A Commentary on Recent Legal Developments by the
Opinions Group of McCarthy Tétrault LLP
What law should a Court apply when determining whether to pierce
the corporate veil of a foreign corporation? How much
deference should an appellate Court give to a lower Court's
findings regarding the appropriate jurisdiction to adjudicate a
case? What law applies to transnational tortious
misrepresentations? These are among the many conflict of laws
issues addressed by the UK Supreme Court recently in VTB Capital plc v. Nutritek International
Corp. The decision in VTB is relevant to the
evolving conflict of laws jurisprudence in Canada.
Although very nuanced, the salient jurisdictional facts of the
VTB case are, briefly stated, as follows. VTB Captial plc
("VTB") is a bank incorporated in England. VTB
entered into various "loan" agreements with Russagroprom
LLC ("RAP"), a Russian company, to finance RAP's
acquisition of various Russian companies from Nutritek
International Corp. ("Nutritek"). RAP defaulted on
the loan. VTB alleged that it entered into the agreements as
a result of misrepresentations in England. A businessmen
resident in Russia called Mr. Malofeev ("Malofeev") was
alleged to be the controlling owner of Nutritek, and two other
corporations — one a British Virgin Island corporation
("Marcap BVI") and the other a Russian corporation
("Marcap Russia"). VTB alleged that Malofeev,
Marcap BVI and Marcap Russia were jointly and severally liable for
After being served with the claim outside of England, Nutritek,
Marcap BVI and Malofeev moved in the English courts to set aside
service. The judge at first instance ruled that England was
not the appropriate forum to adjudicate VTB's claims. The
Court of Appeal agreed. The UK Supreme Court, in a close 3-2
ruling, ultimately upheld these decisions.
In the course of its decision, the UK Supreme Court made some
important comments regarding various conflict of laws issues.
First, the Court cautioned that a jurisdiction hearing should
not become so extensive such that it risks turning into the
"putative trial itself", particularly as the Court can
only make preliminary findings at this stage. Of note, the
Court noted that a defendant is not obliged to advance a positive
case on the merits when contesting the issue of the Court's
Second, the Court affirmed that appellate Courts should
generally not interfere with a lower court's ruling regarding
the appropriate forum, absent significant error. This ruling
is reminiscent of the Supreme Court of Canada's recent remarks
in Van Breda.
Third, the Court ruled that tortious misrepresentations are
governed by the law of the jurisdiction in which they are
ultimately received and relied upon – a principle that is
often applied by Canadian courts. The Court ruled that this
is the case even if the misrepresentations have flowed through an
intermediary before reaching their ultimate recipient.
Fourth, the Court posed various alternatives regarding the law
which should govern the issue of piercing a foreign
corporation's veil – the law of incorporation, the law of
the forum, or the law of a contract connected to the piercing of
the veil issue. Although not ultimately deciding the issue,
the Court hinted that more than one choice of law rule may apply to
The disagreement between the majority and minority speeches
turned on the weight to be given to the governing law of the tort
and non-exclusive jurisdiction clauses (referring to English
courts) in the agreements. The majority ruled that these
factors are not conclusive and indeed have little weight in the
context of the instant case. The minority were prepared to
give significant weight to the fact that the tort at the heart of
the dispute was governed by English law and also cited the
non-exclusive jurisdiction clauses as pointing toward England as
the appropriate forum.
The hard-fought battle in VTB and the split result demonstrate
that conflict of laws jurisprudence has still not achieved the
measure of predictability so valued by clients and the extent of
judicial discretion involved in determining the appropriate forum
for a dispute. Nonetheless, the case contains some important
rulings and judicial remarks which will help to shape the
developing Canadian jurisprudence.
Earlier posts on the VTB case can be accessed
The McCarthy Tétrault Opinions Group consists of members
of the firm's litigation department whose practices focus on
written advocacy and the provision of strategic advice and opinions
in the context of complex business disputes and transactions.
The members of the Opinions Group are Anthony Alexander, Martin
Boodman, Brandon Kain, Hovsep Afarian and Kirsten Thompson.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
While most are well aware that the sale of a business is generally a complex process, even sophisticated business owners are surprised by just how much cost and effort is required to complete the sale.
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