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The Ontario Court of Appeal recently upheld the Superior Court’s decision in Savanta v. Hilditch, which considered ambiguous language regarding jurisdiction over disputes in a Shareholder Purchase Agreement. The dispute centred around whether the Shareholder Purchase Agreement conveyed exclusive jurisdiction to the courts of Massachusetts, or whether Ontario could adjudicate the dispute, as litigation had been commenced in both places.

Massachusetts Corporation (“GEI”) acquires Ontario Corporation (“Savanta”)

The Plaintiff, in this case, was Savanta. Savanta is a privately held Ontario corporation that provides environmental consulting services.

The other party in this case (a co-defendant), was GEI Consultants, Inc. (“GEI’”), which is a privately held corporation incorporated under Massachusetts law. GEI’s head office is in Massachusetts. GEI also offers environmental consulting in the United States.

GEI incorporated GEI Consultants Corporation to purchase Savanta’s shares under a Share Purchase Agreement which was signed in January 2019. After GEI Consultants Corporation acquired Savanta, it amalgamated with GEI, making GEI the sole shareholder of Savanta at the time of these proceedings.

Savanta commenced lawsuit in Ontario; GEI commenced lawsuit in Massachusetts

Savanta began a lawsuit in Ontario. GEI began a lawsuit in Massachusetts. The parties challenged the jurisdiction of the Ontario court to adjudicate certain matters which were in dispute. The other co-defendant, the Hilditch defendants, wanted the lawsuit to continue in Ontario. The Hilditch defendants were employees of Savanta. The Hilditch defendants were involved in a dispute over their employment agreements and non-competition agreement, which all parties agreed was properly dealt with in Ontario, and which formed part of the overall litigation.

Ambiguous language in the Share Purchase Agreement did not provide Massachusetts court with exclusive jurisdiction

The Share Purchase Agreement contained a section which provided that any dispute relating to that Agreement:

“[m]ust be brought in any state or federal court of competent jurisdiction in the Commonwealth of Massachusetts, and each Party irrevocably submits and agrees to attorn to the non-exclusive jurisdiction of such court.”

Both Savanta and GEI argued that this was an “exclusive jurisdiction” clause. They argued that the word “non-exclusive” referred only to the state or federal court of Massachusetts.

The Ontario Superior Court disagreed with Savanta and GEI’s interpretation of this clause, holding that “the parties ought to have been more precise in their language by simply using the word exclusive.” By not doing so, they created ambiguity within the Share Purchase Agreement as to their intentions. The Share Purchase Agreement did not have the “clear and express language” that was required in order to convey exclusive jurisdiction to a particular court or place.

Ontario Superior Court determines that Ontario is the most convenient forum to adjudicate the dispute

The Superior Court found that the language of the Share Purchase Agreement did not oust its jurisdiction. Subsequent to this finding, the Court was then required to determine whether it was the most convenient forum to hear the dispute – that is, would it exercise its jurisdiction?

While Savanta had already consented to the jurisdiction of Ontario courts by starting its claim within Ontario, this was not determinative of whether Ontario would exercise its jurisdiction.

Several factors assessed to determine the most convenient forum

In a previous case of Muscutt at al. v. Courcelles, the Ontario Court of Appeal provided the factors to be considered when determining the most convenient forum for the hearing of a case. While not an exhaustive list, these factors are intended to assist a judge in deciding which jurisdiction has a real and substantial connection to the dispute. These factors include:

  1. The location with the majority of the parties;
  2. The location of key witnesses and evidence;
  3. The contractual provisions that specify the law or jurisdiction;
  4. The avoidance of having multiple proceedings;
  5. The applicable law and its weight in comparison to the factual questions to be determined;
  6. Geographical factors suggesting the best forum;
  7. Whether declining jurisdiction would deprive the plaintiff of a legislative juridical advantage available in the domestic court.

The Superior Court also considered three additional factors, which are:

  1. The threshold for displacing the plaintiff’s choice of jurisdiction is high;
  2. Efficiency and convenience should be balanced against the fairness and justice of a particular forum;
  3. At this stage, the court should be cautious about making findings of fact about the dispute itself.

Dispute had a stronger connection to Ontario

The Superior Court acknowledged that this was an “unusual motion” as it was the plaintiff and one co-defendant who sought to displace their own choice of jurisdiction. The burden was on the plaintiff, Savanta, to demonstrate that Massachusetts was the more appropriate place for the dispute to be determined.

The Superior Court considered that three of the four parties in the underlying proceeding were located within Ontario. The witnesses would all be from either Ontario or Massachusetts. There was also a risk of multiple proceedings, given that GEI had commenced a lawsuit on the same issues within Massachusetts. However, certain claims made concerning the Share Purchase Agreement would turn on the outcome of another aspect of this proceeding regarding the termination of employment of Mr. Hilditch. This aspect of the proceeding was one that all parties agreed was within the exclusive jurisdiction of the Ontario courts. While this was not considered “particularly compelling” it was one additional factor weighing in favour of Ontario.

Considering all the Muscutt factors, the Superior Court found that Ontario was the most convenient forum to hear all the disputes, holding that the dispute had a “much stronger connection with Ontario” than with Massachusetts.

Ontario upheld to be the most convenient forum

Savanta and GEI appealed the decision of the Superior Court to the Ontario Court of Appeal. Savanta and GEI argued that the judge did not consider the meaning of “of such court” found within the jurisdiction clause of the Shareholder Purchase Agreement. They argued that this made the clause clear that it was referring to only the courts of Massachusetts:

“must be brought in any state or federal court of competent jurisdiction in the Commonwealth of Massachusetts, and each Party irrevocably submits and agrees to attorn to the non-exclusive jurisdiction of such court.”

The Ontario Court of Appeal rejected this argument and noted that the threshold that Savanta and GEI needed to meet was that of “palpable and overriding error” on the part of the motions judge. They did not meet that threshold.

The Court awarded costs of $18,390 and $17,748 against Savanta and GEI.

The Lawyers at Bader Law in Toronto advise clients on contracts, corporate organization, and shareholder disputes

The respected business lawyers at Bader Law provide advice to clients on a range of business matters, including start up and reorganization, corporate transactions, shareholders agreements, disputes and more. Contact us at 289-652-9092 or contact us online to schedule a consultation with a member of our business law team to find out how we can assist you.