In Loan Away Inc. v. Facebook Canada Ltd. ("Loan Away"), the Ontario Court of Appeal provided the latest contribution to the growing Canadian jurisprudence regarding forum selection clauses. The decision provides guidance as to the vital role of contextual factors in a court's analysis as to the enforceability of forum selection clauses.

Background: The Douez and Uber Rulings

Forum selection clauses are provisions in contracts that identify a specific court or jurisdiction for the resolution of any disputes related to the contract. Forum selection clauses have been the subject of a number of recent high profile Canadian decisions, including two notable decisions of the Supreme Court of Canada: the Court's 2017 decision in Douez v. Facebook, Inc. ("Douez") and its 2020 decision in Uber Technologies Inc. v. Heller ("Uber"). In these decisions, the Supreme Court established that in order to enforce a forum selection clause:

  1. The party seeking to enforce the clause and stay the action that was commenced in an "improper" forum must establish that the clause is "valid, clear and enforceable" and that it applies to the cause of action in question. As with any contract claim, the party resisting enforcement of the clause may raise defences such as unconscionability, undue influence or fraud at this step.
  2. Once the party seeking enforcement of the clause establishes the validity of the forum selection clause, the onus shifts to the party seeking to continue the action notwithstanding the clause to show "strong cause" for why the court should not enforce the clause nor stay the action. In assessing whether "strong cause" exists, a court must consider all the circumstances, including the balance of convenience, fairness between the parties, and the interests of justice.

The plaintiffs in Douez and Uber were Canadian individuals who agreed to standard form terms and conditions with large corporations (Facebook Inc. ("Facebook"), in Douez, and Uber Technologies Inc., in Uber). In both decisions, the plaintiffs challenged forum selection clauses contained within the standard terms and conditions: in Douez the clause required all disputes be adjudicated in California, and in Uber the clause required all disputes to be adjudicated via arbitration in the Netherlands.

Forum selection clauses unenforceable in both cases

Both plaintiffs were successful in challenging the enforceability of the forum selection clauses. In Douez, the Supreme Court held that there was "strong cause" not to enforce Facebook's forum selection clause as:

  • there was a gross inequality of bargaining power between Facebook and the individual plaintiff;
  • the proceeding concerned constitutional rights, and therefore, its adjudication in Canadian courts served the inherent public good; and
  • the relative costs of litigating in California were far greater to the plaintiff than were the costs of litigating in Canada to Facebook.

As we noted in 2020, the Supreme Court in Uber refused to enforce the forum selection clause on the basis that:

  • the clause was part of an unnegotiated standard form contract;
  • there was a significant gulf in sophistication between the parties (a large corporation and an individual); and
  • a person in the plaintiff's place could not be expected to appreciate the financial and legal implications of the clause (proceeding to arbitration in the Netherlands would have been prohibitively expensive for the plaintiff).

The Loan Away Ruling

In Loan Away, the Court of Appeal applied the test set out in Douez and ultimately reached the conclusion that the forum selection clause ought to be enforced.


Loan Away Inc. ("Loan Away"), a Canadian commercial lender, derived a large portion of its business from advertising on Facebook. When Facebook suspended Loan Away from advertising on Facebook, the company commenced an application in Ontario against Facebook Canada Ltd. ("Facebook Canada") for injunctive relief requiring, among other things, Facebook Canada to accept the Loan Away's advertising.

In response, Facebook Canada asserted that Facebook (the U.S.-based company) alone operated Facebook's services (including, inter alia, its advertising platform), and that Facebook Canada was therefore not the right party to provide the relief sought. Loan Away then amended its application to name Facebook as the respondent, and no longer sought relief against Facebook Canada.

The Stay Motion

In December 2019, Facebook moved to stay Loan Away's application on the basis of the forum selection clause, which provided that disputes with commercial users of Facebook's services, such as Loan Away, must be resolved exclusively before the U.S. District Court for the Northern District of California or a state court in San Mateo County.

Loan Away resisted the stay motion. While it conceded that the forum selection clause was valid and applicable, it argued that the Court of Appeal ought not enforce it in the circumstances.

Applying the test set out in Douez, the motion judge held in favour of Facebook and stayed the application. The motion judge noted that the law favours the enforcement of forum selection clauses in commercial contracts and that a stay should not be granted unless Loan Away could establish "strong cause" not to enforce the impugned clause. Having regard to all of the circumstances, the motion judge held that Loan Away did not do so. Specifically, the motion judge noted that:

  • the contract was a commercial contract;
  • Loan Away did not tender any evidence to address the balance of convenience, fairness, or the interests of justice; and
  • Loan Away only sought relief against Facebook and not against Facebook Canada.

The Court of Appeal Decision

Loan Away appealed the stay order, alleging that the motion judge made three errors within the second branch of the Douez test:

  1. That there was a prima facie injustice in allowing Facebook to rely on the forum selection clause when the relief Loan Away sought was straightforward;
  2. That as a result of the stay order, Loan Away would now be forced to maintain proceedings against Facebook in California and Facebook Canada in Ontario, creating an unfair multiplicity of proceedings; and
  3. That the inequality of bargaining power between Loan Away and Facebook was "strong cause" not to enforce the forum selection clause.

The Court of Appeal responded to these three allegations as follows:

  1. Prima Facie Injustice: The Court of Appeal disagreed that the relief sought by Loan Away was straightforward. The Court of Appeal noted that Loan Away did not merely seek to understand why Facebook had suspended its advertising: rather, it also sought injunctive relief. For relief of this nature, there was no prima facie injustice caused by upholding the parties' agreement that such a proceeding must be brought in California.
  2. Multiplicity of Proceedings: The Court of Appeal held that Loan Away did not need to continue its Ontario proceeding against Facebook Canada (with whom it had no contract), and therefore, there was no true multiplicity of proceedings. It appeared to the Court of Appeal that Loan Away had simply commenced an action against an improper party and that the stay order was not the cause of the alleged need for multiple proceedings.
  3. Inequality of Bargaining Power: The Court of Appeal cited Douez for the proposition that even in the consumer context, where gross inequality of bargaining power may be a relevant consideration in the "strong cause" analysis, it is not in itself determinative. The Court of Appeal endorsed the motion judge's consideration of the totality of the circumstances and the paucity of evidence filed by Loan Away in support of the alleged "strong cause" to intervene.

In light of the foregoing, the Court of Appeal held it was inappropriate to interfere with the motion judge's decision upholding the clause.

Key Takeaway: The Importance of Context

Loan Away reveals the significance of the role of the commercial context in a court's analysis of whether to enforce a forum selection clause. It is a fact-specific exercise in which factors such as the sophistication of the parties (i.e. whether the plaintiff is an individual, as in Douez and Uber, or a corporation, as in Loan Away), the nature of the dispute (i.e. whether it concerns constitutional or quasi-constitutional rights, as in Douez, or is a private dispute, as in Loan Away) and the relative costs of proceeding in the competing forums may influence the result. In fact, the same or a similar forum selection clause may be enforced in a particular commercial context (i.e. Facebook's forum selection clause in Loan Away) and not in others (i.e. Facebook's forum selection clause in Douez).

From a practical perspective, parties looking to include a forum selection clause in their commercial contracts - including standard terms and conditions - may wish to consider (among other contextual factors) the sophistication of their contracting partners, the nature of commercial disputes that may arise under those contracts, and whether the costs of litigating in a particular forum may be prohibitive to contracting partners.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.