Canada: Living with Multi-Jurisdictional Litigation

"Trial occurs locally. A case is heard before a judge at a local Court house, and decided by what goes on before him. The procedure (and often the substantive law) is governed by local law and practice. Although the collection of evidence may take place across boundaries, the goal is to bring that proof home to be heard at trial."

This is an attitude often adopted by litigators presented with a case which has international scope. It is a dangerous attitude because the presence of extra-jurisdictional elements can change almost any or every aspect of a dispute: from the legal rules to be applied, to the proof which may be available. Like a juggler who suddenly has twice as many balls in the air, the attorney confronted with a multi-jurisdictional dispute has much on his mind.

Parallel proceedings offer the most stark example of how drastically the normal rules may change when a dispute exceeds the boundaries of one jurisdiction -- now there is not one Court deciding the dispute, but competing jurisdictions. Ignoring the presence of the competing jurisdiction may result in irreparable damage to the client's claim both at home and in the competing jurisdiction. It is therefor crucial that the attorney and client understand the implications of the cross-border nature of the dispute.

In my limited time, I would like to give several examples of parallel proceedings which have been considered by the Courts. These examples are chosen to demonstrate the different factual and procedural contexts within which multi-jurisdictional litigation may be fought, and the reactions of the Courts, attorneys and clients to these situations.

The most obvious situation of parallel proceedings is where the same person is trying to sue the same defendant for the same reason in two or more different jurisdictions. This is the case of the poorly organized plaintiff. While it may appear wise of the plaintiff to hedge his bets by bringing actions in each possible jurisdiction, there are no guarantees of success. The defendant may succeed in contesting jurisdiction on the basis of the doctrine of lis alibi pendens, which states generally that the Court may suspend or dismiss an action where another action is pending in a foreign jurisdiction between the same parties and in respect of the same subject matter.² But challenges to jurisdiction are not the only risk arising from instituting actions in multiple jurisdictions.

Risk also arises because the plaintiff attorns to the jurisdiction in which he commences each of the actions. It may be impossible for the plaintiff to suspend proceedings in one jurisdiction in favour of another if the defendant insists on pressing forward in the jurisdiction most favourable to it.³ In cases where the proceedings are advanced and the defendant has also attorned to the jurisdiction, the plaintiff may be said to have renounced his right to commence proceedings in any other forum. In such cases, the local forum may be willing to issue an anti-suit injunction to prevent the plaintiff from pursuing the foreign proceedings.⁴

The simple solution to this problem is to avoid instituting multiple actions by thoroughly investigating the issue of jurisdiction before commencing the first action. After weighing the relative advantages of each jurisdiction, it may still be prudent to preserve jurisdiction in an uncontested, but less favourable, forum (due to a statute of limitations problem, for example) while establishing jurisdiction in another, contested but more favourable, jurisdiction.

The above is a simple example of lis alibi pendens. The situation becomes more complicated where it is not the same party who is plaintiff in both jurisdictions, but rather each party has commenced an action in a different jurisdiction, the plaintiff in one jurisdiction being defendant in the other jurisdiction and vice versa. In these situations, the claims before the competing courts are usually not identical, but are rather in the nature of counter claims. Where the claims raise the same or related issues, there may be good reason to suspend one of the proceedings on the basis of lis alibi pendens or of forum non conveniens. However, the mere presence of another, foreign proceeding is not usually sufficient to convince a court to suspend or dismiss the action before it -- a convincing argument that the competing forum is more appropriate is always a necessary part of the application.

In Quebec, lis alibi pendens and forum non conveniens are usually invoked separately as alternative remedies to parallel proceedings, rather than being related remedies as in the common law.⁵ This is due to the fact that the two doctrines are described separately at articles 3135 C.C.Q. (forum non conveniens) and 3137 C.C.Q. (lis alibi pendens). Although there is a tendency on the part of the Court to apply the same criteria in exercising its discretion under either doctrine, there is often an advantage to the applicant in separating the two arguments in order to emphasize the fact that foreign proceedings are under way which may result in inconsistent judgments. However, because the criteria for lis alibi pendens under article 3137 C.C.Q. are quite restrictive, motions contesting jurisdiction are more often granted under the doctrine of forum non conveniens.

This was the case in Sydney Steel Corp. v. Canadian National Railway in which our office was involved.⁶ In that case, a steel manufacturer sued in Nova Scotia for goods sold and delivered, and various other claims related to the cancellation of a series of purchase contracts. The railway commenced action in Quebec alleging construction defects in the steel rail, nullity of the purchase contracts, return of the price and damages for the removal of the rail. Jurisdiction was challenged in both Quebec and Nova Scotia, and the Courts at first instance and on appeal in both jurisdictions decided to allow the actions to continue. The case was subsequently settled out of Court.

The attitude of both the Quebec and Nova Scotia courts in the Sydney Steel Case are indicative of a high tolerance for parallel proceedings. Despite the common underlying factual and contractual issues, neither court was willing to surrender jurisdiction. This would appear to be one of the situations foreseen by the late Justice Sopinka in Amchem :

Multi-jurisdictional litigation may also occur where litigation between different parties respecting the same or related subject matter takes place in different jurisdictions. For example, in a construction case a third party claim (action in warranty) by the general contractor against a supplier of defective goods may not necessarily take place in the same jurisdiction as the principal claim by the owner against the general contractor.

In Quebec, these situations are governed by art. 3139 C.C.Q. which gives the Court discretion to claim jurisdiction over "an incidental demand or a cross demand."⁸

An interesting twist on this situation was raised in the Deskin Case, in which our office is involved, in which several actions were commenced in Quebec by various parties against the owner of a building where a fire had broken out, causing damage to property. The architect who had designed the building was also named as a defendant, for having allegedly failed to ensure sufficient fire separations. In an application of art. 2501 C.C.Q., the architect's insurer was also named as a defendant in the actions on the sole basis that the architect was allegedly insured by that insurer at the time of the alleged fault.

The insurer (the Ontario Association of Architects) sought a declaration from the Ontario courts that the insurance policy was not applicable to the claims. The Ontario proceeding therefor duplicated one of the issues before the Quebec court, that is, the issue of whether or not the architect's insurer must indemnify under the insurance policy.

On an application to stay or dismiss the Ontario proceeding under the doctrine of forum non conveniens, the Ontario Superior Court ruled that the indemnity issue should proceed in Ontario on the basis that the relevant factors (notably the law and place of execution of the contract, the residence of the parties and the early stage of the Quebec proceedings) all pointed to Ontario.⁹ The Ontario judge noted that it was not clear how the Quebec courts would deal with an Ontario judgment on just one of the several issues before it in the Quebec actions, but held that this was not determinative given the clear attachment of the indemnity issue to Ontario.

This case underlines the interesting possibility that a defendant in a complex litigation may separate the issue in which it is involved from the other claims at issue, in order that that separate issue be dealt with expeditiously in another forum. The appropriate forum for trial of the issue may interfere with the interest of the other parties to have all of the issues dealt with together. In the Deskin Case, the ease with which the indemnity issue could be separated from other issues was an important and probably determinative consideration.

This is the case where the defendant in one jurisdiction requests a declaration from the Court of another jurisdiction that it is not liable for the damages claimed from it in the first jurisdiction. An example of this situation occurred between the Guarantee Insurance Co. of North America and Gordon Capital Corp.

In this case, the parties had a dispute regarding an insurance bond in favour of Gordon. Within one day of each other, actions were served in Ontario by La Garantie and in Quebec by Gordon (although the Quebec proceedings were issued two weeks earlier). Gordon claimed payment under the bond before the Quebec courts. La Garantie requested a negative declaration from the Ontario Court (General Division) that it was not liable under the bond because of a two-year contractual limitation period. Under Quebec law, Gordon would have been able to argue that a longer prescription (limitation) period would have applied.

On November 17, 1993, the Superior Court of Quebec dismissed a motion by La Garantie to stay Gordon's action in Quebec on the basis of lis pendens and forum non conveniens. The Court found that there was no lis pendens between the two proceedings and that the doctrine of forum non conveniens did not apply.¹⁰ Leave to appeal was granted on November 29, 1993.¹¹

On January 17, 1994, the Ontario Court (General Division) considered a motion by Gordon to stay or dismiss La Garantie's action for a negative declaration on the basis that the Quebec action was in respect of the same subject matter, and that the Quebec court should be left to determine the matter rather than allowing both actions to continue.¹² The motion was dismissed on the basis of the doctrine of forum non conveniens. The Court made clear that it was not deciding whether or not the Quebec courts had properly assumed jurisdiction, but merely whether Ontario was an appropriate jurisdiction. It is not because a Quebec court has assumed jurisdiction that an Ontario court should automatically dismiss or stay an action in respect of the same subject matter. The Ontario judge also noted that the Ontario action was not vexatious or oppressive.

Leave to appeal the decision of the Ontario Court (General Division) was denied on April 25, 1994.¹³

On August 8, 1995, the Court of Appeal of Quebec held that the action commenced in Quebec be stayed.¹⁴ After finding that this was not a case of lis pendens under the Quebec doctrine of lis pendens, the Court of Appeal applied the doctrine of forum non conveniens, holding that an action should be stayed or dismissed where there is a sufficient connexity between the two actions such that common sense requires one to be suspended pending judgement on the other.

The Quebec Court of Appeal judgment in Gordon Capital favours an approach of comity in the face of parallel proceedings.

Sadly for today's panel, the Supreme Court of Canada dismissed Westec's appeal of the British Columbia Court of Appeal judgment, without reasons, apparently in reaction to the discovery that a default judgment had been obtained by Raytheon in the Kansas proceedings.¹⁵ The case nevertheless raises the same interesting issues of how to deal with parallel proceedings that the Quebec Court of Appeal dealt with in the Gordon Capital Case.

The British Columbia Court of Appeal judgment apparently favours the stay of an action where parallel proceedings were commenced first in another appropriate jurisdiction.¹⁶ While this "first-in-time" approach, based upon the principle of international comity, appears easier to apply than the "common sense" approach of the Quebec Court of Appeal in the Gordon Capital Case, it gives immense importance to a factor which may be just as arbitrary as any other of the factors usually considered during a forum non conveniens analysis. The facts of the Gordon Capital Case point this out: the two actions in that case were served within a day of each other and the Quebec action was ultimately stayed despite having been issued two weeks earlier.

The Westec Case also demonstrates the importance of considering the international nature of a dispute from its inception. It is unclear from the record why Westec allowed a default judgment to be rendered against it in Kansas. What is clear is that the British Columbia Court of Appeal judgment makes it more important than ever to consider the importance of seizing jurisdiction in the forum of choice. This is particularly true where the cost of being forced to litigate in a foreign jurisdiction (or in two jurisdictions) may determine the issue for the party contemplating litigation.