Canada: Never-Ending Saab Stories: The Ontario Superior Court Of Justice Revisits Jurisdictional Issues For International Franchisors

In Stuart Budd & Sons Limited v. IFS Vehicle Distributors ULC¹ (Budd), the Ontario Superior Court of Justice revisited an attempt by defendant automotive companies to dismiss a claim against it by a national group of dealers on the grounds that Ontario courts did not have jurisdiction over the dispute. Back in 2015, the Ontario Superior Court of Justice found in favour of the dealers on the very same motion ( a copy of our summary of that decision can be found here). However, the Ontario Court of Appeal overturned the decision and sent it back to the Ontario Superior Court of Justice to be reconsidered ( a copy of the Court of Appeal's decision can be found here). On the second go-round, the Ontario Superior Court of Justice confirmed its earlier decision that Ontario was an appropriate forum to hear the dispute.

Overview

The case involves motion brought by the defendants for an order dismissing the plaintiffs' statement of claim for a lack of jurisdiction. The plaintiffs had sued the defendants for a declaration that they validly rescinded their Saab Dealer Sales and Service Agreements pursuant to Ontario's franchise legislation, the Wishart Act. They also sought compensation or damages pursuant to section 7(1) of the Act and alternatively, damages for a breach of contract.

By way of background, in 2010, the defendant, International Fleet Sales Inc. (IFS), a California company, was recruited by Saab Automobile AB to assist with the importation and distribution of vehicles and parts from Sweden and the US into Canada. The defendant, IFS Vehicle Distributors ULC (IFS ULC), was subsequently incorporated in British Columbia and registered to do business in Ontario. IFS then recruited the plaintiffs to become dealers. The plaintiffs were dealers spread across Canada with three located in Ontario, two in Quebec and one each in Alberta, Nova Scotia and British Columbia. The parties entered into dealership agreements, each of which designated that Ontario law be applied to the contract.

The issue before the Court on this motion was whether there is a real and substantial connection between the plaintiffs' claim and the Province of Ontario and if so, whether the Court should decline its jurisdiction and find that California, as argued by the defendants, was the more appropriate forum.

A Real and Substantial Connection to the Province of Ontario

In finding a real and substantial connection to Ontario, the Court looked to one of the presumptive connecting factors, which, unless rebutted, will entitle it to assume jurisdiction over the claim. One of these factors is whether IFS ULC carried on business in Ontario. The Court concluded that it did carry on an active business in Ontario and further, failed to satisfy its burden of rebutting this factor.

The Court Should Not Decline Its Jurisdiction

After concluding that it had proper jurisdiction over this litigation, the Court turned to IFS ULC to establish that there was another forum, which was more appropriate. The Court rejected its position that California was the more appropriate forum and based this on several factors, including the fact that three of the plaintiffs reside in Ontario and the remaining five plaintiffs reside within Canada. The Court also noted that the plaintiffs' claims were all connected by the contractual provision in the dealership agreements as agreed upon between the parties selecting the application of Ontario law.

The Lesson

This decision calls into light jurisdictional issues that international franchisors may face when litigation occurs within a Canadian franchise system that spans over multiple provinces. Perhaps most significant for franchisors, this decision highlights the importance of choice of law provisions in franchise agreements. Even where there are agreements signed and dealerships located in different provinces, once the presumptive connecting factor has been established and not rebutted, a Court will assume jurisdiction over all aspects of the case. Franchisors and their lawyers ought to be mindful of this decision when drafting agreements and contemplating potential litigation.

A copy of the full Budd decision is located here.

Footnote

^{1. 2016 ONSC 2980.}

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