CANADA: an interesting case law about Quebec jurisdiction.

André BÉGIN | CANADA | 2013-01-17

André BÉGIN

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Quebec Court of Appeal, Hi-Lex Corporation v. Bombardier Recreational Products Inc.

Legal provisions

The Civil Code of Quebec (CCQ) stipulates that the Quebec courts have exclusive jurisdiction where the parties have by agreement submitted to them all existing or future disputes between themselves arising out of a specified legal relationship.(1) Inversely, the Quebec courts have no jurisdiction if the parties have by agreement submitted disputes to a foreign tribunal, unless the defendant submits to the jurisdiction of the Quebec authority.(2) However, in order to be enforceable before the Quebec courts, such clauses must imperatively and irrevocably oblige the parties to take an action exclusively before the designated tribunal.

Since the reform of the CCQ in 1992 Quebec, under certain restrictions, recognizes foreign judgments without examining the merits of the decision.(3) A foreign judgment will not be recognized where:

(1) by reason of the subject matter or an agreement between the parties, Quebec law grants exclusive jurisdiction to its authorities to hear the action which gave rise to the foreign decision;

(2) by reason of the subject matter or an agreement between the parties, Quebec law recognizes the exclusive jurisdiction of another foreign authority;

(3) Quebec law recognizes an agreement by which exclusive jurisdiction has been conferred upon an arbitrator.(4)

The CCQ also stipulates that a Quebec court may stay its ruling on an action before it where another action is pending before a foreign tribunal or a decision has already been rendered by a foreign tribunal, under the following conditions: (i) the foreign action is between the same parties; (ii) the action is based on the same facts and has the same objective; and (iii) the foreign tribunal’s judgment would be recognized in the province of Quebec.(5) These conditions are cumulative; however, the decision as to staying the proceedings is in the judge’s discretion.

Background

The Plaintiff Bombardier Recreational Product Inc. (‘Bombardier’) concluded a supply contract with the Defendant Hi-Lex Corporation (‘Hi-Lex’), a company based in Michigan, under which Hi-Lex provided parts for snowmobiles manufactured by Bombardier.

The contract contained a selection of forum clause attributing exclusive jurisdiction to the courts of the province of Quebec.

When Bombardier was sued before the courts of the state of New York following an injury suffered by a user of one of its snowmobiles with a cable supplied by Hi-Lex, Bombardier demanded that Hi-Lex take up Bombardier’s defence in the New York action in accordance with a hold ‘harmless clause’ contained in the supply contract.

Hi-Lex filed a motion for declaratory judgment before the Michigan courts asking for a declaration that Hi-Lex had no obligation to indemnify or defend Bombardier in the New York action. When Bombardier filed a motion for declaratory judgment before the Quebec Superior court, asking the said court to declare that Hi-Lex was obligated to take up Bombardier’s defence in the New York proceedings, Hi-Lex filed a motion to dismiss on the ground of lis pendens before the New York courts.

At the time of the judgment of the Superior Court of Quebec, Hi-Lex’s motion for declaratory judgment was still pending before the U.S. federal court.

Superior Court (6)

The judge, Marie Gaudreau, J.C.S., concluded that there was no lis pendens. The parties had by a valid agreement attributed exclusive jurisdiction to the courts of Quebec. Therefore, the courts of Michigan had no competence under the laws of Quebec to hear the motion.

The judge recalled the principles set out by the Supreme Court of Canada in GreCon Dimter Inc. v. J.R. Normand Inc.(7)

22. It should also be noted that respecting the autonomy of the parties makes it possible to implement the broader principle of achieving legal certainty in international transactions. The parties generally give effect to their intention to exclude a dispute from an authority’s jurisdiction by means of an arbitration clause or a choice of forum clause. These clauses foster certainty and foreseeability in international commercial relations, because they enable the parties to provide in advance for the forum to which they will submit their dispute. See Talpis and Castel, at p. 58. This Court has often stressed the importance of such clauses and the need to encourage them, because they provide international commercial relations with the stability and foreseeability required for purposes of the critical components of private international law, namely order and fairness: […]. This shows how deferring to the contracting parties’ intention ensures the implementation of this policy of legal certainty that is an inherent feature of private international law: […]. To recognize the usefulness and effectiveness of choice of forum clauses and arbitration clauses is therefore consistent with the general principles of private international law.
(…)
27 One last type of exception to the autonomy of the parties relates to the wording of arbitration or choice of forum clauses. Whether the jurisdiction of the Quebec authorities is ousted in a specific case will be decided on the basis of the wording of the jurisdiction clause adopted by the parties: […] The clause must be mandatory and must clearly and precisely confer exclusive jurisdiction on the foreign authority: […]. There must also be a meeting of minds between the parties; otherwise the clause is invalid: […].(8)

Furthermore, the motion before the Michigan courts was based only on the supply contract. In addition to this contract, Bombardier had filed before the Superior Court two accessory agreements, an Electronic Order Agreement and a Scheduling Agreement. Neither of these was mentioned in the motion before the Michigan courts. Therefore, the facts were not identical in the cases before the two tribunals. (9)

In conclusion, the judge also mentioned that the Michigan court’s decision would not be recognized by the Quebec courts, as these did not have competence under Quebec law to hear the matter. (10)

Court of Appeal

The Court of Appeal unanimously dismissed the appeal.

The Court of Appeal agreed that the judgment of the Michigan courts could not be enforced in the province of Quebec. Furthermore, the Court of Appeal noted that the motion before it was different from the New York proceedings and recalled the principles of the case Wellingon v. MEC Technologie inc.,(11) in which the Court of Appeal distinguished between an action in warranty and a motion to compel to defend:

The purpose or general objective of calling into warranty is, as our Court has defined it, to permit «[…] an entire solution to the litigation since the party is seeking to have the third party called by the same judgment that condemns it to indemnify the amount that it will itself be ordered to pay». The calling into warranty therefore essentially aims at allowing the insured to be indemnified once a condemnation is pronounced against him by the final judgment. But here, it is not a question for the insured to oppose against the insurer a final judgment rendered on the principal demand, but more to force the insurer, whereas it denies coverage, to take on its obligation to defend. The goal being sought by the insured is therefore not the same as the one sought by the calling into warranty, which only serves for the insured as the means to exercise the right to be indemnified in full the amount which he could be condemned and all the costs related to his defense, not that to be defended.(12)

The Court of Appeal concluded it was therefore possible for each of the New York and Quebec actions to proceed independently before the two forums.

 

Andrè Begin , IDI agency and distribution expert for Canada.

 

 

Notes:

(1) Art. 3148(4) CCQ

(2) Art. 3148 CCQ, par. 2

(3) Art. 3158 CCQ

(4) Art. 3165 CCQ

(5) Art. 3137 CCQ

(6) 11-10-2007, 500-17-036850-074

(7) Supreme Court of Canada, 22-07-2005, Docket 30217 (published as [2005] 2 S.C.R. 401/ 2005 SCC 46)

(8) English version of judgment reproduced here, references omitted. (French version cited in original text)

(9) pars. 24 – 28

(10) par. 29

(11) [1999] R.J.Q. 443 (C.A.)

(12) (our translation)

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