Global commerce transcends borders. When related litigation ensues, it can give rise to thorny jurisdictional issues. For instance, when an Ontario-headquartered mining company relies — based on recommendations from its technical staff in its Vancouver satellite office — upon the engineering reports of US-based consultants to build a gold mine in Costa Rica which then collapses, does an Ontario court have jurisdiction over the subsequent legal dispute between the parties?
The Ontario Court of Appeal addressed this very scenario recently in Central Sun Mining Inc. v. Vector Engineering Inc., 2013 ONCA 601. Central Sun was an Ontario company with its head office in Toronto. It retained various American engineering consultants to assist with the siting and the design of a proposed mine which was to be built in Costa Rica. The American consultants prepared various reports, some of which were sent to technical staff in Vancouver (some reports were sent to Ontario directly). The Vancouver staff then made recommendations to the head office in Toronto where the strategic decisions regarding the mine were made. The mine was constructed in Costa Rica but then suffered a catastrophic collapse which led to the shutdown of the mine, significant remediation costs and the plummeting of Central Sun's stock prices in Toronto. Central Sun then sued the US engineers in Ontario for negligent misrepresentation (among other causes of action). The US engineers sought to stay the Ontario action, claiming that Ontario courts did not have jurisdiction.
The essence of the engineers' argument was that the tort of misrepresentation did not occur in Ontario (but rather in Vancouver or Costa Rica), or that only a minor part of the tort occurred in Ontario. The Court of Appeal rejected this argument. The appeal court ruled that a misrepresentation takes place where it is received and relied upon. The misrepresentations, the Court concluded, were received and relied upon in Toronto as the controlling mind of the company was in Ontario, even though the misrepresentations were first sent in some cases to Vancouver. The commission of the tortious misrepresentation gave rise, in the Court's view, to presumptive jurisdiction by an Ontario court. Furthermore, the presumptive jurisdiction was not rebutted as the receipt of, and reliance upon, a misrepresentation are "core" aspects of a misrepresentation and such receipt and reliance took place in Ontario.
In a significant victory for Central Sun, which was represented by our Firm, the Court of Appeal concluded that Ontario courts have jurisdiction over the misrepresentation claim and, by extension, the other pled causes of action.
The next battle is whether Ontario is the forum conveniens.
The decision in Central Sun demonstrates that a negligent misrepresentation will be deemed, for jurisdictional purposes, to have been committed in the jurisdiction in which the misrepresentation is ultimately relied upon by the controlling mind of a company, even if it is received elsewhere first, particularly when this is in the reasonable contemplation of the party making the misrepresentation.
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.
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