relations and conversion.

[13]

With
    respect to its negligence claim, Aldo pleads that MasterCard owes a duty to
    merchants such as Aldo in imposing and calculating assessments under its
    standards; that MasterCard could foresee that its failure to exercise
    reasonable care in imposing assessments would result in a merchant having to
    make unwarranted payments; and that MasterCard breached its duty in imposing
    the Assessments.

[14]

With
    respect to interference with contractual relations, Aldo pleads that, by
    imposing the Assessments, MasterCard wrongfully interfered with Aldos rights
    under its Merchant Agreement with Moneris. Aldo pleads that MasterCard knew or
    ought to have known that, when the Acquiring Banks were debited, Moneris would in
    turn debit Aldo.

[15]

Aldo
    pleads an unjust enrichment claim, alleging that MasterCard unjustly enriched
    itself by imposing the Assessments, to which it was not entitled. The
    imposition of the assessments caused Aldo to be wrongfully deprived of US
    $4.929 million. Aldo also seeks a variety of declaratory relief including a
    declaration that MasterCard was not entitled, under its rules, policies and
    procedures, to impose the Assessments; a declaration that certain of
    MasterCards security rules are illegal and constitute an unenforceable penalty
    clause; a declaration that the Assessments constitute an illegal and
    unenforceable penalty against the Acquiring Banks; a declaration that
    MasterCard was not entitled to retroactively apply its 2010 security rules to
    the security breach; and a declaration that the security breach did not
    constitute an ADC Event for the purposes of MasterCards standards.

[16]

Finally,
    Aldo pleads an alternative claim seeking the following declaration:

In the further alternative, in the event that it is held that
    Moneris is entitled to the Debit under the [Merchant Agreement], a declaration
    that Aldo is subrogated to the rights of the Banks and/or Moneris and is
    entitled to assert whatever causes of action that the Bank and/or Moneris have
    against MasterCard by reason of its having wrongfully debited the Banks as a
    result of the Intrusion.

[17]

In
    support of its pleaded causes of action, Aldo alleges that it did not violate
    the PCI DSS. Aldo alleges that there is no evidence that the security breach
    resulted in the theft of account data or the use of the data in fraudulent
    transactions. According to Aldo, MasterCard retroactively applied to the 2008
    security breach standards that were amended in 2010. Aldo also alleges that
    Visa intervened, on MasterCards encouragement, in the investigation by Verizon
    Business and directed Verizon Business to reach conclusions about Aldos PCI
    DSS compliance that Verizon Business would not otherwise have reached.

III

THE MOTION JUDGES REASONS

[18]

MasterCard
    moved before Brown J. for a stay of Aldos Ontario action pursuant to s. 106 of
    the
Courts of Justice Act
. MasterCard submitted that Aldos claim
    pleads that MasterCard was not entitled to impose the assessments on BMO and
    Harris under the Licence Agreements. Because Aldo lacks privity of contract
    with MasterCard, Aldo could only assert its claims as an equitable subrogee of the
    Acquiring Banks. However, as an equitable subrogee of the Acquiring Banks, Aldo
    would be subject to MasterCards applicable contractual rights, including the
    Licence Agreements choice of law and choice of forum clause. Similarly, to the
    extent that Aldo asserts claims against MasterCard as an equitable subrogee of
    Moneris, it would be subject to the choice of law and choice of forum clause in
    the Third Party Processing Agreement between MasterCard and Moneris. On this
    basis, MasterCard submitted that Aldo should be bound by the New York forum
    selection clauses.

[19]

Aldo
    opposed the requested relief on the basis that its causes of action were
    grounded in tort and unjust enrichment rather than contract or the doctrine of
    equitable subrogation. Aldo also argued that BMO and Harris, along with any of
    their equitable subrogees, were not bound by the forum selection clause contained
    in the Licence Agreements. Aldo further submitted that, in any event, the forum
    selection clause in the Licence Agreements did not extend to claims asserted by
    an equitable subrogee.

[20]

Moneris
    also opposed the requested stay. Moneris submitted that MasterCard has no
    contractual relationship with Aldo, so MasterCard cannot limit Aldos choice of
    forum. Aldo and Moneris agreed, in their Merchant Agreement, that the Ontario
    courts would have exclusive jurisdiction over any matters arising from the
    Merchant Agreement. Moneris also submitted that MasterCard is a necessary and
    proper party for the resolution of the dispute, that the court had jurisdiction
simpliciter
and that Ontario is the most convenient forum.

(1)     Characterization of Aldos
    Claims

[21]

The
    motion judge considered whether Aldos claim, with an eye to its essential
    character, is based on equitable subrogation:
Weber v. Ontario Hydro
,
    [1995] 2 S.C.R. 929. Recognizing the fair and liberal reading to which Aldos
    pleading was entitled on a s. 106 stay motion, and the limited scope of
    argument available to MasterCard without submitting to the courts
    jurisdiction, the motion judge found that Aldos plea involving subrogation is
    not its primary plea. Aldos claims could not be reduced to claims by a subrogee
    against MasterCard. Rather, Aldos primary claims against MasterCard are
    asserted as a stranger to the Licence Agreements and Third Party Processing
    Agreement.

[22]

The
    motion judge stated as follows, at paras. 83, 85:

In sum, I do not read Aldos Claim as reducing itself to claims
    by a subrogee against MasterCard. Quite the contrary. Aldos primary claims
    against MasterCard are made by it as a stranger to the License Agreement and
    TPP Agreement. Whether those claims as a stranger are tenable at law or on the
    facts is a matter for adjudication on the merits. I think it clear that Aldo
    has cast itself as a stranger to contracts to which MasterCard is privy and
    advances its direct claims against MasterCard on that basis.



I therefore conclude that the essential character of the
    claims pleaded by Aldo is not one of equitable subrogation, but they are direct
    claims advanced by a stranger to the contracts to which MasterCard is privy,
    although some claims for declaratory relief arguably rest on the incorporation
    by reference of the Security Rules in the [Merchant Agreement].

(2)

Application of Forum Selection Clauses to Non-signatories

[23]

Having
    characterized Aldos claims, the motion judge proceeded to consider whether
    Aldo was bound by the forum selection clause contained in the Licence
    Agreements or Third Party Processing Agreement.

[24]

In
    the absence of Canadian authority squarely on point, the motion judge reviewed
    three strands of U.S. cases dealing with the application of a forum selection
    clause to a non-signatory to the contract. The first strand of cases, dealing
    with equitable subrogation, generally supported the proposition that a
    non-signatory asserting a subrogated claim would be bound by a forum selection
    clause in the primary contract. However, given the motion judges conclusion
    that Aldos claim is not one of subrogation, these cases were of no
    application.

[25]

The
    second strand of cases arose in the context of a successor in interest. The
    motion judge noted the United States Second Circuit Court of Appeals holding in
Aguas Lenders Recovery Group LLC v. Suez, S.A.
, No. 08-1589 (2nd Cir.
    2009), that where an entity stands as a successor in interest to a contractual
    arrangement, it is bound by a forum selection clause in the original contract.
    This principle was also of limited relevance given that Aldo did not stand as a
    successor in interest to any contract with MasterCard.

[26]

Finally,
    the motion judge considered MasterCards submission that the court should adopt
    the closely related doctrine applied by courts in New York and elsewhere.
    According to this doctrine, a forum selection clause may be applied to a
    non-signatory to a contract if the non-signatory is so closely related to the
    dispute that enforcement of the forum selection clause against it is foreseeable.
    The motion judge focused in particular on
Coastal Steel Corp. v. Tilghman
    Wheelabrator Ltd.
, 709 F.2d. 190 (3rd Cir. 1983), in which Coastal Steel
    contracted with Farmer Norton, a British corporation. Their contract contained
    an arbitration clause in favour of New Jersey. Farmer Norton executed a supply
    contract with Tilghman, also a British corporation, and that agreement
    contained an English forum selection clause. Farmer Norton went bankrupt and Coastal
    Steel subsequently sued Tilghman and its parent company alleging defects in the
    material supplied. Tilghman moved to dismiss on the basis of the English forum
    selection clause in its contract with Farmer Norton. The court enforced the
    English forum selection clause:

Coastal chose to do business with Farmer Norton, an English
    firm, knowing that Farmer Norton would be acquiring components from other
    English manufacturers. Thus it was perfectly foreseeable that Coastal would be
    a third-party beneficiary of an English contract, and that such a contract would
    provide for litigation in an English court.

[27]

The
    court rejected Coastal Steels argument that the forum selection clause did not
    extend to its claims sounding in tort. The Tilghman-Farmer Norton contract was
    the basic source of any duty to Coastal Steel. The court held that where the
    relationship between the parties is contractual, the pleading of alternative
    non-contractual theories of liability should not prevent enforcement of the
    contractual bargain.

[28]

The
    motion judge declined to follow the closely related doctrine as applied in
Coastal
    Steel
. He noted that
Coastal Steel
did not describe in detail the
    claims asserted by the plaintiff, even though forum selection clauses turn on
    their specific facts. In addition, the court in
Coastal Steel
found no
    evidence to suggest that the forum selection clause was not intended to apply
    to all claims arising out of the contractual relationship. The motion judge
    could not reach a similar conclusion in this case, since MasterCard did not
    cause the Merchant Agreement to incorporate a New York forum selection clause,
    and the Merchant Agreement in fact contained a broad forum selection clause in
    favour of Ontario. Accordingly, it was not foreseeable to Aldo that some other
    forum selection clause would apply to its claims.

[29]

The
    motion judge dismissed MasterCards stay motion.

IV

ANALYSIS

(1)

Standard of Review

[30]

Section
    106 of the
Courts of Justice Act
provides that a court may stay any
    proceeding on such terms as are just. In general, the discretion to stay
    proceedings should be exercised sparingly, in the clearest of cases:
Navionics
    Inc. v. Nautical Data International Inc.
, [2006] O.J. No. 5397 (S.C.), at
    para. 29. The court should interfere with a decision under s. 106 only if the
    exercise of the motion judges discretion is based on a wrong principle, a
    failure to consider a relevant principle or a misapprehension of the evidence:
BTR
    Global Opportunity Trading Ltd. v. RBC Dexia Investor Services Trust
, 2011
    ONCA 518, [2011] O.J. No. 3250, at para. 3.

(2)

The Motion Judges Characterization of Aldos Claim

[31]

MasterCard
    argues that the motion judge erred in his characterization of Aldos claim.
    According to MasterCard, the motion judge was required, by virtue of
Weber
,
    to characterize Aldos claim by examining the facts underlying the dispute
    rather than the legal characterization of the alleged wrongs. Had the motion
    judge done so, MasterCard submits, he would have concluded that the essential,
    contractual character of Aldos claim requires that it be governed by the New
    York forum selection clauses. Aldo does not appear to take issue with
    MasterCards reliance on the test set out in
Weber
, which decided
    whether a claim arose under a collective agreement for the purposes of
    determining whether it should be heard by a labour tribunal or the courts.

[32]

In
    my view, the motion judge did not err in his approach to the characterization
    of Aldos claim. The motion judge expressly stated and applied the
Weber
test, adapted to the circumstances. He began with a plain reading of Aldos
    pleading. Consistent with
Weber
, having considered the alleged wrongs
    as pleaded, the motion judge also considered the underlying factual dispute.
    The motion judge specifically acknowledged that Aldos claim engages the
    imposition and collection of the Assessments by MasterCard. He considered that
    Aldos claim against Moneris engages the question of whether the security
    breach constituted an ADC Event for the purposes of the Assessments, and that
    the claim against MasterCard draws on the same events. In so doing, the motion
    judge turned his mind to the contractual context giving rise to the conduct
    Aldo impugns. It is true that the motion judge did not consider the underlying
    facts in a vacuum, but I do not believe that the essential character of Aldos
    claim can be discerned
solely
by reference to the facts; some
    attention must also be paid to the legal context.

[33]

The
    motion judge was also alive to the concern of artful pleading, which, according
    to MasterCard, is addressed by

a consideration of the underlying
    dispute rather than the legal wrongs as pleaded. The motion judge stated, at
    para. 61, that the court must remain alive to any attempt by the plaintiff to
    plead in a manner simply designed to get around the terms of a forum selection
    clause to which it had agreed. The motion judge considered and rejected the
    possibility that Aldo had pleaded claims in tort, unjust enrichment and for
    declaratory relief in order to circumvent a forum selection clause. Aldo was
    not privy to any contract with MasterCard containing a forum selection clause,
    meaning it was not subject to any clause that it had to avoid using artful
    pleading.

[34]

In
    any event, the motion judges approach led to an accurate characterization of
    Aldos claim. There can be no doubt that the underlying conduct giving rise to
    Aldos claim occurred in the context of a contractual relationship between
    MasterCard, the Acquiring Banks and Moneris. However, MasterCard has not
    established that this context transforms Aldos pleading into an essentially
    contractual claim. Plaintiffs have long been entitled to maintain an action in
    tort even when the underlying facts involve a contract to which the plaintiff
    is not party:

see e.g.
Haig v. Bamford
, [1977] 1
    S.C.R. 466; and
Edgeworth Construction Ltd. v. N.D. Lea & Associates
    Ltd.
, [1993] 3 S.C.R. 206. The possibility, in general, of concurrent
    liability in contract and tort demonstrates that a claim is not necessarily
    grounded in contract even when it relates to a contractual relationship.

[35]

I
    agree with the motion judge that Aldo pleads direct claims against MasterCard
    as a stranger to the Licence Agreements and Third Party Processing Agreement.
    Aldo is not a party to these agreements and does not purport to assert any
    contractual claim against MasterCard. Whether Aldos pleaded claim succeeds is
    a matter for merits adjudication, but its essential character does not require
    that it be litigated in accordance with the New York forum selection clauses.

[36]

For
    the same reason, I would reject MasterCards related argument that Aldo brings
    its claim as an equitable subrogee. MasterCard submits that, if Aldos claim is
    contractual and it is not privy to any contract with MasterCard, it must rely
    for its standing on the doctrine of equitable subrogation. Equitable
    subrogation allows one party to stand in the shoes of another and advance any
    claims held by the original party:
Alberta (Treasury Branches) v. Baker
    Estate
, 2002 ABQB 781, [2002] A.J. No. 1055, at para. 46; and
Ontario
    New Home Warranty Program v. Grant
(2001), 10 C.L.R. (3d) 230 (Ont. S.C.),
    affd (2002), 4 R.P.R. (4th) 56 (Ont. C.A.). According to MasterCard, if Aldo
    pleads as an equitable subrogee, it must accept the original partys
    limitations, including the New York forum selection clause. However, because
    the essential character of Aldos claim is not contractual, Aldo does not
    require an exception to the doctrine of privity, such as equitable subrogation,
    in order to bring its claims against MasterCard. Nor does Aldo purport to rely
    on such an exception. Aldo alleges that it was harmed in its own right by
    MasterCards imposition of the Assessments. It seeks to avail itself of causes
    of action grounded in tort, unjust enrichment and declaratory relief. To do so,
    it need not wear any shoes but its own.

[37]

I
    would therefore reject MasterCards position as it relates to the motion
    judges characterization of Aldos claim.

(3)

The Motion Judges Analysis of the Application of the Forum Selection
    Clauses

[38]

MasterCard
    submits that the motion judge erred in failing to rely on relevant and
    analogous case law regarding the application of forum selection clauses to
    non-signatories. MasterCards primary argument is that the U.S. cases dealing
    with this issue are persuasive and should have been applied. As the motion
    judge recognized, the U.S. cases relied on by MasterCard set out a closely
    related test to determine whether a non-signatory to a contract is
    nevertheless bound by that contracts forum selection clause based on its
    foreseeable application to the non-signatory. In other words, for a non-party
    to be bound by a forum selection clause, it must be closely related to the
    dispute such that it becomes foreseeable that it will be bound:
Weingrad v.
    Telepathy, Inc.
, 2005 WL 2990645 (S.D.N.Y.). MasterCard also shepherds a
    number of Canadian cases in support of its submission that the New York forum
    selection clauses apply to Aldo on the facts of this case.

(a)

The Canadian Authorities

[39]

I
    begin with a review of the Canadian authorities relied on by MasterCard in
    support of its argument that Aldo is bound by the New York forum selection
    clauses. Consideration of these authorities reveals that none is dispositive of
    this case.

[40]

Kates
    v. Wyant
(2002), 27 B.L.R. (3d) 273 (Ont. S.C.), involved a forum
    selection clause to which the plaintiff had agreed. Certain of the defendants
    were not party to the subscription agreement containing the forum selection
    clause, but do not appear to have objected to its application. The plaintiff
    argued that the action did not arise out of the subscription agreement, but the
    court concluded otherwise. The court held that the forum selection clause
    applied to all of the defendants; the issues in dispute were interrelated and
    best addressed by the same court. Unlike the plaintiff in
Kates
, Aldo
    is not a signatory to any forum selection clause the defendant seeks to
    enforce. Unlike the non-party defendants in
Kates
, Aldo strenuously
    objects to the application of the New York forum selection clauses.

[41]

Crown
    Resources Corp. S.A. v. National Iranian Oil Co.
(2006), 273 D.L.R. (4th)
    65 (Ont. C.A.), leave to appeal refused, [2006] S.C.C.A. No. 412, involved
    claims of breach of contract, breach of fiduciary duty and tort against two
    Iranian state-owned corporations. The relevant agreement contained a forum
    selection clause in favour of Iran. Although the plaintiffs  creditors and
    assignees in bankruptcy of one of the parties to the agreements  pleaded claims
    other than in contract against one of the Iranian corporations, these claims
    were so intertwined with the contract so as to justify them being heard
    together. This result was in the interests of avoiding a multiplicity of
    proceedings and inconsistent results. The court did not specifically address the
    issue of whether the plaintiffs, as creditors and assignees in bankruptcy
    rather than signatories to the original agreement, should be bound by the forum
    selection clause. In the present case, Aldo does not plead breach of contract
    along with its other claims. Moreover, adopting MasterCards use of
Crown
    Resources
would promote, rather than avoid, a multiplicity of proceedings
    since Aldo is entitled to proceed against Moneris in Ontario.

[42]

Momentous.ca
    Corp. v. Canadian American Assn. of Professional Baseball Ltd.
, 2010 ONCA
    722, 103 O.R. (3d) 467, affd 2012 SCC 9, [2012] 1 S.C.R. 359, concerned claims
    in contract and tort against a baseball league, its principals and the City of
    Ottawa. The plaintiffs agreements with the league required disputes to be
    arbitrated and enforced in the courts of North Carolina. Laskin J.A. considered
    whether the plaintiffs claims should be allowed to proceed in Ontario against
    two defendants who were not party to these agreements. Laskin J.A. concluded
    that, given the plaintiffs pleading that these defendants were necessary
    parties and that joinder would promote the convenient administration of
    justice, the plaintiffs could not proceed separately against them in Ontario.
    The claims against these defendants were so intertwined with the claims against
    the league that the forum was governed by [t]he choice of forum clause
agreed
    to by the plaintiffs
 (emphasis added). Unlike the plaintiff in
Momentous.ca
,
    Aldo has not agreed to litigate in the forum advanced by the defendant
    MasterCard.

[43]

MasterCards
    Ontario cases dealing with arbitration clauses 
Donaldson International
    Livestock Ltd. v. Znamensky Selekcionno-Gibridny Center LLC
, 2008 ONCA
    872, 305 D.L.R. (4th) 432; and
Dalimpex Ltd. v. Janicki
(2003), 64
    O.R. (3d) 737 (C.A.)  are distinguishable on the same basis. In each, the
    court stayed proceedings against multiple defendants notwithstanding that not
    all were parties to the particular arbitration clause at issue. Notably, and in
    contrast to the present case, each involved an arbitration clause to which the
    plaintiff had agreed.

[44]

Taken
    together, the Canadian cases stand for the proposition that, where a plaintiff
    has accepted a forum selection clause, it will not necessarily escape its
    bargain by pleading causes of action other than in contract or against multiple
    parties only some of which are subject to the clause. Courts are properly
    vigilant in ensuring that pleadings do not defeat contractual provisions, exclusions
    or limitations
to which the plaintiff has agreed
. An important
    motivating factor in these cases is the convenient administration of justice 
    if a plaintiff must proceed elsewhere in respect of some of its claims,
    allowing it to proceed in Ontario in respect of others wastes judicial
    resources and violates the principle of comity. In my view, these authorities
    do not compel the conclusion that a plaintiff is bound by a forum selection
    clause to which it did not agree simply because its claim arises in the context
    of another partys contractual relationship that includes the clause.

(b)

The Closely Related Doctrine

[45]

The
    closely related doctrine operates to bind non-signatories to a forum
    selection clause where they are so closely related to the dispute that it is
    foreseeable that they would become bound by the clause. A non-party is closely
    related to a dispute if its interests are completely derivative of and
    directly related to, if not predicated upon, the signatory partys interests or
    conduct:
Weingrad
.

[46]

It
    bears mention that there are good reasons to limit the scope of forum selection
    clauses to those parties who have bargained for their application. Litigating
    in a particular forum has real consequences that parties must evaluate, as the
    court recognized in
Crown Resources
, at para. 27, quoting
ECS
    Educational Consulting Services Canada Ltd. v. Al Nahyan
, [2000] O.J. No.
    211 (S.C.), affd (2000), 3 C.P.C. (5th) 76 (Ont. C.A.):

In this age of the global economy, business will increasingly
    be faced with the prospect of dealing with different judicial systems in
    different parts of the world. I assume that business people accept that fact as
    a consequence of doing business in different parts of the world. I also assume
    that business people assess those different judicial systems before agreeing to
    attorn to their jurisdiction or that they are prepared to take the risks, if
    such be the case, of so doing.

[47]

Sophisticated
    parties are deemed to have informed themselves about the risks of foreign legal
    systems and are deemed to have accepted those risks in agreeing to a forum
    selection clause:
Crown Resources
, at para. 27. It is precisely
    because signatories to a forum selection clause have weighed and accepted the
    forum and its risks that these clauses should be enforced. Non-signatories have
    not necessarily engaged in this weighing exercise.

[48]

Of
    course, the foreseeability component of the closely related doctrine attempts
    to accommodate this concern. The doctrine only operates to bind a non-signatory
    where it is foreseeable that the non-party would become bound. Arguably, this
    protects against the binding of those who truly failed to assess the advantages
    and disadvantages of litigating in the forum. Yet the foreseeability inquiry is
    uncertain. It injects significant flexibility into the scope of application of
    forum selection clauses. In so doing, it runs contrary to well-established
    policy rationales for enforcing forum selection clauses, including certainty
    and security in commercial transactions:
Z.I. Pompey Industrie v. ECU-Line
    N.V.
, 2003 SCC 27, [2003] 1 S.C.R. 450, at para. 20.

[49]

That
    is not to say that the doctrine should be rejected wholesale by Ontario courts.
    The U.S. cases illustrate a number of circumstances in which the closely
    related doctrine has been sensibly applied. For example, in
Firefly
    Equities LLC v. Ultimate Combustion Co.
, 736 F. Supp. 2d 797 (S.D.N.Y.
    2010), the court applied the doctrine to bind the corporate defendants
    president, who had signed, on the companys behalf, an agreement containing a
    New York forum selection clause. In
Lipcon v. Underwriters at Lloyds,
    London
, 148 F.3d 1285 (11th Cir. 1998), the court applied the doctrine to
    bind guarantor plaintiffs whose spouses had signed an agreement containing
    English forum selection and choice of law clauses. The interests of the
    guarantors were completely derivative of the interests of their spouses.

[50]

Although
    the U.S. experience suggests that there may well be circumstances in which an
    Ontario court would seek to apply the closely related doctrine to a
    non-signatory plaintiff, the present case is not one of them. In this case, the
    application of the closely related doctrine would not assist MasterCard. Given
    the substance of its claim as pleaded, Aldos interests are not completely derivative
    and directly related to the interests of any signatory to the New York forum
    selection clauses. Moreover, the motion judge found that MasterCard exercised significant
    control over the contractual terms governing the issuance and processing of its
    credit cards. MasterCard surely contemplated that the banks with which it
    contracted would, in turn, contract with processors and merchants outside of
    the State of New York. In fact, MasterCard required that certain terms be
    included in the Acquiring Banks downstream contracts with processors and
    merchants. It was open to MasterCard to do the same for forum selection, yet it
    did not. Moneris was permitted to enter into an agreement with Aldo that
    contained a broad forum selection clause in favour of the Ontario courts. On
    this basis, the motion judge found that it was not foreseeable to Aldo that
    MasterCards New York forum selection clauses would apply to its claims, and I
    see no reversible error in this regard. Accordingly, it is unnecessary at this
    juncture to determine the availability, in general, of the closely related
    doctrine.

(4)

The Motion Judges Approach to the Strong Cause Test

[51]

To
    succeed in displacing an applicable forum selection clause, a plaintiff must
    show strong cause that it should not be enforced:
Harster Greenhouses
    Inc. v. Visser International Trade & Engineering B.V.
, 2011 ONSC 2608,
    334 D.L.R. (4th) 481, at para. 67; and
Expedition Helicopters Inc. v.
    Honeywell Inc.
, 2010 ONCA 351, 100 O.R. (3d) 241, at paras. 6, 11. MasterCard
    submits that if Aldo is bound by a New York forum selection clause, the clause
    should be enforced absent strong cause not to enforce. However, the motion
    judge correctly concluded that Aldo is not bound by any applicable New York
    forum selection clause. Accordingly, there is no clause to displace, and the
    motion judge did not err in failing to conduct a strong cause analysis.

[52]

In
    light of my conclusion that Aldo is not bound by either of the New York forum
    selection clauses, it is unnecessary to consider Aldos further submission that
    the language of the forum selection clause in the Licence Agreements does not extend
    to its claims because it is limited to claims initiated by a Member, and Aldo
    is not a Member of the MasterCard credit card association.

[53]

In
    all the circumstances, I would dismiss the appeal.

[54]

The
    respondents are entitled to the costs of this appeal. If the parties cannot
    agree on the quantum of costs, they may make brief written submissions within
    15 days of the release of these reasons.

Released: RAB November 29, 2013

M.H. Tulloch J.A.

I agree. R.A. Blair
    J.A.

I agree. R.G.
    Juriansz J.A.


