Ontario Court Upholds Jurisdiction Over Texas Defendant

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The Court of Appeal for Ontario has ruled that provincial courts have personal jurisdiction over non-resident defendants, including one from Texas, in a case alleging breach of fiduciary duties.

The plaintiff alleges that it hired an Ontario individual and his company to procure financing to develop mining projects in Peru. The plaintiff claims that the Ontario defendants then solicited the assistance of a Texas resident to secure the needed financing from United Kingdom sources. The plaintiff alleges these parties were to work together to procure the financing and they would receive shares in the plaintiff’s Ontario corporation as compensation for their efforts. The plaintiff contends the parties breached their alleged fiduciary duties and a duty of confidentiality owed to the plaintiff by improperly taking the mining opportunities in Peru for themselves to the exclusion of the plaintiff. The plaintiff seeks a declaration that the mining opportunity is held in trust for its benefit or, alternatively, damages of CAD 200 million.

The Court of Appeal rejected the defendants’ assertion that because the agreements upon which the claims are based expressly provide for exclusive jurisdiction in English courts, the Ontario court could not exercise personal jurisdiction over them. The Court of Appeal agreed with the motion judge’s view that the claims against the Texas defendant centered on the fiduciary relationship, not on alleged breaches of the contracts. The suit was about “an alleged abusive course of conduct by fiduciaries.”

Although the Court of Appeal disagreed with the motion judge’s 2-step analysis of personal jurisdiction, it found his conclusion to be correct. The Court applied the “real and substantial connection” test. It found that the Texas defendant received confidential information in Ontario from the Ontario-based plaintiff; that he agreed to work with the Ontario defendant on behalf of an Ontario corporation; and that he knew his co-defendant was the Ontario corporation’s agent and was in a fiduciary relationship with the company. Therefore, the Court found the Texas defendant “could well have foreseen an action in Ontario.”

The Court also rejected the forum non conveniens argument, finding that the defendants did not show that some other jurisdiction, namely England, was a more appropriate forum for the litigation.

This decision on procedural grounds should help to guide American and other foreign defendants on their business dealings in Ontario, other Canadian provinces and shows the potential to become a defendant in litigation in Canadian courts.

Disclaimer: This Litigation and Dispute Resolution Law Alert is provided for informational purposes only and is not intended to serve as or provide legal advice relating to a particular matter. If you would like to discuss a litigation, arbitration or dispute matter please contact Jon P. Yormick, Managing Attorney, [email protected], Jason B. Desiderio, Associate,[email protected], or Ruby K. Singh , Associate, [email protected], or call toll free (U.S. and Canada) at +1.866.967.6425.

 

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