JTG Management Services Ltd. V. Bank Of Nanjing Co. Ltd., 2015 BCCA 200
In this decision involving an international letter of credit, the British Columbia Court of Appeal clarified the analysis required to determine whether a contract is to be performed "to a substantial extent" in British Columbia in order to establish territorial competence under the Court Jurisdiction and Transfer Proceedings Act.
A B.C. company agreed to sell softwood lumber to a Chinese company, the payment of which was secured by an irrevocable export letter of credit issued by a bank. A dispute arose over the documents provided by the lumber company to Nanjing Bank to obtain payment, and the lumber company sued the bank in B.C. for breach of the letter of credit. The bank challenged the jurisdiction of the B.C. courts, arguing, among other things, that the lower Court improperly interpreted s. 10(e)(i) of the Court Jurisdiction and Transfer Proceedings Act, which provides that the Court will have territorial competence if the contract underlying the proceeding was to be performed "to a substantial extent" in B.C.
The Court of Appeal held that the analysis under s. 10(e)(i) must focus on the nature of the obligations arising under the contract and the expectations of the parties at contract formation. The fact that more than one court may assert jurisdiction over a dispute is no bar to finding a real and substantial connection under s. 10(e)(i) because in an international contract, both parties may perform the obligations "to a substantial extent" in their home jurisdictions. The Court held that the receipt of payment and the preparation of documents necessary to obtain payment constituted the requisite performance "to a substantial extent" in B.C. The Court of Appeal also upheld the lower Court's decision to not decline jurisdiction in favour of China.
For more on this decision and it potential impacts, see McCarthy Tétrault LLP's Canadian Appeals Monitor blog post entitled "Jurisdiction in International Commercial Contracts: New Guidance from the B.C. Court of Appeal."
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